SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
____________________________________
Date of report (Date of earliest event reported): July 1,
2000
CARDIAC SCIENCE, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-19567
33-0465681
(State or Other Juris- (Commission File
No.) (IRS Employer
diction of Incorporation)
Identification No.)
16931 Millikan Avenue, Irvine, CA
92606
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code:
(949) 587-0357
N/A
(Former Name or Former Address, if Changed Since
Last Report.)
<PAGE>
ITEM 2. Acquisition or Disposition of Assets.
On July 1, 2000, Cardiac Science, Inc. (the
"Company"), through a newly formed wholly-owned
subsidiary, Cardiac Acquisition Corp. (the "Acquisition
Subsidiary"), acquired Cadent Medical Corporation
("Cadent"), a privately-held company that has developed a
cell phone size defibrillator designed to be worn by mobile
cardiac patients.
The acquisition was effected pursuant to a Merger
Agreement and Plan of Reorganization (a copy of which is
attached hereto as Exhibit A, the "Merger Agreement"),
dated as of June 22, 2000, by and among the Company,
Cadent, and the Acquisition Subsidiary. Pursuant to the
Merger Agreement, the Acquisition Subsidiary was merged
with and into Cadent (the "Merger"), with Cadent being the
surviving corporation and a wholly-owned subsidiary of the
Company. As consideration, the Cadent shareholders
received an aggregate of 4 million shares of restricted
common stock of the Company, 420,000 shares of which
are being held in escrow pursuant to an escrow agreement
(a copy of which is attached hereto as Exhibit B), and
300,000 shares of which either shall be issued to certain
employees of Cadent on or before January 2, 2001 (upon
to the satisfaction of certain conditions) or shall be added
to the shares held in escrow.
The Merger Agreement also provides that the
Company shall take all action reasonably necessary to elect
Robert Carpenter and Brian Dovey, directors of Cadent, to
the Company's Board of Directors of the Company.
The Company intends to continue to utilize Cadent's
assets in the manner in which they were used prior to the
Merger.
ITEM 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Financial Statements of Businesses Acquired
Audited financial statements of Cadent will
be filed with the Securities and Exchange
Commission (the "SEC") by amendment on Form
8-K/A on or before September 14, 2000.
(b) Pro Forma Financial Information
Pro forma financial statements will be filed
with the SEC by amendment on Form 8-K/A on or
before September 14, 2000.
(c) Exhibits
A. Merger Agreement and Plan of
Reorganization, dated June 22, 2000, by and among
the Company, Cadent, and the Acquisition
Subsidiary.
B. Escrow Agreement, dated June 21,
2000.
Signatures:
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
CARDIAC SCIENCE, INC.
By: /s/ Raymond W. Cohen
Raymond W. Cohen, President and Chief
Executive Officer
Date: July 15, 2000
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
between
Cardiac Science, Inc.,
Cardiac Acquisition Corp.,
and
Cadent Medical Corporation
Dated June 22, 2000
<PAGE>
MERGER AGREEMENT AND PLAN OF
REORGANIZATION
THIS AGREEMENT AND PLAN OF
REORGANIZATION (this "Agreement") is entered into as
of June 22, 2000 (the "Agreement Date"), by and among
Cardiac Science, Inc., a Delaware Corporation
("Acquiror"), Cardiac Acquisition Corp., a Delaware
corporation ("Merger Sub") and Cadent Medical
Corporation, a Delaware corporation ("Cadent").
R E C I T A L S
A. The Board of Directors of each of Acquiror,
Cadent and Merger Sub deem it in the best interests of
each entity and their respective shareholders that Acquiror
acquire Cadent through the statutory merger of Merger Sub
with and into Cadent (the "Merger") and, in furtherance
thereof, have approved the Merger and the transactions set
forth herein.
B. The combination of Cardiac and Cadent shall
be effected by the terms of this Agreement through a
transaction in which merger Sub will merge with and into
Cadent, Cadent will be the surviving corporation and
become a wholly-owned subsidiary of Cardiac, and the
shareholders of Cadent will become shareholders of
Acquiror.
C. A portion of the Cardiac Merger Shares (as
hereinafter defined) shall be placed in escrow by Acquiror,
the release of which shall be contingent upon certain events
and conditions, as set forth more fully in the Escrow
Agreement attached hereto as Exhibit "A".
D. For Federal income tax purposes it is
intended that the Merger qualify as a reorganization within
the meaning of Section 368(a) of the Code.
E. Acquiror, Merger Sub and Cadent desire to
make certain representations and warranties and other
agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the
covenants, promises and representations set forth herein,
and for other good and valuable consideration, intending to
be legally bound thereby, the parties hereto agree as
follows:
ARTICLE I.
CERTAIN DEFINITIONS
1.1 "Average Closing Price" means the average
of the last reported sales price of one share of Cardiac
Common Stock as quoted on the OTC Bulletin Board (or
such other exchange or quotation system on which Cardiac
Common Shares are then traded or quoted) for the fifteen
consecutive full trading days ending on the third such day
prior to the Closing Date.
1.2 "Cadent Fully Diluted Number" means that
number that is equal to the sum of: (a) the total number of
Cadent Shares that are issued and outstanding immediately
prior to the Closing; plus (b) the total number of Cadent
Shares that are issuable by Cadent upon the exercise of all
Cadent options or convertible securities that are issued and
outstanding immediately prior to the Closing and, in the
case of Cadent options, that are vested or exercisable
immediately prior to the Closing or that will become
exercisable or vested as a result of the Closing.
1.3 "Cadent Intellectual Property" has the
meaning set forth in Section 3.12.
1.4 "Cadent's Knowledge" means the actual
knowledge after reasonable inquiry of Cadent and each of
its officers and directors.
1.5 "Cadent Shares" means issued and
outstanding shares of the capital stock (of any class or
series) of Cadent.
1.6 "Cardiac Common Shares" means the shares
of the Acquiror's Common Stock, $0.001 par value per
share.
1.7 "Cardiac Merger Shares" means Four
Million Two Hundred Thousand (4,200,000) Cardiac
Common Shares.
1.8 "Certificate of Merger" shall have the
meaning ascribed to it in Section 8.2 hereof.
1.9 "Charter Documents" of an entity means the
Certificate of Incorporation and By-Laws of such entity or
any equivalent corporate documents.
1.10 "Claim" means a claim, damage or legal
action or proceeding giving rise to indemnification rights
under this Agreement.
1.11 "Closing" means the closing of the Merger
pursuant to Article VIII.
1.12 "Closing Date" has the meaning set forth in
Section 8.1.
1.13 "Effective Time" shall mean the time of
acceptance by the Secretary of State of Delaware of the
Certificate of Merger.
1.14 "Environmental, Health, and Safety
Requirements" means all statutes, regulations, ordinances
and other provisions having the force or effect of law, all
judicial and administrative orders and determinations, all
contractual obligations and all law concerning public health
and safety, worker health and safety, and pollution or
protection of the environment, including without limitation
all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup
of any Hazardous Materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or
radiation, each as amended and as now or hereafter in
effect.
1.15 "Escrow Agreement" has the meaning set
forth in Section 2.7
1.16 "Exchange Act" means the Securities
Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
1.17 "GAAP" means generally accepted
accounting principles, unless otherwise indicated, of the
United States of America.
1.18 "Governmental Authority" means the United
States of America, the State of Massachusetts, the County
of Middlesex, the City of Bedford, Massachusetts and any
agency, department, commission, board, agency, bureau,
political subdivision or instrumentality of any one or more
of them.
1.19 "Hazardous Material" means any substance
(i) the presence of which requires investigation or
remediation under any applicable law or federal, state or
local statute, regulation, rule, ordinance, order, action,
policy or common law; or (ii) which is or becomes defined
as a "hazardous substance," pollutant or contaminant under
any applicable law or federal, state or local statute,
regulation, rule or ordinance or amendments thereto
including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 6901 et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.); or (iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous and is or becomes
regulated by any Governmental Authority; or (iv) without
limitation which contains gasoline, diesel fuel or other
petroleum hydrocarbons; or (v) without limitation which
contains polychlorinated biphenyls, asbestos or urea
formaldehyde insulation
1.20 "Material Adverse Effect" means with
respect to an entity, any circumstance, change in, or effect
on such entity that, individually or in the aggregate with
any other circumstances, changes in, or effects on such
entity, (i) is or is reasonably likely to be materially adverse
to the condition (financial or otherwise), business,
properties or results of operations of such entity, taken as
a whole, or (ii) could reasonably have an adverse effect the
ability of such entity to perform its obligations hereunder
or consummate the transactions contemplated hereby
1.21 "Merger" means the statutory merger of
Merger Sub into Cadent.
1.22 "Projected Balance Sheet" shall have the
meaning ascribed to it in Section 3.7 hereof.
1.23 "SEC" means the U.S. Securities and
Exchange Commission.
1.24 "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations
promulgated thereunder.
1.25 "Shareholders" shall mean all of the
shareholders of Cadent.
1.26 "Shareholders Agreement" means that certain
agreement, dated as of the date hereof, among the Acquiror
and certain other individuals and entities party thereto.
1.27 "Subsidiary" of an entity means a
corporation or other business entity in which such entity
owns, directly or indirectly, at least a fifty percent (50%)
interest or that is otherwise, directly or indirectly,
controlled by such entity.
1.28 "Surviving Corporation" has the meaning set
forth in Section 2.1.
ARTICLE II.
THE MERGER
2.1 The Merger. Subject to the terms and
conditions of this Agreement and the Delaware General
Corporations Law ("Delaware Law"), at the Closing,
Merger Sub shall be merged with and into Cadent, the
separate corporate existence of Merger Sub shall cease, and
Cadent shall continue as the Surviving Corporation and as
a wholly-owned subsidiary of Acquiror. Cadent, as the
surviving corporation after the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
2.2 Effect of the Merger. At the Effective
Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting
the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers
and franchises of Cadent and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties
of Cadent and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
2.3 Certificate of Incorporation; Bylaws.
2.3.1 Unless otherwise determined by
Acquiror prior to the Effective Time, at the Effective
Time, the Certificate of Incorporation of Merger Sub shall
be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law
and such Certificate of Incorporation; provided, however,
that Article I of the Articles of Incorporation of the
Surviving Corporation shall be amended to read as follows:
"The name of the corporation is Cadent Medical
Corporation."
2.3.2 Unless otherwise determined by
Acquiror, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter
amended.
2.4 Directors and Officers. The director(s) of
Merger Sub immediately prior to the Effective Time shall
be the initial director(s) of the Surviving Corporation, each
to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the
Bylaws of the Surviving Corporation.
2.5 Maximum Shares to Be Issued; Effect on
Capital Stock. The maximum number of Cardiac Common
Shares to be issued in exchange for the acquisition by
Acquiror of all outstanding Cadent Shares (as defined in
Section 3.3.2) shall be the Cardiac Merger Shares. Subject
to the terms and conditions of this Agreement, as of the
Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Cadent or the
Shareholders, the following shall occur:
2.5.1 Conversion of Cadent Shares. Each
of the Cadent Shares issued and outstanding immediately
prior to the Effective Time (other than any Dissenting
Shares (as defined and to the extent provided in
Section 2.6)) will be canceled and extinguished and be
converted automatically into the right to receive that
number of shares of Cardiac Merger Shares as is set forth
in Schedule 2.5.1 attached hereto upon surrender of the
certificate representing such Cadent Shares in the manner
provided in Section 2.9.
2.5.2 Capital Stock of Merger Sub. Each
share of stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid and
nonassessable share of stock of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership
of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
2.6 Dissenting Shares.
2.6.1 Notwithstanding any provision of this
Agreement to the contrary, any Cadent Shares held by a
Shareholder who has demanded and perfected appraisal or
dissenters' rights for such shares and who, as of the
Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("Dissenting Shares") shall
not be converted into or represent a right to receive
Cardiac Merger Shares pursuant to Section 2.5.1, but the
holder thereof shall only be entitled to such rights as are
granted by Delaware Law.
2.6.2 Notwithstanding the provisions of
subsection (a), if any holder of Cadent Shares who
demands appraisal of such shares under Delaware Law
shall effectively withdraw or lose (through failure to perfect
or otherwise) the right to appraisal, then, as of the later of
the Effective Time and the occurrence of such event, such
holder's shares shall automatically be converted into and
represent only the right to receive Cardiac Merger Shares
as provided in Section 2.5.1, upon surrender of the
certificate representing such shares.
2.6.3 Cadent shall give Acquiror (i) prompt
notice of any written demands for appraisal of any Cadent
Shares, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received
by Cadent and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for
appraisal under Delaware Law. Cadent shall not, except
with the prior written consent of Acquiror, voluntarily
make any payment with respect to any demands for
appraisal of capital stock of Cadent or offer to settle or
settle any such demands.
2.7 Escrow. Notwithstanding anything to the
contrary contained in this Agreement, promptly after the
Effective Time, Acquiror shall deposit into an escrow fund
(the "Escrow Fund") a stock certificate or certificates
representing ten percent (10%) of the total number of
Cardiac Merger Shares (rounded down to the nearest whole
share) (the "Hold-back Shares") (which shares shall be
withheld from each Shareholder ratably based on the
number of Cadent Shares held by such Shareholder
immediately prior to the Effective Time). The Escrow
Fund shall be administered and distributed pursuant to the
provisions of the Escrow Agreement in the form attached
hereto as Exhibit "A" (the "Escrow Agreement"). The
Escrow Shares shall be registered in the name of the
Escrow Holder as nominee for the Holders.
2.8 No Fractional Shares. No fractional Cardiac
Common Shares will be issued in connection with the
Merger, but all share amounts issuable to an individual
Shareholder, as set forth in Section 2.1, shall be rounded
down to the nearest whole Cardiac Common Share.
2.9 Surrender of Certificates.
2.9.1 Acquiror to Provide Common Stock.
At the Closing, Acquiror shall make available for exchange
in accordance with this Article II the Cardiac Merger
Shares, minus the Hold-back Shares (as determined
pursuant to Section 2.7), which will be retained and
released as provided in the Escrow Agreement.
2.9.2 Merger Procedures. Upon surrender
of a Cadent share certificate (the "Certificate") for
cancellation, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing
the number of whole shares of Cardiac Merger Shares (less
the Hold-back Shares to be deposited on such holder's
behalf pursuant to Section 2.7 hereof), to which such
Shareholder is entitled pursuant to Section 2.5.1, and the
Certificate so surrendered shall forthwith be canceled. The
Hold-back Shares shall be beneficially owned by the
Shareholder on whose behalf such shares were deposited
and shall be available to compensate Acquiror as provided
in the Escrow Agreement. Until so surrendered, each
outstanding Certificate that, prior to the Closing,
represented a specific number of Cadent Shares will be
deemed from and after the Closing, for all corporate
purposes, other than the payment of dividends, to evidence
the ownership of the number of full shares of Cardiac
Merger Shares into which such shares shall have been so
converted.
2.9.3 Distributions With Respect to
Unexchanged Shares. No dividends or other distributions
with respect to Cardiac Merger Shares declared or made
after the Closing and with a record date after the Closing
will be paid to the holder of any unsurrendered Certificate
with respect to the Cardiac Merger Shares represented
thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing
whole Cardiac Merger Shares, without interest, at the time
of such surrender, the amount of dividends or other
distributions with a record date after the Closing
theretofore payable with respect to such whole Cardiac
Merger Shares.
2.10 No Further Ownership Rights in Acquiror
Capital Stock. All Cardiac Merger Shares issued upon the
surrender for exchange of shares of Cadent Shares in
accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to
such Cadent Shares, and there shall be no further
registration of transfers of Cadent Shares which were
outstanding immediately prior to the Closing.
2.11 Further Assurances. If, at any time after the
Closing, Acquiror considers or is advised that any further
deeds, assignments or assurances are reasonably necessary
or desirable to vest, perfect, confirm or continue in
Acquiror title to (and record, legal and beneficial
ownership of) the Cadent Shares as provided herein,
Acquiror and any of its officers are hereby authorized by
Cadent to execute and deliver all such proper deeds,
assignments and assurances and do all other things
necessary or desirable to vest, perfect, confirm or continue
title to such Cadent Shares in Acquiror, and otherwise to
carry out the purposes of this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
CADENT
Except as set forth in the Disclosure Letter
delivered to Acquiror (which shall specifically reference the
Sections of this Agreement to which specific items of
disclosure therein constitute an exception), Cadent hereby
represents and warrants as follows:
3.1 Organization and Good Standing. Cadent is
a company duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the
power and authority to own, operate and lease its
properties and to carry on its business as now conducted
and is duly qualified to do business and is in good standing
in each jurisdiction where the character of its properties
owned or leased or the nature of its activities make such
qualification necessary (each such jurisdiction being listed
on Schedule 3.1), except where the failure to be so
qualified would not have a Material Adverse Effect on
Cadent.
3.2 Power, Authorization and Validity.
3.2.1 Cadent has the right, power, legal
capacity and authority to enter into and perform its
obligations under this Agreement. This Agreement and all
other agreements set forth herein have been duly and
validly approved by the directors of Cadent.
3.2.2 Other than approval by the
Shareholders, no filing, authorization, consent or approval,
governmental or otherwise, or filing with any governmental
authority or court is necessary to enable Cadent to enter
into, and to perform their respective obligations under, this
Agreement, except for (a) such filings as may be required
to comply with all applicable securities laws, and
(b) consents required under contracts disclosed in
Schedule 3.5.
3.2.3 This Agreement is a valid and binding
obligation of Cadent, enforceable against Cadent in
accordance with its terms, except as to the effect, if any,
of (a) applicable bankruptcy law and other similar laws
affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief or other
equitable remedies and (c) the enforceability of provisions
requiring indemnification in connection with the offering,
issuance and sale of securities.
3.3 Capitalization.
3.3.1 Authorized/Outstanding Capital Stock
of Cadent. The authorized capital stock of Cadent consists
solely of 9,684,000 shares of Common Stock, $0.01 par
value of which 516,627 are issued and outstanding as of the
date hereof and 800,000, 560,000, 860,000, 2,797,000 and
1,993,000 shares, respectively, of Class A, Class B, Class
C, Class D and Class E Preferred Stock, each with par
value $0.01 per share, of which 799,999, 554,657,
859,462, 2,638,086 and 1,754,152, respectively, were
issued and outstanding as of the date hereof, all of which
are held of record and owned by the Shareholders as more
fully set forth on Schedule 3.3.1 hereto. As of the Closing
Date, Cadent will have 2,290,000 shares of Class F
Preferred Stock and 330,000 shares of Class G Preferred
Stock authorized, each with par value $.01 per share,
2,285,714 shares of Class F and 300,000 shares of Class
G will be issued and outstanding. No equity securities of
Cadent shall be issued and outstanding at the time of the
Closing other than Cadent Shares set forth on
Schedule 3.3.1. All issued and outstanding Cadent Shares
have been duly authorized and validly issued, are fully paid
and nonassessable, are not subject to any right of rescission
and have been offered, issued, sold and delivered by
Cadent in compliance with all requirements of applicable
laws. Except as otherwise set forth on Schedule 3.3.1,
there is no liability for dividends accrued and unpaid by
Cadent.
3.3.2 Options/Rights. Except as set forth
on Schedule 3.3.2, there are no stock appreciation rights,
options, warrants, calls, rights, commitments, conversion
privileges or preemptive or other rights or agreements
outstanding to purchase or otherwise acquire any Cadent
Shares (collectively, "Capital Stock") or any securities or
debt convertible into or exchangeable for Capital Stock or
obligating Cadent to grant, extend or enter into any such
option, warrant, call, commitment, conversion privileges or
preemptive or other right or agreement. Except as set
forth on Schedule 3.3.2, there are no voting agreements,
registration rights, rights of first refusal, preemptive rights,
co-sale rights, or other restrictions applicable to any
outstanding securities of Cadent.
3.4 Subsidiaries. Cadent does not have any
Subsidiaries or any equity interest, direct or indirect, in, or
loans to, any corporation, partnership, joint venture,
limited liability company or other business entity.
3.5 No Violation of Certificate or Existing
Agreements. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions
provided for herein, will conflict with, or (with or without
notice or lapse of time, or both) result in a termination,
breach, impairment or violation of, (a) any provision of the
Charter Documents of Cadent, as currently in effect, (b) in
any material respect, any instrument, contract, agreement,
permit, mortgage or license to which Cadent is a party or
by which Cadent or any of its assets is bound or (c) any
judgment, writ, decree, order, statute, rule or regulation
applicable to Cadent or any of its assets or properties.
Except as set forth in Schedule 3.5, the Merger will not
require the consent of any third party.
3.6 Litigation. Except as set forth on
Schedule 3.6, there is no action, proceeding or
investigation pending or, to Cadent's Knowledge,
threatened against Cadent before any court or
administrative agency that, if determined adversely to any
such person or entity may (a) reasonably be expected to
have a Material Adverse Effect on Cadent, or (b) in which
the adverse party or parties seek to recover in excess of
$25,000 against Cadent, or (c) seeks an injunction against
Cadent for any reason, or the Shareholders with regard to
the Merger. There is no reasonable basis for any person,
firm, corporation or entity to assert a claim against Cadent
or, to Cadent's Knowledge, any Shareholder based on
ownership of or entitlement to acquire or purchase any
Cadent Shares or any other securities of Cadent.
3.7 Cadent Financial Statements. Cadent has
delivered to Acquiror Cadent's (i) audited balance sheet as
of December 31, 1999, and the related audited statements
of operations and statements of cash flows for the twelve
month period then ended, and (ii) unaudited balance sheet
as of May 31, 2000, and the related unaudited statement of
operations for the five (5) months then ended, (ii) and a
projected balance sheet (the "Projected Balance Sheet")
dated as of the Closing Date (collectively, the "Cadent
Financial Statements"), a copy of each of which is included
as Schedule 3.7. The Cadent Financial Statements (a) are
in accordance with the books and records of Cadent and
(b) fairly and accurately represent the financial condition of
Cadent at the respective dates specified therein and the
results of operations for the respective periods specified
therein in conformity with GAAP applied on a consistent
basis. Cadent has not incurred any debt, liability or
obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become
due, except for those reflected in the Cadent Financial
Statements or those incurred after May 31, 2000 (the
"Balance Sheet Date") in the ordinary course of Cadent's
business, consistent with past practices that are not material
in amount either individually or collectively.
3.8 Taxes.
3.8.1 For purposes of this Agreement,
(i) "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A
of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar),
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, and (ii) "Tax Return"
means any return, report, information return, other
document, or declaration (including any related or
supporting information) filed or required to be filed with
any taxing authority or jurisdiction (foreign or domestic),
and any documents with respect to or accompanying
requests for the extension of time in which to file a Tax
Return, in connection with the determination, assessment,
collection, administration, or imposition of any Tax.
3.8.2 Cadent has duly and timely, or will
duly and timely file, all Tax Returns due on or before the
Closing Date and has duly and timely paid all Taxes, or
will duly and timely pay (whether or not shown on any Tax
Return) due to any federal, foreign, state, or local taxing
authorities prior to the Closing or has set up an adequate
reserve for all Taxes payable. True and correct copies of
all Tax Returns relating to federal Taxes and state income
and sales Taxes for the period from organization through
the Closing Date have been heretofore delivered to
Acquiror. The accruals and reserves for Taxes contained
in the Financial Statements and carried on the books of
Cadent (other than any reserve for deferred taxes
established to reflect timing differences between book and
tax income) are adequate to cover all Tax liabilities.
Cadent has not incurred any Tax liabilities other than in the
ordinary course of business. There are no Tax liens (other
than liens for current Taxes not yet due) upon any
properties or assets of Cadent (whether real, personal, or
mixed, tangible or intangible). Cadent has not granted or
been requested to grant any extension of the limitation
period applicable to any claim for Taxes or assessments
with respect to Taxes. Cadent is not a party to any Tax
allocation or sharing agreement. Cadent has no liability for
the Taxes of any Affiliated Group under Treasury
Regulation 1.1502-6 (or any similar provision of state,
local, or foreign law). Cadent has withheld and paid all
Taxes required by law to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, or stockholder. Cadent
has never made an election to be treated as an "S"
corporation for federal or state income tax purposes.
3.8.3 Schedule 3.8 lists each jurisdiction in
which Cadent files Tax Returns for each period or portion
thereof ending on or before the Closing Date. Except as
set forth in Schedule 3.8, there is no claim outstanding
against Cadent by any taxing authority in a jurisdiction
where Cadent does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
3.8.4 All material elections with respect to
Taxes affecting Cadent as of the date hereof are set forth
on Schedule 3.8.
3.8.5 Cadent has not (i) filed a consent
pursuant to Section 341(f) of the Code nor agreed to have
Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in
Section 341(f) of the Code) owned by Cadent; (ii) agreed,
or is required to agree, to make any adjustment under
Section 481(a) of the Code by reason of a change in
accounting method or otherwise that will affect adversely
the liability of Cadent for Taxes; (iii) made an election, or
is required to make an election, to treat any asset of Cadent
as owned by another person pursuant to the provisions of
former Section 168(f)(8) of the Code or as tax-exempt bond
financed property or tax-exempt use property within the
meaning of Section 168 of the Code; and (iv) made any of
the foregoing elections and is not required to apply any of
the foregoing rules under any comparable state or local tax
provision.
3.8.6 Cadent is not and has never been a
member of an "affiliated group" of corporations (within the
meaning of Section 1504 of the Code).
3.8.7 Since the date of its incorporation,
Cadent has been reporting its income in accordance with
the accrual method of accounting.
3.8.8 Other than the capital stock identified
in Section 3.3 hereof, there exists no other outstanding
security or instrument of any type (whether issued,
sponsored or guaranteed by Cadent) that constitutes an
equity interest in the Cadent for income tax purposes.
3.8.9 Cadent is not a party to any contract,
agreement, plan or arrangement covering any person that
is reasonably likely to give rise to the payment of any
amount (or the provision of any compensatory benefit) in
connection with the Merger that would not be deductible as
a so-called "parachute payment" by reason of Section 280G
of the Code or subject any payee to any excise tax imposed
under Section 4999 of the Code.
3.8.10 Audits, Investigations or
Claims. No deficiencies for Taxes of Cadent have been
claimed, proposed or assessed by any taxing or other
governmental authority. There are no pending or
threatened audits, assessments or other actions for or
relating to any liability in respect of Taxes of Cadent, and
there are no matters under discussion between Cadent and
any governmental authorities, or known to Cadent, with
respect to Taxes that are likely to result in an additional
liability for Taxes. There have been no audits of federal,
state or local Tax Returns by the relevant taxing
authorities, and neither Cadent nor any predecessor of
Cadent has been notified that any taxing authority intends
to audit a Tax Return for any other period.
3.8.11 Partnerships. Cadent has no
interest in nor is it subject to any joint venture, partnership,
or other arrangement or contract which is treated as a
partnership for federal income tax purposes.
3.8.12 No Withholding. The
transaction contemplated herein is not subject to the tax
withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other
provision of law.
3.8.13 USRPC. Cadent is not and
has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in
section 897(c)(1)(A)(ii) of the Code.
3.9 Title to Properties; Condition of Equipment.
Except as set forth on Schedule 3.9, Cadent has good and
marketable title to all of its assets (including its rights in
Cadent Intellectual Property) used in its business or as
shown on the balance sheet as of the Balance Sheet Date
included in the Cadent Financial Statements, free and clear
of all liens, charges, encumbrances or restrictions (other
than for taxes not yet due and payable and Permitted
Liens), other than such assets, set forth on Schedule 3.9,
as were sold by Cadent in the ordinary course of business
since the Balance Sheet Date or which are subject to
capitalized leases. Such assets are sufficient for the
continued operation of the business of Cadent consistent
with current practice. All leases of real or personal
property to which Cadent is a party are fully effective and
afford Cadent peaceful and undisturbed possession of the
subject matter of the lease. Cadent is not in violation of
any material zoning, building, safety or environmental
ordinance, regulation or requirement or other law or
regulation applicable to the operation of owned or leased
properties that would have a Material Adverse Effect on
Cadent, and Cadent has not received any notice of such
violation with which it has not complied. The machinery
and equipment (the "Equipment") owned or leased by
Cadent is in all material respects (i) suitable for the uses to
which it is currently employed, (ii) in generally good
operating condition, normal wear and tear excepted,
(iii) regularly and properly maintained, (iv) not obsolete,
dangerous or in need of renewal or replacement, except for
renewal or replacement in the ordinary course of business,
and (v) free from any material defects.
3.10 Absence of Certain Changes. Since the
Balance Sheet Date, Cadent has carried on its business in
the ordinary course substantially in accordance with the
procedures and practices in effect on the Balance Sheet
Date, and except as provided in the Projected Balance
Sheet, since the Balance Sheet Date there has not been with
respect to Cadent:
a. any change in the financial
condition, properties, assets, liabilities, business, results of
operations or prospects of Cadent, which change by itself
or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had or
can reasonably be expected to have a Material Adverse
Effect on Cadent or its ability to conduct its business as
presently conducted;
b. any contingent liability
incurred as guarantor or surety with respect to the
obligations of others;
c. any mortgage, encumbrance or
lien placed on any of its properties or granted with respect
to any of its assets which exceeds $25,000;
d. any material obligation or
liability incurred by Cadent other than in the ordinary
course of business;
e. any purchase or sale or other
disposition, or any agreement or other arrangement for the
purchase, sale or other disposition, of any of the properties
or assets of Cadent other than sales of inventory and
purchases of raw materials in the ordinary course of
business;
f. any damage, destruction or
loss, whether or not covered by insurance, materially and
adversely affecting the properties, assets or business of
Cadent;
g. any declaration, setting aside
or payment of any dividend on, or the making of any other
distribution in respect of, the capital stock of Cadent, any
split, stock dividend, combination or recapitalization of the
capital stock of Cadent or any direct or indirect
redemption, purchase or other acquisition by Cadent of the
capital stock of Cadent;
h. any labor dispute or claim of
material unfair labor practices;
i. any change with respect to the
officers or management or supervisory employees of
Cadent (the officers and management and supervisory
employees of Cadent are listed on Schedule 3.10 hereof);
j. any material modification of
the benefits payable or to become payable to any of its
directors or employees, or any increase in the
compensation payable or to become payable to any of the
directors or employees of Cadent, or any bonus payment or
arrangement made to or with any of such directors or
employees, except salary increases (not in excess of 10%
for any individual) in the ordinary course of business
consistent with past practice or as disclosed in
Schedule 3.10;
k. any increase in or modification
of any bonus, pension, insurance or other employee benefit
plan to persons that are not executive officers or directors,
payment or arrangement (including, but not limited to, the
granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its
employees, except in the ordinary course of business
consistent with past practice or as disclosed in
Schedule 3.10;
l. except as otherwise set forth
on Schedule 3.10, any making of any loan, advance or
capital contribution to, or investment in, any person other
than (A) travel loans or advances made in the ordinary
course of business of Cadent and (B) other loans and
advances in an aggregate amount which does not exceed
$25,000 outstanding at any time;
m. any entry into, amendment of,
relinquishment, termination or nonrenewal by Cadent of
any contract, lease transaction, commitment or other right
or obligation other than in the ordinary course of business,
but in no event involving obligations (contingent or
otherwise) of, or payments to Cadent in excess of $25,000
in the aggregate;
n. any payment or discharge of
a material lien or liability thereof, which lien or liability
was not either (i) shown on the balance sheet as of the
Balance Sheet Date included in the Cadent Financial
Statements or (ii) incurred in the ordinary course of
business after the Balance Sheet Date; or
o. any obligation or liability
incurred by Cadent to any of its officers, directors or
Shareholders, or any loans or advances made to any of its
officers, directors, Shareholders or affiliates, except normal
compensation and expense allowances payable to officers;
or
p. any change in any Cadent
product design.
3.11 Agreements and Commitments. Except as
set forth in Schedule 3.11, Cadent is not a party or subject
to any oral or written executory agreement, contract,
obligation or commitment that is material to Cadent, its
financial condition, business or prospects, including but not
limited to the following:
a. any contract, commitment,
letter agreement, quotation or purchase order providing for
payments by or to Cadent in an aggregate amount of
$25,000;
b. any license agreement under
which Cadent is licensor; or under which Cadent is licensee
(except for standard "shrink wrap" licenses for off-the-shelf
software products, the cost of which does not exceed
$1,000 on an individual basis);
c. any agreement by Cadent to
encumber, transfer or sell rights in or with respect to any
Cadent Intellectual Property;
d. any agreement for the sale or
lease of real or personal property involving more than
$25,000 per year;
e. any dealer, distributor, sales
representative, original equipment manufacturer, value
added remarketer, volume purchase agreement or other
agreement for the distribution or sale of Cadent's products
(other than individual purchase orders in the ordinary
course of business);
f. any franchise agreement;
g. any stock redemption or
purchase agreement;
h. any joint venture contract or
arrangement or any other agreement that involves a sharing
of profits with other persons or the payment of royalties to
any other person;
i. any instrument evidencing
indebtedness for borrowed money or guarantees thereof;
j. any contract containing
covenants purporting to limit Cadent's freedom to compete
in any line of business in any geographic area;
k. any agreement of
indemnification other than standard warranties in
connection with the sale of products and/or services in the
ordinary course of business;
l. any agreement, contract or
commitment relating to capital expenditures and which
involves future payments in excess of $25,000;
m. any agreement, contract or
commitment relating to the disposition or acquisition of any
assets) by Cadent or any Cadent Intellectual Property,
which involves payments individually in excess of $25,000
in the aggregate; or
n. any purchase order or contract
for the purchase of raw materials which involves payments
in the aggregate in excess of $25,000.
All agreements, contracts, obligations and
commitments listed in Schedules 3.11 and 3.12 (collectively
"Material Agreements"), are valid and in full force and
effect. Neither Cadent nor, to Cadent's Knowledge, any
other party is in breach of or default under any material
term of any such agreement, obligation or commitment, nor
will Cadent nor, to Cadent's Knowledge, any other party
be in breach of or default under any such term after giving
effect to the Merger. To Cadent's Knowledge, no party to
any such contract, agreement or instrument intends to
cancel, withdraw, modify or amend such contract,
agreement or arrangement.
3.12 Cadent Intellectual Property. Cadent owns
all right, title and interest in, or has the right to make,
have made, use, sell, import, or license, all patent
applications, patents, trademark and service mark
applications, trademarks, service marks, trade names,
domain names, copyright applications, copyrights, trade
secrets, know-how, technology, publicity rights, customer
lists, proprietary processes and formulae, all source and
object code, algorithms, inventions, development tools and
all documentation and media constituting, describing or
relating to the above, including, without limitation,
manuals, memoranda and records and other intellectual
property and proprietary rights used in or reasonably
necessary or required for the conduct of its respective
business as presently conducted and to make, have made,
use, sell, import, or license its respective existing products
under development ("Cadent Intellectual Property"). Set
forth on Schedule 3.12 is a true and complete list of all
copyright, trademark, service mark and domain name
registrations and applications, all patents and patent
applications for Cadent Intellectual Property owned by
Cadent. Except as set forth in Schedule 3.12, to Cadent's
Knowledge, it is not aware of any material loss,
cancellation, termination or expiration of any such
registration or patent. To Cadent's Knowledge, the
business and products of Cadent do not and shall not cause
infringement of the patents, trademarks, service marks,
trade names, domain names, mask works, copyrights, trade
secrets, publicity rights, proprietary rights or other
intellectual property rights of any other person or entity.
Cadent has not received any written or oral claim or notice
of infringement or potential infringement of the intellectual
property of any other person or entity. To Cadent's
Knowledge, there are no royalties, fees or other payments
payable by Cadent to any person or entity by reason of the
ownership, use, license, sale or disposition of Cadent
Intellectual Property (other than as set forth in
Schedule 3.12). Neither the manufacture, marketing, sale,
use or potential use (excluding use of "off-the-shelf"
software products purchased or licensed for a cost not in
excess of $1,000 each) of any product currently licensed or
sold by Cadent or currently under development by Cadent
(i) violates any license or agreement between Cadent and
any third party, or (ii) to Cadent's Knowledge, infringes or
will infringe any third party's intellectual property rights.
Cadent has taken reasonable and practicable steps designed
to safeguard and maintain the secrecy and confidentiality
of, and its proprietary rights in, all material Cadent
Intellectual Property. Cadent is not aware of any
infringement of any Cadent Intellectual Property by any
third party.
3.13 Compliance with Laws. Cadent has
complied and as of the Closing Date is in compliance in all
material respects with all applicable laws, ordinances,
regulations and rules, and all orders, writs, injunctions,
awards, judgments and decrees, applicable to Cadent or to
the assets, properties and business of Cadent, except where
such failure to comply has not had a Material Adverse
Effect on Cadent. Cadent has received all permits and
approvals from, and has made all filings with, third parties,
including Government Authorities, that are necessary to the
conduct of its business as presently conducted, and there
exists no current default under or material violation of any
such permit or approval. Schedule 3.13 includes a
summary of all material violations of, or conflicts with,
any applicable statute, law, rule, regulation, ruling, order,
judgment or decree, and all allegations of any such
violations, of which Cadent has received notice from such
Governmental Authority since December 31, 1996.
3.14 Certain Transactions and Agreements. To
Cadent's Knowledge, no person who is an officer, director
of Cadent, or a member of any officer's, director's
immediate family, (a) has any direct or indirect ownership
interest in or any employment or consulting agreement with
any firm or corporation that competes with Cadent or
Acquiror (except with respect to any interest in less than
1% of the outstanding voting shares of any corporation
whose stock is publicly traded), (b) is directly or indirectly
interested in any material contract or informal arrangement
with Cadent, except for compensation for services as an
officer, director or employee of Cadent as listed in
Schedule 3.15.6, (c) has any interest in any property, real
or personal, tangible or intangible, used in the business of
Cadent, except for the normal rights of a shareholder, or
(d) has had a either directly or indirectly, a material
interest in: (i) any person or entity which purchases from
or sells, licenses or furnishes to Cadent any goods,
property, technology or intellectual or other property rights
or services; or (ii) any contract or agreement to which
Cadent is a party or by which it may be bound or affected.
3.15 Employees.
3.15.1 Cadent is not subject to a
collective bargaining agreement with respect to its
employees and is not subject to any current labor dispute.
Except as set forth in Schedule 3.15, Cadent has had good
labor relations with respect to its employees, and to
Cadent's Knowledge, there are no facts indicating that the
consummation of the transactions provided for herein (other
than the contemplated reductions in work force associated
therewith) will have a Material Adverse Effect on its labor
relations or that any of its officers or management or
supervisory employees, or any significant number of other
employees, intend to leave its employ voluntarily (other
than in connection with the contemplated reductions in
work force associated with the consummation of the
transactions provided for in this Agreement). Between
December 31, 1999 and the date of this Agreement, to
Cadent's Knowledge, no management or supervisory
employee, or significant number of other employees, of
Cadent, has given notice that such employee intends to
terminate his or her employment with Cadent. To Cadent's
Knowledge, there are no activities or proceedings of any
labor union to organize any employees of Cadent and there
are no strikes, or material slowdowns, work stoppages or
lockouts, or threats thereof by or with respect to any
employees of Cadent. Since December 31, 1997, Cadent
has been in compliance in all material respects with all
applicable laws regarding employment practices, terms and
conditions of employment, and wages and hours.
3.15.2 Schedule 3.15.2 contains a list
of all employment and consulting agreements, pension,
retirement, disability, medical, dental or other health plans,
life insurance or other death benefit plans, profit sharing,
deferred compensation agreements, stock, stock option,
bonus or other incentive compensation plans, vacation,
sick, holiday or other paid leave plans, severance plans or
other similar employee benefit plans presently maintained
by Cadent (the "Employee Plans"). Cadent has delivered
true and complete copies or descriptions of all the
Employee Plans, and, the extent applicable, true and
complete copies of (i) the three most recent annual reports
(Form 5500s) for such plans, (ii) each trust agreement
related to such Employee Plans, (iii) the most recent
Internal Revenue Service determination letter issued with
respect to any Employee Plan and (iv) any material contract
regarding the funding arrangements for any Employee Plan.
Each of the Employee Plans, and its operation and
administration, is, in all material respects, in compliance
with all applicable laws and ordinances, orders, rules and
regulations.
3.15.3 Except as set forth in
Schedule 3.15.3, all such Employee Plans that are
"employee pension benefit plans" (as defined in
Section 3(2) of ERISA) which are intended to qualify under
Section 401(a) of the Code have received favorable
determination opinion notification or advisory letters with
respect to such plans that such plans comply with the Tax
Reform Act of 1986 or have remaining a period of time
under applicable treasury regulations or IRS
pronouncements in which to apply for such a letter and
make any amendments necessary to obtain a favorable
determination as to the qualified state of each such
Employee Plan. In addition, Cadent has never been a
participant in a "prohibited transaction" within the meaning
of Section 406 of ERISA which was not otherwise exempt
pursuant to Section 4975 of the Code or Section 408 of
ERISA (including, but not limited to, any individual
exemption granted under Section 408(a) of ERISA) with
respect to any Employee Plan that is an employee pension
benefit plan (as defined in Section 3(2) of ERISA) which
can result in any material liability for Cadent. Except as
set forth in Schedule 3.15.3, no Employee Plans will be
subject to any surrender fees or service fees upon
termination other than the normal and reasonable
administrative fees associated with the termination of
benefit plans. All Employee Plans to the extent applicable,
are in material compliance with (a) the continuation
coverage requirements of Section 4980B of the Code and
Section 601 through 608 of ERISA, (b) the Americans with
Disabilities Act of 1990, as amended, and (c) the Family
and Medical Leave Act of 1993, as amended, and the
regulations thereunder.
3.15.4 To Cadent's Knowledge,
(a) no employee of Cadent is in material violation of any
term of any employment contract or any other contract or
agreement, or any restrictive covenant, with Cadent
relating to the right of any such employee to be employed
by Cadent or to use trade secrets or proprietary information
of others, and (b) the employment of each employee of
Cadent does not subject Cadent to any liability to any third
party to the extent due and payable.
3.15.5 Except as set forth in
Schedule 3.15.5, Cadent is not a party to any (a) agreement
with any executive officer or other key employee of Cadent
(i) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a
transaction involving Cadent in the nature of any of the
transactions contemplated by this Agreement, (ii) providing
any term of employment or compensation guarantee or
(iii) providing severance benefits or other benefits after the
termination of employment of such employee regardless of
the reason for such termination of employment, or
(b) agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be
materially increased, or the vesting of benefits of which
will be materially accelerated, by the occurrence of any of
the transactions contemplated by this Agreement.
3.15.6 A list of all employees and
officers of Cadent and their current compensation and
benefits as of the date of this Agreement is set forth on
Schedule 3.15.6.
3.15.7 All contributions due from
Cadent as of the Balance Sheet Date with respect to any of
the Employee Plans and all employee social security
contributions have been made or accrued on the Cadent
Financial Statements, and no further contributions will be
due or will have accrued thereunder as of the Closing Date,
other than contributions accrued or due in the ordinary
course of business after the Balance Sheet Date.
3.15.8 Cadent is not obligated to
make any excess parachute payment, as defined in
Section 280G(b)(1) of the Code, nor will any excess
parachute payment be deemed to have occurred as a result
of or arising out of the Merger to the extent Section 280G
of the Code is applicable to Cadent.
3.15.9 All Cadent employees have
executed Non-Disclosure and Assignment of Inventions
Agreements in the form attached hereto as Schedule 3.15.9.
3.16 Corporate Documents. Cadent has provided
to Acquiror complete and correct copies of all documents
identified in the Schedules to this Agreement including,
without limitation, the following: (a) copies of Cadent's
Charter Documents as currently in effect; (b) copies of its
minute book containing records of all proceedings,
consents, actions and meetings of each Cadent's directors,
committees of the board of directors and shareholders;
(c) copies of its stock ledger, journal and other records
reflecting all stock issuances and transfers and all stock
option grants and agreements; (d) copies of the Material
Agreements, and all amendments thereto; and (e) all
permits, orders and consents issued by any regulatory
agency with respect to Cadent, or any securities of Cadent,
and all applications for such permits, orders and consents.
3.17 No Brokers. Except as disclosed on
Schedule 3.17, Cadent is not obligated for the payment of
fees or expenses of any investment banker, broker or finder
in connection with the origin, negotiation or execution of
this Agreement in connection with any transaction provided
for herein.
3.18 Disclosure. The Disclosure Letter to this
Agreement and any of the certificates or documents to be
delivered by Cadent to Acquiror under this Agreement,
taken together, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements contained herein and therein,
in light of the circumstances under which such statements
were made, not misleading.
3.19 Books and Records. The books, records and
accounts of Cadent (a) are in all material respects true and
complete, (b) have been maintained in accordance with
reasonable business practices on a basis consistent with
prior years, (c) are stated in reasonable detail and
accurately and fairly reflect the transactions and
dispositions of the assets of Cadent and (d) accurately and
fairly reflect the basis for the Cadent Financial Statements.
Cadent maintains a system of internal accounting controls
sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with
management's general or specific authorization;
(b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with U.S.
GAAP, and (ii) to maintain accountability for assets, and
(c) the amount recorded for assets on the books and records
of Cadent is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
3.20 Insurance. Cadent maintains for itself, fire,
casualty and liability insurance as listed on Schedule 3.20.
All premiums heretofore due under all such policies and
bonds have been paid and Cadent is otherwise in full
compliance in all material respects with the terms of such
policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Cadent does not
know of any threatened termination of, or premium
increase (except standard increases in the industry) with
respect to, any of such policies.
3.21 Environmental, Health, and Safety Matters.
To Cadent's Knowledge:
3.21.1 Each of Cadent, its
predecessors and affiliates have complied and is in
compliance with all Environmental, Health, and Safety
Requirements in all material respects.
3.21.2 Neither Cadent, nor, to
Cadent's Knowledge, any of its respective predecessors or
affiliates have received any written notice regarding any
actual or alleged violation of Environmental, Health, and
Safety Requirements, or any liabilities or potential
liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to any of them
or its facilities arising under Environmental, Health, and
Safety Requirements.
3.21.3 To Cadent's Knowledge, none
of the following exists at any property or facility owned or
operated by Cadent: (a) underground storage tanks,
(b) Hazardous Materials or (c) landfills, surface
impoundments or disposal areas.
3.21.4 To Cadent's Knowledge, no
facts, events or conditions relating to past or present
facilities, properties or operations of each of Cadent, its
predecessors and affiliates will prevent, hinder or limit
continued compliance with Environmental, Health, and
Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give
rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to
Environmental, Health, and Safety Requirements, including
without limitation any relating to onsite or offsite releases
or threatened releases of hazardous materials, substances or
wastes, personal injury, property damage or natural
resources damage.
3.22 Suppliers. Cadent has no any outstanding
material disputes greater than $10,000 concerning goods or
services provided by any supplier who, in the fiscal year
ended December 31, 1999, was one of the twenty largest
suppliers of goods and services to Cadent, based on
amounts paid ("Significant Supplier"). Cadent has not
received any written notice of a termination or interruption
of any existing contracts or arrangements with any
Significant Suppliers. Cadent has access, on commercially
reasonable terms, to all goods and services reasonably
necessary to Cadent to carry on its business as currently
conducted, and there is nothing to Cadent's Knowledge to
give it reason to believe that it will not continue to have
such access on commercially reasonable terms.
3.23 Restrictions on Business Activities. There is
no agreement, judgment, injunction, order or decree
binding upon Cadent or which has or could reasonably be
expected to have the effect of prohibiting or materially
impairing any business practice of Cadent, any acquisition
of property by Cadent or the conduct of business of Cadent
as currently conducted or as currently proposed to be
conducted.
3.24 Bank Accounts. Schedule 3.24 sets forth the
names and locations of all banks, trust companies, savings
and loan associations, and other financial institutions at
which Cadent maintains accounts of any nature and the
names of all persons authorized to draw thereon or make
withdrawals therefrom.
3.25 Other Entities' Liabilities. Cadent has no
liabilities, contingent or otherwise with respect to the
operations, transactions, liabilities or obligations of any
other entity.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR
Acquiror hereby represents and warrants, that,
except as set forth on the Schedules attached hereto:
4.1 Organization. Acquiror is duly organized
and validly existing under the laws of the State of
Delaware, and has the corporate power and authority to
own, operate and lease its properties and to carry on its
business as now conducted and as proposed to be
conducted, and is qualified to do business in each
jurisdiction in which such qualification is required. Merger
Sub was organized on June 9, 2000, and validly exists,
under the laws of the State of Delaware for the sole
purpose of effecting the Merger and enabling the Acquiror
to become the sole shareholder of Cadent as of the
Effective Time and, except for its organization and this
Agreement and the transactions contemplated hereby,
Merger Sub has not entered into any transaction and has no
assets, nor any indebtedness, liabilities or other obligations
of any kind, contingent or otherwise.
4.2 Power, Authorization and Validity.
4.2.1 Acquiror and Merger Sub each have
the right, power, legal capacity and authority to enter into
and perform its respective obligations under this Agreement
and the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the
Escrow Agreement have been duly and validly approved
and authorized by all necessary corporate and shareholder
action of each of Acquiror and Merger Sub.
4.2.2 No filing, authorization, consent or
approval, governmental or otherwise, is necessary to enable
Acquiror or Merger Sub to enter into, and to perform their
respective obligations under this Agreement, except for
(a) such post-Closing filings as may be required to comply
with federal and state securities and other applicable laws;
and (b) consents obtained prior to the Closing Date.
4.2.3 This Agreement when executed by
Acquiror and Merger Sub will be their, valid and binding
obligations of each respectively, enforceable in accordance
with their respective terms, except as to the effect, if any,
of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other
equitable remedies and (c) the enforceability of provisions
requiring indemnification in connection with the offering,
issuance or sale of securities.
4.3 Capitalization. The authorized share capital
of Acquiror consists of 40,000,000 shares of Common
Stock, $0.001 par value per share, of which 12,800,000
shares are issued and outstanding as of the date hereof, and
1,000,000 shares of preferred stock $0.001 par value per
share, of which no shares are issued and outstanding as of
the date hereof. Merger Sub is authorized to issue 1,000
shares of Common Stock, .001 par value, all of which are
issued and outstanding as of the date hereof. All of the
issued and outstanding shares of Acquiror Common Stock
are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All issued
and outstanding shares of Merger Sub are owned by
Acquiror free and clear of all security interests, liens,
claims, pledges, agreements, limitations on Acquiror's
voting rights, charges or other encumbrances of any nature.
All of the Cardiac Merger Shares will be, when issued in
accordance with this Agreement, duly authorized, validly
issued, fully paid and nonassessable, and will not be
subject to any preemptive rights or rights of first refusal
created by statute, the charter documents of Acquiror or
any agreement to which Acquiror is a party.
4.4 No Violation of Existing Agreements.
Neither the execution and delivery of this Agreement nor
the Cadent Shareholders Agreement, nor the consummation
of the transactions contemplated hereby, will conflict with
or (with or without notice or lapse of time, or both) result
in a termination, breach, impairment or violation of (a) any
provision of the Certificate of Incorporation or Bylaws of
Acquiror, as currently in effect, (b) in any material respect,
any material agreement, instrument or contract to which
Acquiror is a party or by which Acquiror is bound, or
(c) any national, provincial, local or foreign judgment,
writ, decree, order, statute, rule or regulation applicable to
Acquiror or its assets or properties.
4.5 Litigation. Except as set forth in the
Disclosure Package (as defined in Section 4.7), there is no
action, proceeding or investigation pending or, to
Acquiror's actual knowledge, threatened against Acquiror
or Acquiror before any court or administrative agency that,
if determined adversely to Acquiror or Acquiror, may
reasonably be expected to have a Material Adverse Effect
on Acquiror or Acquiror.
4.6 Absence of Certain Changes. Since
March 31, 2000, there has not been any change in the
financial condition, properties, assets, liabilities, business
or results of operations of Acquiror, which change by itself
or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had or
can reasonably be expected to have a Material Adverse
Effect on Acquiror.
4.7 Disclosure. Acquiror has previously
furnished or made available to Cadent complete and
accurate copies, as amended or supplemented, of:
(a) Acquiror's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, as filed with the SEC; and
(b) all other reports filed by Acquiror under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act
with the SEC since December 31, 1999, including, without
limitation, its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000; (the reports listed in
subsections (a) and (b) are collectively referred to herein as
the "Acquiror Reports"). The Acquiror Reports constitute
all of the documents required to be filed by Acquiror under
Section 13 or subsections (a) or (c) of Section 14 of the
Exchange Act with the SEC from December 31, 1999
through the date of this Agreement. The Acquiror Reports
complied in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder
when filed. As of their respective dates, the Acquiror
Reports did not contain any untrue statement of a material
fact or omit 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. The audited financial statements and unaudited
interim financial statements included in the Acquiror
Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto when filed,
(ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto,
and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act),
(iii) fairly present the consolidated financial condition,
results of operations and cash flows of Acquiror as of the
respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records
of Acquiror.
ARTICLE V.
PRECLOSING COVENANTS OF CADENT AND
THE SHAREHOLDERS
During the period from the date of this Agreement
until the Closing Date, Cadent covenants and agrees with
Acquiror as follows:
5.1 Advice of Changes. Cadent will promptly
advise Acquiror's President, in writing, to the extent of the
knowledge of any of Cadent's officers (a) of any event
occurring subsequent to the date of this Agreement that
would render any representation or warranty of Cadent
contained in this Agreement, if made on or as of the date
of such event or the Closing Date, untrue or inaccurate in
any material respect and (b) of any Material Adverse Effect
with respect to Cadent.
5.2 Maintenance of Business. The parties hereto
understand and acknowledge that it is their intent to work
closely together during the period from the date hereof
until the Closing Date. If Cadent becomes aware of a
material deterioration in the relationship with any material
customer, supplier or key employee, Cadent will promptly
bring such information to the attention of Acquiror in
writing and, if requested by Acquiror, will exert all
commercially reasonable efforts to restore the relationship.
5.3 Conduct of Business. Cadent will continue
to conduct its business in the ordinary course consistent
with the manner as heretofore conducted and, to the extent
consistent therewith, use all commercially reasonable
efforts to preserve intact its current business organization,
keep available the services of its current officers and
employees and preserve its relationship with customers,
suppliers, licensors, licensees, distributors and others
having business dealings with it. Without limiting the
foregoing, prior to the Closing, Cadent will not enter into
any transaction or agreement or take any action out of the
ordinary course without the prior written consent of
Acquiror, including, without limitation:
a. borrow any money in excess
of the aggregate amount of $25,000 that remains due and
payable after the Closing;
b. enter into any transaction, or
make any payment or capital expenditure, that is not in the
ordinary course of business or that is inconsistent with past
practice, or enter into any transaction, or make any
payment or commitment, involving an expense or capital
expenditure in excess of an aggregate of $25,000;
c. encumber or permit to be
encumbered any of its assets except in the ordinary course
of its business consistent with past practice and to an extent
which is not material;
d. dispose of any of its assets
except sales of inventory in the ordinary course of business
consistent with past practice;
e. enter into any material lease
or contract for the purchase or sale of any property, real or
personal, tangible or intangible, except in the ordinary
course of business consistent with past practice, or enter
into agreement which would be a Material Agreement if in
effect on the date hereof;
f. fail to maintain its equipment
and other assets in good working condition and repair
according to the standards it has maintained to the date of
this Agreement, subject only to ordinary wear and tear;
g. pay any bonus, royalty,
increased salary or special remuneration to any director,
officer or Shareholder who is an employee of or consultant
to Cadent or pay bonuses, royalties, increased salaries or
special remunerations to employees who are not directors,
officers or Shareholders of Cadent or enter into any new
employment or consulting agreement with any such person,
or enter into any new agreement or plan of the type
described in Section 3.15.2, except as otherwise disclosed
on Schedule 5.3(g);
h. change accounting methods, or
materially reduce, write off or write down the value of any
asset;
i. declare, set aside or pay any
cash or stock dividend or other distribution in respect of its
capital stock, or redeem or otherwise acquire any of its
capital stock;
j. amend or terminate any
contract, agreement or license to which it is a party except
those amended or terminated in the ordinary course of
business, consistent with past practice, and which are not
material in amount or effect;
k. lend any amount to any person
or entity, other than advances to employees for travel and
expenses which are incurred in the ordinary course of
business consistent with past practice, not material in
amount, which travel and expenses shall be documented by
receipts for the claimed amounts;
l. guarantee or act as a surety
for any obligation except for the endorsement of checks and
other negotiable instruments in the ordinary course of
business, consistent with past practice which are not
material in amount;
m. waive or release any material
right or claim except in the ordinary course of business,
consistent with past practice;
n. issue or sell any shares of its
capital stock of any class or any other of its securities, or
issue or create any warrants, obligations, subscriptions,
options, convertible securities, stock appreciation rights or
other commitments to issue shares of capital stock, or
accelerate the vesting of any outstanding option or other
security;
o. split or combine the
outstanding shares of its capital stock of any class or enter
into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or
affecting any other of its securities;
p. except for the Merger, merge,
consolidate or reorganize with, or acquire any entity;
q. except as set forth on
Schedule 5.3(q), amend its Charter Documents;
r. agree to any audit assessment
by any tax authority or file any income or franchise tax
return unless copies of such returns have been delivered to
Acquiror for its review prior to filing;
s. enter into any agreements,
including but not limited to license, assignment or joint
venture agreements, that may affect the Cadent Intellectual
Property;
t. change any insurance
coverage;
u. make any material payments
outside the ordinary course of its business;
v. commence a lawsuit other than
(i) for the routine collection of bills, or (ii) in such cases
where it in good faith determines that failure to commence
suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with
Acquiror prior to the filing of such a suit;
w. agree to do any of the things
described in the preceding clauses 5.3(a) through 5.3(v); or
x. make any material design, or
other material changes, in any existing products of Cadent.
5.4 Regulatory Approvals. Cadent will execute
and file, or join in the execution and filing, of any
application or other document that may be reasonably
necessary in order to obtain the authorization, approval or
consent of any governmental body which may be
reasonably required, or which Acquiror may reasonably
request, in connection with the consummation of the
transactions provided for in this Agreement. Cadent will
use all commercially reasonable efforts to obtain or assist
Acquiror in obtaining all such authorizations, approvals and
consents.
5.5 Necessary Consents. Cadent will use its
commercially reasonable efforts to obtain such written
consents and take such other actions as may be reasonably
necessary or appropriate to facilitate and allow the
consummation of the transactions provided for herein and
to facilitate and allow Acquiror to carry on Cadent's
business after the Closing.
5.6 Litigation. Cadent will notify Acquiror in
writing promptly after learning of any action, suit,
proceeding or investigation by or before any court or
Governmental Authority, initiated by or against Cadent or
threatened against it.
5.7 No Other Negotiations. From the date
hereof until the termination of this Agreement (provided
such termination is not in breach of this Agreement) or the
consummation of the Merger, except as required by the
Board of Directors of Cadent in fulfillment of its fiduciary
duties under Delaware Law, Cadent will not, and will not
authorize any officer, director, employee or affiliate of
Cadent, or any other person, on its or their behalf, directly
or indirectly, to (a) solicit, facilitate, discuss or encourage
any offer, inquiry or proposal received from any party
other than Acquiror, concerning the possible disposition of
all or any substantial portion of Cadent's business, assets
or capital stock by merger, sale or any other means or to
otherwise solicit, facilitate, discuss or encourage any such
disposition (other than the Exchange), or (b) provide any
confidential information to or negotiate with any third party
other than Acquiror in connection with any offer, inquiry
or proposal concerning any such disposition. Cadent will
immediately notify Acquiror of any such offer, inquiry or
proposal.
5.8 Satisfaction of Conditions Precedent. Cadent
will use all commercially reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent which are
set forth in Article IX, and will use all commercially
reasonable efforts to cause the transactions provided for in
this Agreement to be consummated, and, without limiting
the generality of the foregoing, to make all filings with,
and give all notices to, third parties that may be necessary
or reasonably required on its part in order to effect the
transactions provided for herein.
5.9 Securities Laws. Cadent shall use all
reasonable efforts to assist Acquiror, to the extent
necessary, to comply with the securities laws of all
jurisdictions applicable in connection with the Merger;
provided, however, that Acquiror shall be responsible for
all costs and expenses associated with such compliance.
5.10 Investigation of Tax Elections. Cadent will
cooperate with the Acquiror to permit the Acquiror to
determine what, if any, material Tax elections Cadent has
made which are not reflected on Schedule 3.8, and in
connection with such investigation, Cadent shall provide
copies of all Tax Returns filed or to be filed by or on
behalf of Cadent and all other documentation which
Acquiror shall reasonably request and shall cause Cadent's
auditors and attorneys to assist in such investigation.
ARTICLE VI.
ACQUIROR PRECLOSING COVENANTS
During the period from the Agreement Date until
the Closing Date, Acquiror covenants to and agrees as
follows:
6.1 Regulatory Approvals. Acquiror will
execute and file, or join in the execution and filing, of any
application, notification or other document that may be
necessary in order to obtain the authorization, approval or
consent of any governmental body which may be
reasonably required, or which Cadent may reasonably
request, in connection with the consummation of the
transactions provided for in this Agreement. Acquiror will
use all commercially reasonable efforts to obtain all such
authorizations, approvals and consents.
6.2 Satisfaction of Conditions Precedent.
Acquiror will use all commercially reasonable efforts to
cause the transactions provided for in this Agreement to be
consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third
parties and to make all filings with, and give all notices to,
third parties that may be necessary or reasonably required
on its part in order to effect the transactions provided for
herein.
6.3 Litigation. Acquiror will notify Cadent in
writing promptly after learning of any material action, suit,
proceeding or investigation by or before any court, board
or governmental agency, initiated by or against Acquiror or
threatened against it.
6.4 No Severance Payments. Acquiror shall
have no responsibility for any severance payment to any
Cadent employee terminated prior to the Closing.
6.5 Regulatory Approvals. Acquiror will
execute and file, or join in the execution and filing, of any
application or other document that may be necessary in
order to obtain the authorization, approval or consent of
any governmental body which may be reasonably required,
or which Cadent may reasonably request, in connection
with the consummation of the transactions provided for in
this Agreement. Acquiror will use all reasonable efforts to
obtain or assist Cadent in obtaining all such authorizations,
approvals and consents.
6.6 Necessary Consents. Acquiror will use its
reasonable efforts to obtain such written consents and take
such other actions as may be necessary or appropriate to
facilitate and allow the consummation of the transactions
provided for herein and to facilitate and allow Acquiror to
carry on Cadent's business after the Closing.
ARTICLE VII.
ADDITIONAL AGREEMENTS
7.1 Cadent Shareholder Approval. As promptly
as practicable after the execution of this Agreement and at
such time as is permitted by applicable law, Cadent shall
submit this Agreement and the transactions contemplated
hereby to its shareholders for approval and adoption as
provided by Delaware Law and its Charter Documents.
Cadent shall use its best efforts to solicit and obtain the
consent of its Shareholders sufficient to approve the Merger
and this Agreement and to enable the Closing to occur as
promptly as practicable. Cadent has made available to its
Shareholders the terms of the Merger and this Agreement
and the unanimous recommendation of the Board of
Directors of the Cadent in favor of the Merger and this
Agreement.
7.2 Access to Information. Each party shall
afford the others and its accountants, counsel and other
representatives, reasonable access during normal business
hours during the period prior to the Effective Time to
(a) all of its properties, books, contracts, commitments and
records, and (b) all other information concerning the
business, properties and personnel (subject to restrictions
imposed by applicable law) of it as the others may
reasonably request, subject, in the case of Acquiror, to
reasonable limits on access to its technical and other
nonpublic information.
7.3 Expenses. Whether or not the Merger is
consummated, all fees and expenses incurred in connection
with the Merger including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees
and expenses of third parties incurred by a party in
connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the
respective party incurring such fees and expenses.
7.4 Consents. Cadent shall use all commercially
reasonable efforts to obtain the consents, waivers and
approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers
and approvals are set forth in Cadent Schedules) so as to
preserve all rights of and benefits to Cadent thereunder.
7.5 Notification of Certain Matters. Cadent shall
give prompt notice to Acquiror, and Acquiror shall give
prompt notice to Cadent, of (i) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty
of Cadent and Acquiror, respectively, contained in this
Agreement to be untrue or inaccurate at or prior to the
Effective Time and (ii) any failure of Cadent or Acquiror,
as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 7.5 shall not limit or
otherwise affect any remedies available to the party
receiving such notice.
ARTICLE VIII.
CLOSING MATTERS
8.1 The Closing. Subject to termination of this
Agreement as provided in Article X below, the Closing
will take place as promptly as practicable, but no later than
five (5) business days following satisfaction or waiver of
the conditions set forth in Article IX, at the offices of
Stradling Yocca Carlson & Rauth, 660 Newport Center
Drive, Suite 1600, Newport Beach, California on June 23,
2000 (the "Closing Date").
8.2 Certificate of Merger. On the Closing Date,
the parties hereto shall cause the Merger to be
consummated by filing Certificate of Merger (or like
instrument) with the Delaware Secretary of State (the
"Certificate of Merger"), in accordance with the relevant
provisions of applicable law.
ARTICLE IX.
CONDITIONS TO OBLIGATIONS
9.1 The obligations of Acquiror hereunder are
subject to the fulfillment or satisfaction on, and as of the
Closing, of each of the following conditions (any one or
more of which may be waived by Acquiror, but only in a
writing signed on behalf of Acquiror by the President of
Acquiror):
9.1.1 Accuracy of Representations and
Warranties. The representations and warranties of Cadent
set forth in Article III shall be true and accurate in all
material respects on and as of the Closing.
9.1.2 Closing Certificate. Acquiror shall
receive a certificate to the effect that the requirements of
Section 9.1.1 have been satisfied signed an executive
officer of Cadent.
9.1.3 Compliance with Law. There shall
be no order, decree, or ruling by any court or
governmental agency or threat thereof, or any other fact or
circumstance, which would prohibit or render illegal the
transactions provided for in this Agreement.
9.1.4 Government Consents. There shall
have been obtained at or prior to the Closing Date such
permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the
Merger by any regulatory authority having jurisdiction over
the parties and the actions herein proposed to be taken,
including but not limited to satisfaction of all requirements
under applicable securities laws, and any applicable notices
shall have been filed and waiting periods terminated or
expired under any statute or governmental regulation.
9.1.5 Opinion of Cadent's Counsel.
a. Acquiror shall have received
from Nutter, McClennen & Fish, LLP counsel to Cadent,
an opinion in the form attached hereto as Exhibit "B", with
regard to the transactions contemplated in this Agreement,
in form and substance reasonably satisfactory to the
Acquiror.
b. Acquiror shall have received
that certain opinion of Choate, Hall & Stewart, dated as of
May 24, 2000 and previously delivered to Acquiror
regarding the Cadent Intellectual Property, updated as of
the Closing, addressed to Acquiror and stating to the effect
that Acquiror is entitled to rely on the legal opinions
contained therein.
9.1.6 Consents. Acquiror shall have
received duly executed copies of all material third-party
consents, approvals, assignments, waivers, authorizations
or other certificates contemplated by this Agreement or
reasonably deemed necessary by Acquiror's legal counsel
to provide for the continuation in full force and effect of
any and all Material Agreements and any other material
contracts and leases of Cadent and for the consummation of
the transactions contemplated hereby in form and substance
reasonably satisfactory to Acquiror.
9.1.7 No Litigation. No litigation or
proceeding shall be pending for the purpose or with the
probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by
this Agreement or which would have a Material Adverse
Effect on Cadent.
9.1.8 Satisfactory Form of Legal and
Accounting Matters. The form, scope and substance of all
closing documents delivered hereunder shall be reasonably
acceptable to Acquiror.
9.1.9 Stockholder Approval. The principal
terms of this Agreement shall have been approved by the
Shareholders as required by Cadent's Charter Documents
and applicable law. Holders of more than 80% of the
outstanding Cadent Shares shall have executed the written
consent approving the Merger, the Escrow Agreement, the
Cadent Shareholders Agreement and the transactions set
forth herein and therein, provided, however, that Cadent
shall use its reasonable best efforts to get the holders of at
least 95% of the outstanding Cadent Shares to execute the
said written consent.
9.1.10 Unaudited Financial
Statements. Acquiror shall have received copies of
Cadent's balance sheet as of May 31, 2000, and Cadent's
statement of operations for the period then ended, in
conformity with GAAP.
9.1.11 Dividends. All accrued
and unpaid dividends referred to on Schedule 3.3.1 shall
have been extinguished in full at or prior to the Closing.
9.2 The obligations of Cadent hereunder are
subject to the fulfillment or satisfaction on, and as of, the
Closing, of each of the following conditions (any one or
more of which may be waived by Cadent, but only in a
writing signed on behalf of Cadent by the Chief Executive
Officer of Cadent):
9.2.1 Accuracy of Representations and
Warranties. The representations and warranties of
Acquiror set forth in Article IV shall be true and accurate
in all material respects on and as of the Closing.
9.2.2 Closing Certificate. Cadent shall
receive a certificate to the effect that the requirements of
Section 9.2.1 have been satisfied signed by an executive
officer of Acquiror.
9.2.3 Compliance with Law. There shall
be no order, decree, or ruling by any court or
governmental agency or threat thereof, or any other fact or
circumstance, which would prohibit or render illegal the
transactions provided for in this Agreement.
9.2.4 Government Consents. There shall
have been obtained at or prior to the Closing Date such
permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the
Merger by any regulatory authority having jurisdiction over
the parties and the actions herein proposed to be taken,
including but not limited to satisfaction of all requirements
under applicable securities laws, and any applicable notices
shall have been filed and waiting periods terminated or
expired under any statute or governmental regulation.
9.2.5 Opinion of Acquiror's Counsel.
Acquiror shall have received from Stradling Yocca Carlson
and Rauth, counsel to Acquiror, an opinion in the form
attached hereto as Exhibit "C", with regard to the
transactions contemplated in this Agreement, in form and
substance reasonably satisfactory to Cadent.
9.2.6 Consents. Cadent shall have received
duly executed copies of all material third-party consents,
approvals, assignments, waivers, authorizations or other
certificates contemplated by this Agreement for the
consummation of the transactions contemplated hereby in
form and substance reasonably satisfactory to Cadent.
9.2.7 No Litigation. No litigation or
proceeding shall be pending for the purpose or with the
probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by
this Agreement.
ARTICLE X.
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be
terminated at any time prior to the Closing:
a. by the mutual written consent
of Acquiror and Cadent;
b. by Cadent, if there has been
a breach by Acquiror of any representation, warranty,
covenant or agreement set forth in this Agreement on the
part of Acquiror, or if any representation of Acquiror will
have become untrue, in either case which has or can
reasonably be expected to have a Material Adverse Effect,
and which Acquiror failed to cure within a reasonable time,
not to exceed ten (10) days after written notice thereof
(except that no cure period will be provided for a breach
by Acquiror which by its nature cannot be cured);
c. by Acquiror, if there has been
a breach by Cadent of any representation, warranty,
covenant or agreement set forth in this Agreement on the
part of Cadent, or if any representation of Cadent will have
become untrue, in either case which has or can reasonably
be expected to have a Material Adverse Effect, and which
Cadent failed to cure within a reasonable time, not to
exceed ten (10) days after written notice thereof (except
that no cure period will be provided for a breach by Cadent
which by its nature cannot be cured); or
d. by any party, if (i) the Merger
shall not have been consummated by July 15 for any
reason; provided, however, that the right to terminate this
Agreement under this Section 10.1(d)(i) shall not be
available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the
Merger, as the case may be, to occur on or before such
date if such action or failure to act constitutes a breach of
this Agreement; or (ii) a permanent injunction or other
order by any court which would make illegal or otherwise
restrain or prohibit the consummation of the Merger will
have been issued and will have become final and
nonappealable.
e. Any termination of this
Agreement under this Section 10.1 will be effective by the
delivery of written notice of the terminating party to the
other party hereto.
10.2 Certain Continuing Obligations. Following
any termination of this Agreement pursuant to
Section 10.1, the parties hereto will continue to perform
their respective obligations under Article XI but will not be
required to continue to perform their other covenants under
this Agreement.
10.3 Effect of Termination. In the event of
termination of this Agreement as provided in Section 10.1,
this Agreement shall forthwith become void and there shall
be no liability or obligation on the part of Acquiror,
Merger Sub or the Cadent, or their respective officers,
directors or shareholders, provided that each party shall
remain liable solely for any knowingly made breach of this
Agreement prior to its termination; and provided further
that, the provisions of Sections 7.3 and 12.16 of this
Agreement shall remain in full force and effect and survive
any termination of this Agreement.
10.4 Extension; Waiver. At any time prior to the
Effective Time, Acquiror and Merger Sub, on the one
hand, and the Cadent, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of
any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made
to such party contained herein or in any document
delivered pursuant hereto, and (iii) waive compliance with
any of the agreements or conditions for the benefit of such
party 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.
ARTICLE XI.
CONTINUING COVENANTS
11.1 Termination of Representations. The
representations and warranties of Cadent set forth in this
Agreement will remain operative and in full force and
effect for a period of one (1) year following the Closing
Date (the "Expiration Date"), regardless of any
investigation made or on behalf of the parties to this
Agreement; provided, however, that no claim for violations
of any representation and warranty (absent fraud or
deliberate malfeasance) shall be made unless Acquiror
gives written notice thereof to Cadent on or prior to the
Expiration Date.
11.2 Special Share Pool. Acquiror covenants and
agrees to issue on January 2, 2001 to the individuals set
forth on Schedule 11.2 the number of Cardiac Common
Shares set forth opposite their respective names, provided
that in order for Acquiror to be obligated to issue any such
shares to a particular individual, such person must have
complied in all material respects with the provisions of any
agreement he may have with Cadent concerning non-
competition between himself and Cadent. Any shares for
which the Acquiror is not obligated to issue on January 2,
2001 pursuant to the terms of this Section 11.2 shall be
immediately deposited in the Escrow Fund and treated as
Hold-back Shares for the purposes of this Agreement. Any
shares issued pursuant to this Section 11.2 shall be deemed
"Registrable Shares" as such term is defined in the
Shareholder Agreement.
11.3 Employee Share Pool.
a. Acquiror covenants and agrees
to issue on or before January 2, 2001 to the individuals set
forth on Schedule 11.3 the number of shares of Cardiac
Common Shares (the "Employee Shares") set forth opposite
their respective names on Schedule 11.3, provided that in
order for Acquiror to be obligated to issue any shares to a
particular individual, such person must (i) be employed by
Acquiror or any subsidiary or affiliate thereof on
January 2, 2001 (except in the case of such employee's
death or permanent disability), (ii) have been terminated by
Acquiror other than for Cause (as defined below), or
(iii) have terminated his or her own employment for Good
Reason (as defined below). Any shares for which the
Acquiror is not obligated to issue on January 2, 2001
pursuant to the terms of this Section 11.3 shall be
immediately deposited in the Escrow Fund and treated as
Hold-back Shares for the purposes of this Agreement.
b. Acquiror covenants and agrees
that, as promptly as practicable following the Closing, the
Acquiror shall file with the SEC a Registration Statement
on Form S-8 in compliance with the Securities Act
covering the resale of the Employee Shares and will use all
commercially reasonable efforts to maintain the
effectiveness of such Registration Statement for a period of
not less than two years.
c. For the purposes of this
Agreement, "Cause" means a good faith finding by
Acquiror of: (i) gross negligence or willful misconduct by
an employee in connection with his or her employment
duties, (ii) repeated failure by an employee to perform his
or her duties or responsibilities required pursuant to his or
her employment, or (iii) his or her indictment for,
conviction of, or entry of a plea of no contest with respect
to, any felony. For the purposes of this Agreement, "Good
Reason" means the occurrence of any of the following
conditions without the employee's consent which condition
continues after notice by employee to Acquiror and a
reasonable opportunity to cure such condition: (i) a
decrease in employee base salary, (ii) relocation of
employee's work place to a location more than 10 miles
from his or her current business location, or (iii) his or her
professional assignment to a position where the duties of
the position are either outside such employee's area of
professional expertise, if any, or substantially reduced from
the level of responsibility maintained by such employee at
Cadent prior to the Merger.
11.4 Employee Benefit Matters. Acquiror agrees
to provide the employees of Cadent who remain employed
after the Closing Date (collectively, the "Transferred
Company Employees") with the types and levels of
employee benefits maintained by Acquiror for similarly
situated employees of Acquiror. As soon as
administratively practicable after the Effective Time,
Acquiror shall permit the Transferred Company Employees
to participate in Acquiror's group hospitalization, medical,
life and disability insurance plans, employee pension
benefit plan and similar plans, if any, on the same terms
and conditions as applicable to comparable employees of
Acquiror (including the waiver of pre-existing conditions,
restrictions, exclusions or limitations), giving Transferred
Company Employees full credit for all "years of service,"
as that term is defined in Section 411(a)(5) of the Code,
with Cadent (to the extent Cadent gave effect) as if such
service was with Acquiror, for purposes of eligibility, and
calculation of benefits under vacation, severance and other
plans; provided that no such obligation shall be imposed on
Acquiror with respect to the issuance of any of its capital
stock or other securities or the granting of any options, or
other rights, to purchase any of its securities or the terms
of any plan or agreement related to such securities.
11.5 Treatment of the Merger for Income Tax
Purposes. Each of the parties expect and intend that the
Merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code, and each agrees to
comply with Treasury Regulation Section 1.368.3.
11.6 Representation on Board of Directors.
a. Effective as of the Closing
Date, the Acquiror and its Board of Directors shall take all
action as is reasonably necessary and within its control to
elect Robert Carpenter and Brian Dovey (each, a "Cadent
Director") to the Board of Directors as soon as practicable.
b. For so long as it or one of its
affiliates holds at least 50% of the shares of Acquiror
Common Stock issued to it in connection with the Merger,
HFC-Cadent, L.P. ("HFC") shall be entitled to designate
an individual to sit as an observer (the "Hunt Observer") of
the Board of Directors of the Acquiror, and to be present
in person or by telephone at any meeting of the Acquiror's
Board of Directors or any committee thereof and to receive
copies of the same written materials presented to the other
directors at such meetings or for their action by written
consent, provided that the Hunt Observer keeps in strict
confidence the content of such meetings and written
materials, other than disclosures made internally to HFC,
or its affiliates, reasonably necessary to carry out its
function as the observer for HFC or as compelled by law.
Acquiror shall give the Hunt Observer notice of the time
and place of the meetings of the Acquiror Board of
Directors or its committees and the written materials to be
presented thereto at the same time and on the same basis as
it notifies the members of its Board of Directors.
11.7 Indemnification.
a. From and after the Effective
Time, Acquiror agrees that it will, or will cause the
Surviving Corporation to, indemnify each present and
former director and officer of Cadent (the "Indemnified
Executives") who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including
any such actions suit or proceeding initiated by Cadent or
in the right of Cadent) arising by reason of the fact that
such person is or was a director, officer or employee of
Cadent against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually
and reasonably incurred by such Indemnified Executive in
connection with such action, suit, or proceeding, whether
asserted or claimed prior to, at or after the Effective Time,
to the fullest extent permitted under Delaware Law if such
person acted in good faith and in a manner such
Indemnified Executive reasonably believed to be in, or not
opposed to, the best interest of the corporation and, with
respect to any criminal action or proceeding, had no
reasonable cause to believe that such Indemnified
Executive's conduct was unlawful. Acquiror or the
Surviving Corporation shall promptly reimburse the
expenses of such person that are actually and reasonably
incurred to the fullest extent permitted under Delaware
Law, provided that such person promises in writing to
repay such advances if such person is not ultimately
successful on the merits or otherwise in defense of any
action, suit or preceding referred to above.
b. In the event Acquiror or any
of its successors or assigns (i) consolidates with or mergers
into any other person or entity and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or
substantially all of its assets to any person, then, and in
each such case, to the extent necessary, proper provision
shall be made so that the successors and assigns of
Acquiror assume the obligations set forth in this Section
11.7.
c. The provisions of this Section
11.7 are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Executive and his or her
heirs and representatives.
ARTICLE XII.
GENERAL PROVISIONS
12.1 Dispute Resolution. Any dispute hereunder
not otherwise settled by the parties ("Dispute") shall be
resolved by arbitration in or around Boston, Massachusetts,
and, except as herein specifically stated, in accordance with
the commercial arbitration rules of the American
Arbitration Association ("AAA Rules") then in effect.
However, in all events, these arbitration provisions shall
govern over any conflicting rules which may now or
hereafter be contained in the AAA Rules. Upon
appointment, the arbitrator shall establish procedures which
(i) allow for limited and reasonable discovery in
preparation for a hearing on the merits of the Dispute;
(ii) permit the holding of such hearing within ninety (90)
days, unless the parties agree or the arbitrator concludes
that the Dispute requires additional time to prepare for
hearing; and (iii) issue his award in writing within thirty
(30) days from the time that the hearing on the merits of
the Dispute is concluded. Notwithstanding anything to the
contrary set forth in this Agreement, any dispute relating
to intellectual property matters shall be deemed not to fall
within the definition of "Dispute" and any and all such
disputes shall be adjudicated before a court of law.
12.1.1 Compensation of Arbitrator.
Any such arbitration will be conducted before a single
arbitrator who will be compensated for his or her services
at a rate to be determined by the parties or by the
American Arbitration Association, but based upon
reasonable hourly or daily consulting rates for the arbitrator
in the event the parties are not able to agree upon his or
her rate of compensation.
12.1.2 Selection of Arbitrator. The
American Arbitration Association will have the authority to
select an arbitrator from a list of arbitrators who are
lawyers familiar with California contract law as
appropriate; provided, however, that such lawyers cannot
work, or have worked within the last five (5) years, for a
firm then performing services for either party, that each
party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may
wish and that the American Arbitration Association will
select the arbitrator from the list of arbitrators as to whom
neither party makes any such objection. If the foregoing
procedure is not followed, each party will choose one
person from the list of arbitrators provided by the
American Arbitration Association (provided that such
person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the
American Arbitration Association the person who will act
as the arbitrator.
12.1.3 Payment of Costs. Acquiror,
on the one hand, and the Shareholders, on the other, will
bear the expense of deposits and advances required by the
arbitrator in equal proportions, but either party may
advance such amounts, subject to recovery as an addition
or offset to any award. The arbitrator will award to the
prevailing party, as determined by the arbitrator, all costs,
fees and expenses related to the arbitration, including
reasonable fees and expenses of attorneys, accountants and
other professionals incurred by the prevailing party. If
Acquiror is required to pay any costs, fees or expenses of
the Shareholders pursuant to this Section 12.1.3, Acquiror
shall pay such amounts directly to the Shareholders'
attorneys, accountants or other professionals, as
appropriate, and shall not under any circumstances pay
such amounts to the Shareholders or to persons related to
any of them.
12.1.4 Burden of Proof. For any
Dispute submitted to arbitration, the burden of proof will
be as it would be if the claim were litigated in a judicial
proceeding instituted regarding the Dispute before a court
of competent jurisdiction over the subject matter located in
the State of California.
12.1.5 Award and Enforcement.
Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the
basis and reasons for any decision reached and will deliver
such documents to each party to this Agreement along with
a signed copy of the award. In rendering the decision and
award, the arbitrator shall follow the substantive law
selected by the parties in Section 12.1, provided, however,
that the arbitrator may not award punitive damages. Any
judgment upon the award rendered by the arbitrator may be
entered and enforced in any court having jurisdiction over
the subject matter thereof. The arbitrator shall have the
authority to grant any equitable and legal remedies that
would be available in any judicial proceeding instituted in
a court of competent jurisdiction over the subject matter
located in the State of California to resolve a Dispute.
12.1.6 Terms of Arbitration. The
arbitrator chosen in accordance with these provisions will
not have the power to alter, amend or otherwise affect the
terms of these arbitration provisions or the provisions of
this Agreement.
12.2 Assignment; Binding upon Successors and
Assigns. Neither party hereto may assign any of its rights
or obligations hereunder without the prior written consent
of the other parties hereto. Any purported assignment in
violation of this Section 12.2 shall be void. This
Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and
permitted assigns.
12.3 Severability. If any provision of this
Agreement, or the application thereof, will for any reason
and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such
provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes
of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be
executed in any number of counterparts, each of which will
be an original as regards any party whose signature appears
thereon and all of which together will constitute one and
the same instrument. This Agreement will become binding
when one or more counterparts hereof, individually or
taken together, will bear the signatures of both parties
reflected hereon as signatories. The delivery of a signature
page of this Agreement by one party to the other party via
facsimile transmission shall constitute the execution and
delivery of this Agreement by the transmitting party.
12.5 Other Remedies. Except as otherwise
provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and
not exclusive of any other remedy conferred hereby or by
law on such party, and the exercise of any one remedy will
not preclude the exercise of any other.
12.6 Amendment and Waivers. The observance
of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to
be bound thereby. The waiver by a party of any breach
hereof or default in the performance hereof will not be
deemed to constitute a waiver of any other default or any
succeeding breach or default. Any term or provision of
this Agreement may be amended, either retroactively or
prospectively, only by an agreement in writing signed by
Acquiror and Cadent.
12.7 No Waiver. The failure of any party to
enforce any of the provisions hereof will not be construed
to be a waiver of the right of such party thereafter to
enforce such provisions.
12.8 Attorneys' Fees. Should any arbitration or
any suit be brought to enforce or interpret any part of this
Agreement, each party shall be responsible for its own
costs and attorneys' fees.
12.9 Notices. Any notice or other communication
required or permitted to be given under this Agreement will
be in writing, will be delivered personally or by registered
or certified mail, postage prepaid, and will be deemed
given upon delivery, if delivered personally, or three days
after deposit in the mails, if mailed, to the following
addresses:
(i) If to Acquiror:
Cardiac Science, Inc.
16931 Millikan Ave.
Irvine, CA 92606
Telecopy: (949) 951-7315
Attention: President
with a copy to:
Stradling Yocca Carlson &
Rauth
660 Newport Center Drive,
Suite 1600
Newport Beach, CA 92660
Telecopy: (949) 725-4100
Attention: Shivbir S.
Grewal
(ii) If to Cadent:
Cadent Medical Corporation
19 Crosby Drive, Suite 220
Bedford, MA 01730
Telecopier: (781) 275-9522
Attention: John Geisel
with a copy to:
Nutter, McClennen & Fish,
LLP
One International Place
Boston, Massachusetts
02110-2699
Telecopier: (617) 973-9748
Attention: Constantine
Alexander, Esq.
or to such other address as a party may have furnished to
the other parties in writing pursuant to this Section 12.9.
12.10 Stamp Duty. Any stamp duty, transfer tax
or similar tax payable in connection with the transfer of
Cadent Shares by any Shareholder shall be payable by such
Shareholder.
12.11 Construction of Agreement. This Agreement
has been negotiated by the respective parties hereto and
their attorneys and the language hereof will not be
construed for or against either party. A reference to a
Section or an exhibit will mean a Section in, or exhibit to,
this Agreement unless otherwise explicitly set forth. The
titles and headings herein are for reference purposes only
and will not in any manner limit the construction of this
Agreement which will be considered as a whole. All
personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all
other genders.
12.12 No Joint Venture. Nothing contained in this
Agreement will be deemed or construed as creating a joint
venture or partnership between any of the parties hereto.
No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party.
No party will have the power to control the activities and
operations of any other and their status is, and at all times
will continue to be, that of independent contractors with
respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in
contravention of this Section 12.12.
12.13 Further Assurances. Each party agrees to
cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give
such further written assurances as may be reasonably
requested by any other party to evidence and reflect the
transactions described herein and contemplated hereby and
to carry into effect the intents and purposes of this
Agreement.
12.14 Absence of Third Party Beneficiary Rights.
No provisions of this Agreement are intended, nor will be
interpreted, to provide or create any third party beneficiary
rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner or any party hereto
or any other person or entity unless specifically provided
otherwise herein, and, except as so provided, all provisions
hereof will be personal solely between the parties to this
Agreement; provided, that, (a) the provisions of Article II
concerning the issuance of the Cardiac Merger Shares are
intended for the benefit of and shall be enforceable by the
Shareholders and their heirs and representatives, (b) the
provisions of Section 11.3 and 11.4 are intended for the
benefit of and shall be enforceable by the employees of
Cadent and their heirs and representatives and (c) the
provisions of Section 11.2 are intended for the benefit of
and shall be enforceable by the individuals set forth on
Schedule 11.2 and their heirs and representatives.
12.15 Public Announcement. Upon execution of
this Agreement, Acquiror will issue a press release
announcing the transactions contemplated by this
Agreement and will give Cadent an opportunity to review
and comment upon such release prior to its issuance.
12.16 Confidentiality. Cadent and Acquiror each
recognize that they have received and will receive
confidential information concerning the other during the
course of negotiations and preparations for the Merger.
Accordingly, Acquiror and Cadent each agrees (a) to use
its respective all reasonable efforts to prevent the
unauthorized disclosure of any confidential information
concerning the other that was or is disclosed during the
course of such negotiations and preparations, and is clearly
designated in writing as confidential at the time of
disclosure, and (b) to not make use of or permit to be used
any such confidential information other than for the
purpose of effectuating the transactions contemplated by
this Agreement. The obligations of this Section 12.16 will
not apply to information that (i) is or becomes part of the
public domain, (ii) is disclosed by the disclosing party to
third parties without restrictions on disclosure, (iii) is
received by the receiving party from a third party without
breach of a nondisclosure obligation to the other party or
(iv) is required to be disclosed by law. If this Agreement
is terminated, all copies of documents containing
confidential information shall be returned by the receiving
party to the disclosing party.
12.17 Entire Agreement. This Agreement, the
Escrow Agreement and the Shareholder Agreement and the
exhibits, schedules and appendices hereto constitute the
entire understanding and agreement of the parties hereto
with respect to the subject matter hereof, subject to
provisions of law applicable to this Agreement and the
transactions provided for herein, and supersede all prior
and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or
oral, between the parties with respect hereto. The express
terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of
the terms hereof.
12.18 Interpretation. The words "include,"
"includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained
in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
12.19 Governing Law. This Agreement shall be
governed by and construed in accordance with the internal
laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of
conflicts of laws hereof.
12.20 Definition of Satisfaction. Any provision of
this Agreement which provides that a matter must be
satisfactory to a party shall be deemed to require that such
party determine its satisfaction reasonably, whether or not
expressly so stated.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the Agreement Date.
"Acquiror"
Cardiac Science, Inc.
By:________________________________
Raymond Cohen, President
Merger Sub"
Cardiac Acquisition Corp.
By:
Raymond Cohen, President
"Cadent"
Cadent Medical Corporation
By:
John R. Geisel, Chief Executive Officer
EXHIBIT B
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made as
of June 21, 2000 by and among U.S. Bank, N.A., as
escrow agent (the "Escrow Agent"), Cardiac Science, Inc.,
a Delaware corporation ("Cardiac"), Cadent Medical
Corporation, a Delaware corporation ("Cadent"), the
Shareholders listed on Schedule A attached hereto (the
"Shareholders"), and David Castaldi and Stephen Smiley,
as representatives of the Shareholders of Cadent (as further
defined herein, the "Securityholder Agent").
RECITALS
A. Cardiac, Cadent, and Cardiac Acquisition
Corp., a Delaware corporation ("Merger Sub"), are parties to
that certain Agreement and Plan of Merger, dated as of June
23, 2000 (the "Merger Agreement") pursuant to which Cardiac
will acquire Cadent through the statutory merger of Merger
Sub with and into Cadent (the "Merger").
B. The Merger Agreement requires that 420,000
Cardiac Merger Shares representing 10% of the total number
of Cardiac Merger Shares being issued as consideration for the
Merger be placed into an escrow by Cardiac to be available as
the sole remedy for Cardiac and its affiliates for any Claims
(as defined below) as more fully set forth herein (the "Hold-
back Shares").
C. Capitalized terms used herein without definition
shall have the meanings designated for them in the Merger
Agreement unless the context requires otherwise.
NOW, THEREFORE, it is hereby mutually agreed by
all parties hereto as follows:
1.1 Acknowledgment of Receipt of Merger
Agreement. The Escrow Agent hereby acknowledges receipt
of a copy of the Merger Agreement, but except for reference
thereto regarding definitions of certain words or terms not
defined herein, the Escrow Agent is not charged with any
duties or responsibilities thereunder. This Escrow Agreement
shall become effective at the Closing Date as defined in the
Merger Agreement.
1.2 Escrow Arrangements.
(a) Escrow Fund. At the Closing, the
Shareholders of Cadent will be deemed to have received and
deposited the Hold-back Shares (plus any additional shares as
may be issued upon any stock split, stock dividend,
recapitalization or similar event effected by Cardiac after the
Closing of the Merger) with the Escrow Agent without any act
of any Shareholder. As soon as practicable after the Closing,
the Hold-back Shares, without any act of any Shareholder, will
be deposited with U.S. Bank, N.A. (or other institution
acceptable to Cardiac and the Securityholder Agent (as further
defined below) as Escrow Agent (the "Escrow Agent")), such
deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein and at Cardiac's cost
and expense. The portion of the Hold-back Shares contributed
on behalf of each Shareholder of Cadent shall be in proportion
to the aggregate Cardiac Merger Shares which such holder
would otherwise be entitled under the terms of the Merger
Agreement. No portion of the Escrow Fund shall be
contributed in respect of any Cadent options or warrants.
(b) Claims/Exclusive Remedy. The Hold-
back Shares shall be the exclusive and sole remedy available
to Cardiac and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including
reasonable attorneys' fees and expenses, and reasonable
expenses of investigation and defense, but not in any event
including any consequential or punitive damages (hereinafter
individually a "Loss" and collectively "Losses") incurred by
Cardiac, its officers, directors, or affiliates directly or
indirectly as a result of (i) any breach of a representation or
warranty of Cadent contained in the Merger Agreement (as
modified by Cadent Schedules thereto), (ii) any failure by
Cadent to perform or comply with any covenant contained
therein, or (iii) Cadent's dispute with any employee. Cardiac
and Cadent each acknowledge that such Losses, if any, would
relate to unresolved contingencies existing at the Effective
Time, which if resolved at the Effective Time would have led
to a reduction in the aggregate Merger consideration. Cardiac
may not receive any Hold-back Shares from the Escrow Fund
unless and until Officer's Certificates (as defined in Section
1.2(e) below) identifying Losses that exceed $25,000 in the
aggregate have been delivered to the Escrow Agent as
provided in Section 1.2(f) below; in such case, Cardiac may
recover from the Escrow Fund a number of Hold-back Shares
equal to its total Losses, including the $25,000 threshold
amount.
(c) Escrow period; Distribution of Escrow
Fund. The Escrow Agent shall release the remaining Hold-
back Shares of the Escrow Fund as soon as practicable after
5:00 p.m., Pacific time, on June 30, 2001 ("Escrow Period");
provided that the Escrow Period shall not terminate with
respect to such amount (or some portion thereof) that together
with the aggregate amount remaining in the Escrow Fund is
necessary in the reasonable judgment of Cardiac, subject to the
objection of the Securityholder Agent and the subsequent
arbitration in the manner provided in Section 1.2(g) hereof, to
satisfy any unsatisfied claims concerning facts and
circumstances existing prior to the termination of such Escrow
Period specified in any Officer's Certificate delivered to the
Escrow Agent prior to termination of the Escrow Period. As
soon as all such claims have been resolved, the Escrow Agent
shall deliver to the Shareholders the remaining portion of the
Escrow Fund not required to satisfy such claims. Deliveries
of Hold-back Shares to the Shareholders pursuant to this
Section 1.2(c) shall be made in proportion to their respective
original contributions to the Escrow Fund. In the event that
all of the Hold-back Shares have not been distributed to the
former Shareholders of Cadent as of June 30, 2001, the
Securityholder Agent may require the Escrow Agent to sell the
remaining shares of Cardiac Common Stock in the Escrow
Fund for the purposes of substituting the proceeds of such sale
for such shares.
(d) Protection of Escrow Fund.
(i) The Escrow Agent shall hold
and safeguard the Escrow Fund during the Escrow Period,
shall treat such fund as a trust fund in accordance with the
terms of this Agreement and not as the property of Cardiac
and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
(ii) Any additional Cardiac Merger
Shares and/or other equity securities issued or distributed by
Cardiac (including shares issued upon a stock split, stock
dividend, recapitalization or similar event) ("New Shares") in
respect of the Hold-back Shares in the Escrow Fund which
have not been released shall be added to the Escrow Fund and
become a part thereof. New Shares issued in respect of the
Hold-back Shares which have been released from the Escrow
Fund shall not be added to the Escrow Fund but shall instead
be distributed to the recordholders thereof. Cash dividends on
the Hold-back Shares shall not be added to the Escrow Fund
but shall instead be distributed to the recordholders thereof.
(iii) Each Shareholder shall have
voting rights and receive all distributions with respect to the
Hold-back Shares contributed to the Escrow Fund by such
Shareholder (and on any voting securities added to the Escrow
Fund in respect of such Hold-back Shares), and Cardiac agrees
that all Hold-back Shares shall be reflected and shown on
Cardiac's financial statements as issued and outstanding.
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow
Agent at any time on or before the last day of the Escrow
Period of a certificate signed by any officer of Cardiac (an
"Officer's Certificate"): (A) stating that Cardiac has paid or
properly accrued or reasonably anticipates that it will have to
pay or accrue Losses, and (B) specifying in reasonable detail
the individual items of Losses included in the amount so
stated, the date each such item was paid or properly accrued,
or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which
such item is related, the Escrow Agent shall, subject to the
provisions of Sections 1.2(g) and 1.2(h) hereof, deliver to
Cardiac from the Escrow Fund a number of Hold-back Shares
equal to such Losses, as determined below.
(ii) For the purposes of determining
the number of Hold-back Shares to be returned to Cardiac out
of the Escrow Fund pursuant to Section 1.2(e)(i) above, each
Hold-back Share shall be valued at the Average Closing Price.
Cardiac and the Securityholder Agent shall certify such fair
market value in a certificate signed by both Cardiac and the
Securityholder Agent, and shall deliver such certificate to the
Escrow Agent.
(f) Objections to Claims. At the time of
delivery of any Officer's Certificate to the Escrow Agent, a
duplicate copy of such certificate shall be delivered to the
Securityholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to
Cardiac of any Hold-back Shares pursuant to Section 1.2(e)
hereof unless the Escrow Agent shall have received written
authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period,
the Escrow Agent shall make delivery of Hold-back Shares
from the Escrow Fund in accordance with Section 1.2(e)
hereof, provided that no such payment or delivery may be
made if the Securityholder Agent shall object in a written
statement to the claim made in the Officer's Certificate, and
such statement shall have been delivered to the Escrow Agent
prior to the expiration of such thirty (30) day period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent
shall so object in writing to any claim or claims made in any
Officer's Certificate, the Securityholder Agent and Cardiac
shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the
Securityholder Agent and Cardiac should so agree, a
memorandum setting forth such agreement shall be prepared
and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on
any such memorandum and distribute shares of Cardiac
Merger Shares from the Escrow Fund in accordance with the
terms hereof.
(ii) If no such agreement can be
reached after good faith negotiation, either Cardiac or the
Securityholder Agent may demand arbitration of the matter
unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter
shall be settled by arbitration conducted by three arbitrators.
Cardiac and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The arbitrators shall set a limited time period
and establish procedures designed to reduce the cost and time
for discovery while allowing the parties an opportunity,
adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the
subject matter of the dispute. The arbitrators shall rule upon
motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and
costs, to the extent as a court of competent law or equity,
should the arbitrators determine that discovery was sought
without substantial justification or that discovery was refused
or objected to without substantial justification. The decision
of a majority of the three arbitrators as to the validity and
amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 1.2(f) hereof, the
Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written
and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree
or order awarded by the arbitrators.
(iii) Judgment upon any award
rendered by the arbitrators may be entered in any court having
jurisdiction. Any such arbitration shall be held in or around
Boston, Massachusetts under the rules then in effect of the
American Arbitration Association. For purposes of this
Section 1.2(g), in any arbitration hereunder in which any claim
or the amount thereof stated in the Officer's Certificate is at
issue, Cardiac shall be deemed to be the "Non-Prevailing
Party" in the event that the arbitrators award Cardiac less than
the sum of one-half (1/2) of the disputed amount plus any
amounts not in dispute; otherwise, the Shareholders as
represented by the Securityholder Agent shall be deemed to be
the "Non-Prevailing Party". The Non-Prevailing Party to an
arbitration shall pay its own expenses, the fees of any
arbitrator, the administrative costs of the arbitration and the
expenses, including without limitation, reasonable attorneys'
fees and costs, incurred by the other party to the arbitration.
(h) Securityholder Agent of the
Shareholders; Power of Attorney.
(i) In the event that the Merger is
approved by the Shareholders, effective upon such vote, and
without further act of any Shareholder, David Castaldi shall be
appointed as agent and attorney-in-fact, and if the occasion
shall arise that his service as such is required at a time when
he is unavailable for any reason, then Stephen Smiley is
hereby appointed his replacement for such occasion with full
authority to so act as agent and attorney-in-fact (the
"Securityholder Agent") for each Shareholder (except such
Shareholders, if any, as shall have perfected their appraisal or
dissenters' rights under Delaware Law), for and on behalf of
the Shareholders, to give and receive notices and
communications, to authorize delivery to Cardiac Hold-back
Shares from the Escrow Fund in satisfaction of claims by
Cardiac, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of the Securityholder
Agent for the accomplishment of the foregoing. The
Securityholder Agent has full power and authority to act on
behalf of the Shareholders. Such agency may be changed by
the Shareholders from time to time upon not less than thirty
(30) days prior written notice to Cardiac; provided that the
Securityholder Agent may not be removed unless holders of
a two-thirds interest in the Escrow Fund agree to such removal
and to the identity of the substituted agent. Any vacancy in
the position of the Securityholder Agent may be filled by
approval of the holders of a majority in interest of the Escrow
Fund. No bond shall be required of the Securityholder Agent,
and the Securityholder Agent shall not receive compensation
for his or her services. Notices or communications to or from
the Securityholder Agent shall constitute notice to or from
each of the Shareholders.
(ii) The Securityholder Agent shall
not be liable for any act done or omitted hereunder as
Securityholder Agent while acting in good faith and in the
exercise of reasonable judgment. The Shareholders on whose
behalf the Hold-back Shares were contributed shall severally
indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, liability or
expense incurred without negligence or bad faith on the part
of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by
the Securityholder Agent.
(iii) The Securityholder Agent shall
be entitled to recover from the Hold-back Shares expenses
incurred by him in responding to third party claims which
could give rise to losses, up to a maximum of $50,000.
(iv) The Securityholder Agent shall
be entitled to recover his reasonable out-of-pocket expenses
incurred by him in carrying out his duties hereunder (other
than with respect to subsection (iii) above) from the Hold-back
Shares being released from the Escrow upon expiration of the
Escrow Period pursuant to Section 1.2(c).
(i) Actions of the Securityholder Agent.
A decision, act, consent or instruction of the Securityholder
Agent shall constitute a decision of all the Shareholders with
respect to claims against the Escrow Fund and shall be final,
binding and conclusive upon each of such Shareholders, and
Cardiac may rely upon any such decision, act, consent or
instruction of the Securityholder Agent as being the decision,
act, consent or instruction of each every such Shareholder.
Cardiac is hereby relieved from any liability to any person for
any acts done by it in accordance with such decision, act,
consent or instruction of the Securityholder Agent.
(j) Third-Party Claims. In the event
Cardiac becomes aware of a third-party claim which Cardiac
believes may result in a demand against the Escrow Fund,
Cardiac shall notify the Securityholder Agent of such claim,
and the Securityholder Agent, as representative for the
Shareholders, shall be entitled, at their expense, to participate
in any defense of such claim. The Securityholder Agent will
have the right to undertake the defense of such action, except
that Cardiac shall be entitled to retain the defense of any third-
party action or claim that involves potential losses in excess of
the Escrow Fund, or could reasonably be expected to affect
Cardiac's ongoing operations, or if the Securityholder Agent
does not elect, within twenty (20) days after receipt of notice
of such claim, to defend the claim. The Securityholder Agent
shall not settle any such claim without the consent of Cardiac,
which shall not be unreasonably withheld. Cardiac shall not
settle any such claim without the consent of the Securityholder
Agent, which shall not be unreasonably withheld. In the event
that the Securityholder Agent has consented to any such
settlement, the Securityholder Agent shall have no power or
authority to object under any provision of this Agreement to
the amount of any claim by Cardiac against the Escrow Fund
with respect to such settlement.
(k) Escrow Agent's Duties.
(i) The Escrow Agent shall be
obligated only for the performance of such duties as are
specifically set forth herein, and as set forth in any additional
written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by
an officer of Cardiac and the Securityholder Agent, and may
rely and shall be protected in relying or refraining from acting
on any instrument reasonably believed to be genuine and to
have been signed or presented by the proper party or parties.
The Escrow Agent shall not be liable for any act done or
omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done
or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby
expressly authorized to comply with and obey orders,
judgments or decrees of any court of law, notwithstanding any
notices, warnings or other communications from any party or
any other person to the contrary. In case the Escrow Agent
obeys or complies with any such order, judgment or decree of
any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be
liable in any respect on account of the identity, authority or
rights of the parties executing or delivering or purporting to
execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(iv) The Escrow Agent shall not be
liable for the expiration of any rights under any statute of
limitations with respect to this Agreement or any documents
deposited with the Escrow Agent.
(v) In performing any duties under
the Agreement, the Escrow Agent shall not be liable to any
party for damages, losses or expenses, except for gross
negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability
for (A) any act or failure to act made or omitted in good faith,
or (B) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in
good faith believe to be genuine, nor will the Escrow Agent
be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In
addition, the Escrow Agent may consult with the legal counsel
in connection with Escrow Agent's duties under this
Agreement and shall be fully protected in any act taken,
suffered or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any
person acting or purporting to act on behalf of any party to
this Agreement.
(vi) If any controversy arises
between the parties to this Agreement, or with any other party,
concerning the subject matter of this Agreement, its terms or
conditions, the Escrow Agent will not be required to determine
the controversy or to take any action regarding it. The Escrow
Agent may hold all documents and the Hold-back Shares and
may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in the Escrow
Agent's discretion, the Escrow Agent may be required, despite
what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage.
Furthermore, the Escrow Agent may at its option file an action
of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents
and Hold-back Shares held in escrow, except all costs,
expenses, charges and reasonable attorney fees incurred by the
Escrow Agent due to the interpleader action and which the
parties jointly and severally agree to pay. Upon initiating such
action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by
the terms of this Agreement.
(vii) The parties and their respective
successors and assigns agree jointly and severally to indemnify
and hold Escrow Agent harmless against any and all losses,
claims, damages, liabilities and expenses, including reasonable
costs of investigation, counsel fees and disbursements that may
be imposed on Escrow Agent or incurred by Escrow Agent in
connection with the performance of his/her duties under this
Agreement, including, but not limited to, any litigation arising
from this Agreement or involving its subject matter, except
such losses and the like that result from the gross negligence
or willful misconduct of the Escrow Agent.
(viii) The Escrow Agent may resign
at any time upon giving at least thirty (30) days written notice
to the parties; provided, however, that no such resignation
shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the
parties shall use their best efforts to mutually agree on a
successor escrow agent within thirty (30) days after receiving
such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have
the right to appoint a successor escrow agent authorized to do
business in the State of California. The successor escrow
agent shall execute and deliver an instrument accepting such
appointment and it shall, without further acts, be vested with
all the estates, properties, rights, powers and duties of the
predecessor escrow agent as if originally named as escrow
agent. The Escrow Agent shall be discharged from any
further duties and liability under this Agreement.
(l) Fees. All fees of the Escrow Agent for
performance of its duties hereunder shall be paid by Cardiac.
It is understood that the fees and usual charges agreed upon
for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this
Agreement. In the event that the conditions of this Agreement
are not promptly fulfilled, or if the Escrow Agent renders any
service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to,
or intervenes in, any litigation pertaining to this escrow or its
subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed
for all costs, attorney's fees and expenses occasioned by such
default, delay, controversy or litigation. Cardiac promises to
pay these sums upon demand.
1.3 Termination of Escrow. The Hold-back Shares
shall be retained by the Escrow Agent in the Escrow Fund
until distributed to the appropriate parties pursuant to the
terms of this Agreement. This Agreement shall terminate at
such time as all the Hold-back Shares (or proceeds received
upon the sale of the Hold-back Shares pursuant to Section
1.2(c)) have been distributed to the Shareholders.
1.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or
mailed by registered or certified mail (return receipt requested)
or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice):
(a) if to Cardiac to:
Cardiac Science, Inc.
16931 Millikan Ave.
Irvine, CA 92606
Facsimile: (949) 951-7315
Attention: President
with a copy to:
Stradling Yocca Carlson &
Rauth
660 Newport Center Drive,
Suite 1600
Newport Beach, CA 92660
Facsimile: (949) 725-4100
Attention: Shivbir S. Grewal
(b) if to Cadent, to:
Bob Carpenter
9 Lowell Road
Wellesley, MA 02481
Telephone: (781) 237-9912
Facsimile: (781) 237-3634
with a copy to:
Stradling Yocca Carlson &
Rauth
660 Newport Center Drive,
Suite 1600
Newport Beach, CA 92660
Telecopy: (949) 725-4100
Attention: Shivbir S. Grewal
(c) if to the Shareholders or
Securityholder Agent, to:
David Castaldi
11 Bellingham Road
Chestnut Hill, MA 02467
Telephone No.: 617-566-7066
Facsimile No.: 617-566-8344
Stephen Smiley
Hunt Financial Group
1445 Ross Field
Dallas, Texas 75202-2785
Telephone No.: 214-978-8582
Facsimile No.: 214-855-6999
With a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Facsimile No.: (617) 973-
9748
Attn: Constantine Alexander, Esq.
(d) if to the Escrow Agent, to:
U.S. Bank, N.A.
Escrow Division
4100 Newport Place
Suite 100
Newport Beach, California 92660
Telephone No.: 949-863-2499
Facsimile No.: 949-863-2414
Successors and Assigns. This
Agreement is binding upon and shall inure to the benefit of
the respective parties hereto and their respective heirs,
executors, administrators, successors and assigns; provided,
however, that any heirs, executors, administrators, successors
and assigns shall only be liable for any liabilities hereunder
to the extent of the value of the property or assets received
from their respective predecessor in interest
1.5 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, without reference to conflicts of laws
principles.
1.6 Amendments. Any provision of this
Agreement may be amended only by agreement in writing
signed by all of the signatories hereto.
1.7 Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
1.8 Execution by Written Consent. This
Agreement may be executed by means of a Written Consent
of the Shareholders, by which the Shareholders manifest their
assent to enter into this Agreement, the Merger Agreement and
the Exhibits hereto and thereto and the transactions
contemplated hereby and thereby, which such consent shall be
deemed an original counterpart execution page to this
Agreement, all of which together shall constitute one
instrument.
* * * * *
<PAGE>
IN WITNESS WHEREOF, Cardiac, Cadent, the
Securityholder Agent and the Escrow Agent have caused this
Agreement to be signed by their duly authorized respective
representatives, all as of the date first written above.
CADENT MEDICAL CORPORATION
By:
Name:
Title:
Title: CARDIAC SCIENCE, INC.
By:
Name:
Title:
SECURITYHOLDER AGENT:
By:
Name: David Castaldi
ESCROW AGENT:
By:
Name:
Title:
SECURITYHOLDER AGENT:
By:
Name: Stephen Smiley
<PAGE>
Schedule of Shareholders
Name Status
1. Agel, Ron Accredited
2. Blair, Henry E. Accredited
3. Bonsall, Jr., Frank A. Accredited
4. Carpenter, Robert J. Accredited
5. Castaldi, David L. Accredited
6. Chisholm, William V. Non-
Accredited
7. Christensen, Gustav A. Accredited
8. Chubb, Stephen D. Accredited
9. Coral Partners IV, L.P. Accredited
10. Domain Partners III, L.P. Accredited
11. DP III Associates, L.P. Accredited
12. Feinstein, Peter Accredited
13. Flynn, Robert E. Accredited
14. Fincke, Randall Accredited
15. Flynn, Robert E Accredited
16. Gibbons, Edward Accredited
17. Greene, Jr., Howard Accredited
18. Grein, Jr., Frederick H. Accredited
19. Harbus Investors, Inc. Accredited
20. HFC-Cadent, L.P. Accredited
21. Kao, John Accredited
22. Khuen, Charles Accredited
23. Kinet, Lawrence Accredited
24. Maniatis, Ph.D., Thomas Accredited
25. McNerney, Peter H. Accredited
26. Moufflet, Gerard Accredited
27. O'Connell, Desmond Accredited
28. O'Leary, James P. Accredited
29. 3i Investment Trust, PLC. Accredited
30. Reed, Guy Accredited
31. Sayare, Mitchel Accredited
32. Schaubert, Stephen J. Accredited
33. Schmergel, Gabriel Accredited
34. Skaletsky, Mark Accredited
35. Termeer, Henri A. Accredited
36. Whitesides, George Accredited
37. Wirth, Peter Accredited
38. John Vozella Non-
Accredited
