Exhibit 99.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MIAVITA LLC
AND
MATRIA HEALTHCARE, INC.
DATED AS OF MARCH 9, 2005
INDEX OF TERMS
Term Section
---- -------
Action 4.17
Adjusted EBITDA 2.4(g)
Adjusted Net Revenue 2.4(e)
Affiliate 1(d)
Agreement Preamble
Alternate Accounting Firm 2.5(f)
Ancillary Revenue 2.4(e)
Assets 1(a)
Assignment and Assumption Agreement 8.2(h)
Assumed Liabilities 1(c)
Assumed Trade Payables 1(c)
Assumed Vacation Pay 1(c)
Balance Sheet Date 4.8
Benefit Plan 4.19(a)
Benefit Plans 4.19(a)
Bonus Plan 7.12
Bundled Business Services 2.4(h)
Business Recitals
Cap Amount 10.3(b)
Cash Amount 2.1(d)
Claim Notice 10.4(a)
Claims Period 10.1(b)
Closing 3
Closing Date 3
Closing Date Financial Statements 2.3(a)
Closing Stock Price 2.5(b)
Code 4.19(c)
Collateral Agreements 4.2
Confidentiality Agreement 9.2(a)
Credit Agreement 2.5(c)
Term Section
---- -------
Credited Pricing 2.4(h)
Customers 4.27(a)
Damages 10.2(a)
Designated Contract 2.4(e)
Environmental Laws 4.28
ERISA 4.19(a)
Escrow Agent 2.2(b)
Escrow Agreement 2.2(b)
Estimated Balance Sheet 2.1(f)
Estimated Initial Purchase Price 2.1(f)
Estimated Mile Stone Payment 2.5(d)
Excess Amount 2.3(b)
Excluded Assets 1(b)
Excluded Assets Amounts 2.1(c)
Excluded Liabilities 1(d)
Excluded Liabilities Amounts 2.1(c)
Exclusive Period 7.4
Final Mile Stone Payment 2.5(e)
Financial Statements 4.6
Furniture, Fixtures and Equipment 1(a)(viii)
GAAP 4.6
Georgia Act 4.35(c)
Government Payments 4.18
Government Returns 4.18
Governmental Entity 4.17
HIPAA Compliant 4.32
Indebtedness 1(d)
Indemnifiable Claim 10.4(a)
Indemnified Party 10.4(a)
Indemnifying Party 10.4(a)
Initial Purchase Price 2.1(a)
Term Section
---- -------
Intellectual Property Rights 1(a)(i)
Inventory 1(a)(vii)
January 31 Balance Sheet 4.6
Key Employees 8.2(i)
Legal Requirement 4.4
Lien 1(d)
Material Adverse Effect 4.8(g)
Matria Preamble
Matria Common Stock 2.5(b)
Matria Indemnities 10.2(a)
Matria Shares 2.5(b)
Mile Stone Date 2.5(c)
Mile Stone Excess Amount 2.5(e)
Mile Stone Objection Notice 2.5(d)
Mile Stone Objection Period 2.5(d)
Mile Stone Payment Cap 2.4(d)
Mile Stone Payments 2.1(b)
Mile Stone Statements 2.5(a)
Net Revenue 2.3(f)
Non-Competition Agreements 8.2(l)
Ordinary Course 4.8(a)
Other Items of Property 1(a)(ix)
Other Parties 12.12
Period 1 2.4(a)
Period 2 2.4(b)
Permits 1(a)(v)
Person 1(d)
Policies 4.15
Prime Rate 2.4(g)
Proprietary Information 4.14
Purchased Contracts 1(a)(iii)
Term Section
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PWC 2.5(f)
Purchase Price 2.1
Real Property 4.9
Receivables 4.16(a)
Reports 5.4
Revenue Growth Percentage 2.4(b)
Reviewing Party 2.5(f)
SEC 5.4
Securities Act 2.5(b)
Seller Preamble
Specified Matters 10.1(b)
Successive Measurement Period 2.4(c)
Termination Date 10.1(b)
Threshold 10.3(a)
Vendor Management Agreement 2.4(e)
TABLE OF CONTENTS
Page
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1. ASSETS AND LIABILITIES.................................................... 1
2. PURCHASE PRICE AND PAYMENT................................................ 4
2.1 Purchase Price................................................... 4
2.2 Payment of the Initial Purchase Price............................ 5
2.3 Purchase Price Adjustment........................................ 5
2.4 Mile Stone Payments.............................................. 6
2.5 Calculation and Payment of Mile Stone Payments................... 8
2.6 Possession....................................................... 12
2.7 Sales, Use and Transfer Tax...................................... 12
2.7 Allocation of Purchase Price and Adjustments..................... 12
3. CLOSING................................................................... 13
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER.............................. 13
4.1 Title to Assets.................................................. 13
4.2 Organization, Good Standing and Authority........................ 13
4.3 Execution and Delivery........................................... 13
4.4 No Conflicts..................................................... 13
4.5 Records.......................................................... 14
4.6 Financial Statements............................................. 14
4.7 No Undisclosed Liabilities; Trade Payables....................... 14
4.8 Absence of Certain Changes....................................... 15
4.9 Property; Encumbrances........................................... 17
4.10 Condition of Assets.............................................. 17
4.11 Condition of Real Property....................................... 17
4.12 Subleases........................................................ 17
4.13 Inventories...................................................... 17
4.14 Intellectual Property and Proprietary Rights..................... 17
4.15 Insurance........................................................ 18
4.16 Receivables...................................................... 18
4.17 Judgments; Litigation............................................ 19
4.18 Government Payments.............................................. 19
4.19 Employee Benefit Matters......................................... 20
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TABLE OF CONTENTS
(continued)
Page
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4.20 Permits, Licenses, etc........................................... 21
4.21 Regulatory Filings............................................... 21
4.22 Consents......................................................... 21
4.23 Purchased Contracts; No Defaults................................. 21
4.24 Employee Matters................................................. 22
4.25 Affiliations..................................................... 22
4.26 Compliance with Law.............................................. 23
4.27 Customers and Suppliers.......................................... 23
4.28 Hazardous Materials.............................................. 24
4.29 Brokers' Fees.................................................... 24
4.30 FIRPTA........................................................... 24
4.31 Certain Payments................................................. 24
4.32 HIPAA Compliance................................................. 25
4.33 Bank Accounts.................................................... 25
4.34 Insolvency Proceedings........................................... 25
4.35 Securities Matters............................................... 25
4.36 Disclosure....................................................... 26
5. REPRESENTATIONS AND WARRANTIES OF MATRIA.................................. 26
5.1 Organization; Good Standing; Authority........................... 26
5.2 Execution and Delivery........................................... 27
5.3 No Conflicts..................................................... 27
5.4 Exchange Act Reports............................................. 27
5.5 Disclosure....................................................... 27
6. CONDUCT OF BUSINESS PENDING CLOSING....................................... 28
6.1 Qualification.................................................... 28
6.2 Ordinary Course.................................................. 28
6.3 Organic Changes.................................................. 28
6.4 Liens............................................................ 28
6.5 Maintenance of Assets............................................ 28
6.6 Accounting....................................................... 28
6.7 Compliance with Legal Requirements............................... 28
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TABLE OF CONTENTS
(continued)
Page
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6.8 Disposition of Assets............................................ 28
6.9 Compensation..................................................... 28
6.10 Modification or Breach of Agreements; New Agreements............. 29
6.11 Capital Expenditures............................................. 29
6.12 Maintain Insurance............................................... 29
6.13 Discharge........................................................ 29
6.14 Distributions.................................................... 29
6.15 Other Actions.................................................... 29
6.16 Seller to Advise Matria of Changes............................... 29
7. ADDITIONAL COVENANTS...................................................... 30
7.1 Consents......................................................... 30
7.2 Matria's Access to Information................................... 30
7.3 Further Assurances............................................... 30
7.4 Exclusive Period................................................. 31
7.5 Expenses......................................................... 31
7.6 No Public Announcements.......................................... 31
7.7 Notices of Certain Events........................................ 32
7.8 Certain Filings.................................................. 32
7.9 Change of Seller Name............................................ 32
7.10 Insurance Matters................................................ 32
7.11 Modification of Vendor Management Agreement...................... 32
8. CONDITIONS PRECEDENT TO CLOSING........................................... 33
8.1 Conditions of Matria and the Seller.............................. 33
8.2 Conditions of Matria............................................. 33
8.3 Conditions of Seller............................................. 35
9. TERMINATION, AMENDMENT AND WAIVER......................................... 35
9.1 Termination...................................................... 35
9.2 Effect of Termination............................................ 36
9.3 Amendment........................................................ 36
9.4 Waiver........................................................... 36
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TABLE OF CONTENTS
(continued)
Page
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10. INDEMNIFICATION........................................................... 37
10.1 Survival Provisions.............................................. 37
10.2 Indemnification.................................................. 37
10.3 Limitations on Indemnification................................... 38
10.4 Third Party Claims............................................... 38
11. COVENANTS NOT TO COMPETE.................................................. 39
11.1 Covenant Not To Compete.......................................... 39
11.2 No Solicitation.................................................. 39
11.3 Severability..................................................... 40
11.4 Specific Performance............................................. 40
12. GENERAL PROVISIONS........................................................ 40
12.1 Notices.......................................................... 40
12.2 Severability..................................................... 41
12.3 Third Party Rights............................................... 41
12.4 Entire Agreement................................................. 41
12.5 Successors and Assigns........................................... 41
12.6 Counterparts..................................................... 42
12.7 Recitals, Schedules and Annexes.................................. 42
12.8 Construction..................................................... 42
12.9 Governing Law.................................................... 42
12.10 Attorneys' Fees.................................................. 42
12.11 Arbitration...................................................... 42
12.12 No Reliance...................................................... 43
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is made and entered
into as of March 9, 2005, by and between MATRIA HEALTHCARE, INC., a Delaware
corporation ("MATRIA") and MIAVITA LLC, a Delaware limited liability company
("SELLER").
RECITALS
A. Seller is in the business of providing health and wellness
programs (the "BUSINESS").
B. Seller desires to sell, and Matria desires to buy, the Assets (as
defined below).
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto hereby agree as follows:
1. Assets and Liabilities.
(a) Acquired Assets. Upon the terms and subject to the conditions of
this Agreement, as of the Closing, Matria shall purchase from Seller, and Seller
shall sell, assign, transfer and convey to Matria, all of Seller's assets,
property and rights, other than the Excluded Assets (collectively the "ASSETS"),
including, but not limited to, those assets set out or described in this Section
1(a) or on SCHEDULES 1(a)(I) THROUGH 1(a)(xii):
(i) Intellectual Property Rights. All of Seller's right, title
and interest in and to all patents, patent applications, rights to sue for
infringements of patents, trademarks, service marks, trademark and service mark
registrations and applications, copyrights, copyright registrations and
applications, trade names (including, without limitation, all rights in the name
"Miavita"), fictitious business names, logos, brand names, computer software,
together with any rights at common law directly arising therefrom, licenses with
respect to any of the foregoing and all other intellectual property rights used
or proposed to be used in connection with the Business, substantially all of
which are listed (other than off-the-shelf software customarily sold by vendors)
on SCHEDULE 1(a)(I) (the "INTELLECTUAL PROPERTY RIGHTS");
(ii) Customer Lists. All customer or vendor lists or other
documents used by Seller in the Business, including, but not limited to,
correspondence, credit information, manuals, and data, sales, marketing and
advertising materials;
(iii) Purchased Contracts. All of Seller's rights and
interests (including deposits and prepaid expenses) under the contracts,
instruments, agreements, commitments or other understandings or arrangements
(including deposits and prepaid
expenses), whether written or oral, express or implied, attributable or relating
to the Business, the Assets or the Assumed Liabilities, all of which are listed
on SCHEDULE 1(a)(iii) (the "PURCHASED CONTRACTS");
(iv) Records and Documentation. Originals or copies of all
business and financial records, correspondence, tax information, files, books
and forms relating to the Assets described in the other clauses of this Section
1(a) or to the Assumed Liabilities, including, but not limited to, employee
records and books and records, if any, which are required to continue the
Business as it is currently conducted or which reflect the principal terms of
each Purchased Contract;
(v) Permits. To the extent assignable, all federal, foreign,
state, local or other governmental consents, licenses, permits, grants,
approvals, registrations, authorizations and similar rights owned or held by
Seller or utilized by Seller in the operation of the Business, all of which are
listed on SCHEDULE 1(a)(v) (the "PERMITS");
(vi) Inchoate Rights. All rights, warranty or other claims,
credits, causes of action or rights of set-off with respect to or arising out of
(A) the Assets, (B) the Assumed Liabilities, or (C) proceeds paid or payable
under insurance contracts relating to the Assets;
(vii) Inventory. All items of inventory used by Seller in
connection with the Business (the "INVENTORY");
(viii) Furniture, Fixtures, Equipment, etc. All items of
furniture, fixtures, leasehold improvements, equipment, computers, computer
software, photocopy machines and office supplies owned or leased by Seller or
used in the Business (the "FURNITURE, FIXTURES AND EQUIPMENT"), substantially
all of which are listed on SCHEDULE 1(a)(viii);
(ix) Other Items of Property. All other items of property,
supplies or other assets, other than the Excluded Assets, that are used by
Seller in connection with the Business, including, but not limited to, those
listed on SCHEDULE 1(a)(ix) ("OTHER ITEMS OF PROPERTY");
(x) Receivables. All notes and accounts receivable and all
documents, records and other agreements relating thereto;
(xi) Telephone Numbers, etc. All telephone and facsimile
numbers and domain names used by Seller in connection with the Business; and
(xii) Goodwill. The Business as a going concern and all
goodwill associated with the Business and any of the assets, properties and
rights set forth above.
(b) Excluded Assets. Seller shall not sell, assign, transfer or
convey to Matria, and Matria shall not purchase (i) the qualifications to
conduct business as a foreign limited liability company, arrangements with
registered agents relating to foreign
2
qualifications, taxpayer and other identification numbers, seals, minute books
and any other documents relating to the organization, maintenance, and existence
of Seller as a limited liability company, (ii) any of the rights of Seller under
this Agreement or any other agreement entered into in connection with this
Agreement, (iii) any Benefit Plans or any rights, contracts, or agreements
associated therewith, (iv) insurance policies listed on SCHEDULE 4.15, or (v)
any of the assets forth on SCHEDULE 1(b)(V) (the "EXCLUDED ASSETS").
(c) Liabilities Assumed by Matria. Upon the terms and subject to the
conditions of this Agreement, and in reliance on the representations,
warranties, covenants and agreements made by Seller herein, effective as of the
Closing Date, Matria shall assume and be obligated pursuant to this Agreement to
pay when due, perform, or discharge only (i) all accounts payable to third
parties and other trade payables incurred in the Ordinary Course (as hereinafter
defined), but only to the extent such payables are not aged more than thirty-one
(31) days as of the Closing Date (the "ASSUMED TRADE PAYABLES"), (ii) employee
accrued vacation obligations to any employees of Seller hired by Matria (the
"ASSUMED VACATION PAY"), plus (iii) liabilities and obligations arising after
the Closing Date pursuant to the Purchased Contracts, excluding, however, (A)
any liability arising out of a breach or default (including, without limitation,
a payment default) by Seller occurring on or prior to the Closing Date with
respect to any such Purchased Contract, and (B) accrued liabilities which would
be required to be reflected as such on a balance sheet prepared in accordance
with GAAP (collectively, the items set forth in Section 1(c)(i), (ii) and (iii)
shall be referred to as the "ASSUMED LIABILITIES").
(d) Excluded Liabilities. Except as set forth in Section 1(c),
Matria shall not assume or otherwise become obligated pursuant to this Agreement
to pay when due, perform or discharge any debts, claims, liabilities,
obligations, damages or expenses of Seller (whether known or unknown, contingent
or absolute, or arising before, on or after the Closing Date), including,
without limitation, liability for (i) Taxes, (ii) defaults under contracts
resulting from events or occurrences arising prior to the Closing Date, (iii)
Indebtedness, (iv) any litigation or claims by a Governmental Entity or
otherwise, including without limitation the potential litigation described on
SCHEDULE 4.17, (v) obligations under contracts or agreements of Seller not
listed on SCHEDULE 1(a)(iii), hereto (vi) Seller's expenses arising from or
relating to the transactions contemplated by this Agreement, including without
limitation attorneys' fees, accounting fees and investment banking fees, (vii)
other than Assumed Vacation Pay, obligations with respect to employees or with
respect to the Benefit Plans, (viii) accounts payable and accrued liabilities,
and (ix) the liabilities set forth on SCHEDULE 1(d)(ix) (collectively, the
"EXCLUDED LIABILITIES"). "INDEBTEDNESS" means, with respect to any Person, (a)
all indebtedness for borrowed money; (b) that portion of obligations with
respect to capital leases that is properly classified as a liability on a
balance sheet in conformity with GAAP; (c) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money; (d) any indebtedness or other amounts owing to Seller or any of
its Affiliates; (e) guaranties, securing indebtedness for borrowed money; and
(f) all indebtedness secured by any lien, security interest, charge or
encumbrance of any kind (a "LIEN") on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed
3
by that Person or is nonrecourse to the credit of that Person; provided,
however, that Indebtedness shall not include the Assumed Trade Payables.
"AFFILIATE" shall mean any other Person directly or indirectly controlling or
controlled by or under common control with such specified Person. For purposes
of this definition, "control" means the power to direct the management and
policies of another Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise. A "PERSON" shall mean
an individual, corporation, partnership, joint venture, trust or unincorporated
organization or association or other form of business enterprise or a
Governmental Entity.
2. Purchase Price and Payment.
2.1 Purchase Price. The aggregate purchase price for the Assets
("PURCHASE PRICE") shall be the sum of the Initial Purchase Price and the Mile
Stone Payments.
(a) The INITIAL PURCHASE PRICE shall be Five Million Dollars
($5,000,000.00), as adjusted pursuant to Section 2.1(c), Section 2.1(d) and
Section 2.1(e) below.
(b) The MILE STONE PAYMENTS shall be amounts determined and
paid by Matria to Seller in accordance with Section 2.4 and Section 2.5.
(c) In the event Seller's Working Capital (as defined below)
as of the Closing Date is less than $600,000, the Initial Purchase Price will be
reduced by the amount by which Seller's Working Capital as of the Closing Date
is less than $600,000. WORKING CAPITAL means (i) Seller's current assets as
reflected on its balance sheet as of the Closing Date prepared in accordance
with GAAP excluding the amounts of (1) the prepaid insurance premiums, (2) the
capitalized lease costs and (3) the capitalized transaction costs, each as set
forth on SCHEDULE 1(b)(v) (the "EXCLUDED ASSET AMOUNTS") less (ii) Seller's
current liabilities as reflected on its balance sheet prepared in accordance
with GAAP excluding (x) the amount of any Assumed Vacation Pay and (y) the
amounts of all Excluded Liabilities as set forth on SCHEDULE 1(d)(ix) (the
"EXCLUDED LIABILITY AMOUNTS").
(d) In the event the amount of cash reflected on Seller's
balance sheet as of the Closing Date is less than an amount equal to (i)
$375,000 minus (ii) the amount of any Assumed Vacation Pay (the "CASH AMOUNT"),
the Initial Purchase Price will be reduced by the amount by which the amount of
cash reflected on Seller's balance sheet as of the Closing Date is less than the
Cash Amount; provided, however, that any reduction in the Initial Purchase Price
made pursuant to Section 2.1(c) shall be credited against any reduction required
by this Section 2.1(d);
(e) The Initial Purchase Price shall be reduced by the amount
of Assumed Vacation Pay less any cash transferred from Seller to Matria at the
Closing in excess of the Cash Amount;
(f) Not less than seven (7) days prior to the Closing, Seller
shall prepare and deliver to Matria a good faith estimate of the Initial
Purchase Price as of
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the Closing Date (the "ESTIMATED INITIAL PURCHASE PRICE"), a list of the Assumed
Trade Payables, a detailed estimate of the Assumed Vacation Pay, the estimated
Excluded Asset Amounts, the estimated Excluded Liability Amounts, its
calculation of the estimated Working Capital and an estimated balance sheet as
of the Closing (the "ESTIMATED BALANCE SHEET").
2.2 Payment of the Initial Purchase Price.
(a) At the Closing, Matria shall pay to Seller, via wire
transfer of immediately available funds in accordance with the written
instructions of the Seller, the Estimated Initial Purchase Price, less Six
Hundred Sixty-Seven Thousand Dollars ($687,000.00) to be deposited into escrow
pursuant to Section 2.2(b).
(b) Seller and Matria shall each execute and deliver an escrow
agreement (the "ESCROW AGREEMENT") in the form attached hereto as Exhibit A (and
such reasonable changes as may be requested by the escrow agent) and at the
Closing Matria shall deliver the sum of Six Hundred Sixty-Seven Thousand Dollars
($687,000.00) via wire transfer of immediately available funds to the escrow
agent under the Escrow Agreement (the "ESCROW AGENT").
2.3 Purchase Price Adjustment.
(a) Within forty-five (45) days following the Closing Date,
Seller shall prepare and deliver to Matria (i) an unaudited balance sheet,
statement of income and statement of cash flows for the Business as of and for
the partial year ended as of the Closing Date (in their final and binding form,
the "CLOSING DATE FINANCIAL STATEMENTS"), (ii) a list of the actual Excluded
Assets Amounts and Excluded Liabilities Amounts, its calculation of the actual
Working Capital, Assumed Trade Payables and the Assumed Vacation Pay as of the
Closing Date, (iii) its calculation of the Initial Purchase Price, and (iv) a
certificate of a duly authorized officer of Seller certifying the foregoing.
Seller shall give Matria access to all books, records and supporting work papers
requested by Matria related to the preparation of the Closing Date Financial
Statements and the calculation of the Initial Purchase Price. Matria shall
notify Seller in writing of any objection to the Closing Date Financial
Statements or Seller's calculation of the Initial Purchase Price within
forty-five (45) days after receiving the same from Seller. If Matria fails to
give such notice by such time, Matria shall be deemed to have accepted Seller's
calculation of the Initial Purchase Price as delivered. If Matria gives such
notice by such time, and Matria and Seller do not resolve the dispute within
thirty (30) days thereafter, the Initial Purchase Price shall be determined
fully, finally and exclusively by PricewaterhouseCoopers, whose determination
will be final and binding on the parties.
(b) If the Estimated Initial Purchase Price is greater than
the final Initial Purchase Price as determined in accordance with Section
2.3(a), the Escrow Agent shall remit to Matria, in accordance with the Escrow
Agreement, the amount by which the Estimated Initial Purchase Price exceeds the
final Initial Purchase Price (the "EXCESS AMOUNT") and Seller will be required
to deposit with the Escrow Agent, in accordance with the terms of the Escrow
Agreement, an amount equal to the Excess
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Amount. If the final Initial Purchase Price as determined in accordance with
Section 2.3(a) exceeds the Estimated Initial Purchase Price, Matria shall,
within ten (10) business days after the Initial Purchase Price becomes final and
binding, make payment to the Seller of the amount by which the final Initial
Purchase Price exceeds the Estimated Initial Purchase Price by wire transfer of
immediately available funds equal to such amount.
2.4 Mile Stone Payments.
(a) Subject to Section 2.4(d), with respect to the fiscal
period beginning on the Closing Date and ending March 31, 2006 ("PERIOD 1"),
Matria shall pay to Seller a Mile Stone Payment, if any, equal to six and
one-half (6.5) times the sum of (i) Adjusted EBITDA from the Business for such
period (to the extent positive) and (ii) the Ancillary Revenue for such period.
(b) Subject to Section 2.4(d), with respect to the fiscal
period beginning April 1, 2006 and ending March 31, 2007 ("PERIOD 2"), Matria
shall pay to Seller a Mile Stone Payment, if any, equal to the sum of
(i) six and one-half (6.5) times the Ancillary Revenue
for such period; and
(ii) (x) if Adjusted EBITDA for Period 2 is zero, less
than zero or less than or equal to Adjusted EBITDA
for Period 1: zero;
(y) if Adjusted EBITDA for Period 2 is greater than
zero and Adjusted EBITDA for Period 1 was zero or
greater than zero but less than Adjusted EBITDA for
Period 2: six and one-half (6.5) times the difference
arrived at by subtracting Adjusted EBITDA for Period
1 from Adjusted EBITDA for Period 2; or
(z) if Adjusted EBITDA for Period 2 is greater than
zero and Adjusted EBITDA for Period 1 was less than
zero: the greater of (aa) zero and (bb) six and
one-half (6.5) times the sum of Adjusted EBITDA for
Period 1 and Adjusted EBITDA for Period 2,
provided that the Mile Stone Payment pursuant to this Section
2.4(b) shall not include any amounts pursuant to Section
2.4(b)(ii)(y) or Section 2.4(b)(ii)(z) unless the increase in Net
Revenue from the Business in Period 2 over Net Revenue from the
Business in Period 1 expressed as a percentage of Net Revenue from
the Business in Period 1 (the "REVENUE GROWTH PERCENTAGE") is at
least twenty-five percent (25%).
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SCHEDULE 2.4(b)(ii) contains examples of the calculation of the Mile Stone
Payment for Periods 1 and 2 based on various assumptions.
(c) Subject to Section 2.4(d), with respect to the fiscal
period beginning April 1, 2007, and ending March 31, 2008, and with respect to
each successive one-year period through the period ending March 31, 2011, and
with respect to the period April 1, 2011 through June 30, 2012, Matria shall pay
the Seller a Mile Stone Payment, if any, equal to six and one-half (6.5) times
the Ancillary Revenue for the applicable period. Each period described in this
Section 2.4(c) is hereinafter referred to as a "SUCCESSIVE MEASUREMENT PERIOD."
(d) Notwithstanding the foregoing, in no event shall the sum
of all Mile Stone Payments made pursuant to Section 2.4(a), Section 2.4(b) and
Section 2.4(c) exceed Sixty Million Dollars $60,000,000) (the "MILE STONE
PAYMENT CAP").
(e) As used herein, the term "ANCILLARY REVENUE" shall mean
Adjusted Net Revenue of the Business attributable to any Designated Contract
that (i) was executed on or before June 30, 2007, (ii) that provides for
services heretofore not provided by the Business and (iii) with regard to which
the Business and Matria or one of its Affiliates have entered into a subcontract
arrangement pursuant to the terms of a Vendor Management Agreement substantially
in the form of EXHIBIT B attached hereto (the "VENDOR MANAGEMENT AGREEMENT"). In
order for a contract to be a "DESIGNATED CONTRACT" hereunder, Seller and Matria
must agree in writing at the time an opportunity arises from the operation of
the Business or the efforts of Seller that any resultant contract will be so
designated and each such Designated Contract shall be added as a Program
Attachment (as such term is defined in the Vendor Management Agreement) to the
Vendor Management Agreement. As used herein, the term "ADJUSTED NET REVENUE"
shall mean an amount equal to net revenue derived from the Designated Contract,
as determined based upon the books and records of the Business maintained in the
ordinary course of business in accordance with GAAP, consistently applied, less
any subcontract fees paid to Matria or its Affiliates under the Vendor
Management Agreement, provided, that revenues that are at risk for performance
shall only be included in Adjusted Net Revenue in the period when it is finally
determined that such amounts are no longer subject to forfeiture and any bonus
compensation will only be included in Adjusted Net Revenue at the time it is
paid, and further provided, that Adjusted Net Revenue shall not include revenue
from any Designated Contract for periods more than five (5) years after its
effective date (which, in the case of a renewal of an agreement, shall be the
effective date of the original agreement).
(f) As used herein, the term "NET REVENUE" shall mean, with
respect to the Business, an amount equal to net revenue derived from the
Business (excluding, however, any Ancillary Revenue), as determined based on the
books and records of the Business maintained in the ordinary course of business
in accordance with GAAP, consistently applied.
(g) As used herein, the term "ADJUSTED EBITDA" shall mean,
with respect to the Business, the amount equal to (a) the income or loss
(including any
7
Credited Pricing pursuant to Section 2.4(h)) before income Taxes derived from
the Business (for avoidance of doubt, after deducting all direct and indirect
costs, salaries and employee benefits, specific accounts receivable deemed
uncollectible, charges for defective, obsolete or overstocked inventory and
selling, general and administrative expenses incurred in connection with the
Business (selling, general and administrative expenses shall include a
reasonable allocation of expenses for services (which allocation shall not be
less than the prices previously paid by Seller for such services) actually
provided by Matria on behalf of the Business (e.g., HR, accounting, legal,
insurance, etc.), but shall not include any other general allocations by Matria
for management or overhead expenses) and excluding any net revenues derived from
the Designated Contracts or subcontract fees paid to Matria or its Affiliates
under the Vendor Management Agreement for such period) plus (b) all
depreciation, amortization and interest expense deducted in calculating the
income or loss described in clause (a) minus (c) interest charged to Seller on
all working capital made available by Matria to support the operation and growth
of the Business calculated as follows: (i) if such funds are borrowed by Matria,
at the rate per annum incurred by Matria for such funds or (ii) otherwise at the
rate per annum (on the basis of a 365-day year) equal to the prime rate, as set
forth in the "Money Rates" section of The Wall Street Journal (the "PRIME
RATE"), on the date such funds are provided to the Business. Notwithstanding any
provisions herein to the contrary, Adjusted EBITDA shall not include: (x) net
gains or losses (after expenses and Taxes applicable thereto) resulting from the
sale, conversion, condemnation or other disposition of capital assets; or (y)
interest or investment income. All items relevant to the calculation of Adjusted
EBITDA shall be determined based on the books and records of the Business
maintained in the ordinary course of business and in accordance with GAAP,
consistently applied. Charges for services provided to the Business by Matria
and its Affiliates charged against Adjusted EBITDA will not exceed a reasonable
charge consistent with the amounts that would be charged by an unrelated third
party but shall not be less than the prices previously paid by Seller for such
services.
(h) Until March 31, 2007, Matria will keep the Business intact
as a separate business unit. If, following the Closing, products and services of
Matria and/or its Affiliates are offered in conjunction with products and
services offered by the Business (the "BUSINESS BUNDLED SERVICES"),
notwithstanding the actual prices charged by Matria or the applicable Affiliate
to a third party for the Business Bundled Services, in calculating Adjusted
EBITDA, the Business shall be credited with seventy-five percent (75%) of the
lowest price charged by Miavita, whether before or after the Closing, for
similar services to a similar size population (the "CREDITED PRICING").
2.5 Calculation and Payment of Mile Stone Payments.
(a) Unless Matria shall have previously paid Mile Stone
Payments hereunder equal to the Mile Stone Payment Cap, Matria shall prepare and
deliver to the Seller MILE STONE STATEMENTS as follows:
(i) On or before each of May 15, 2006 and May 15, 2007,
Matria shall (a) cause to be prepared in accordance with GAAP, consistently
applied, and delivered to the Seller the unaudited balance sheet of the Business
as of
8
March 31, 2006 and March 31, 2007, respectively, and the unaudited income
statement of the Business for Period 1 and Period 2, respectively, and (b)
prepare and deliver to Seller a statement setting forth a calculation of Net
Revenue, Adjusted EBITDA, Ancillary Revenue, the Revenue Growth Percentage
(Period 2 only), and the Mile Stone Payment payable hereunder, if any, together
with a certificate of a duly authorized officer of Matria certifying the
foregoing; and
(ii) Within forty-five (45) days of the end of each
Successive Measurement Period, Matria shall prepare and deliver to Seller a
statement setting forth the calculation of Ancillary Revenue and the Mile Stone
Payment payable hereunder, if any, with respect to the applicable period,
together with a certificate of a duly authorized officer of Matria certifying
the foregoing.
The balance sheet and income statement of the Business to be
provided by Matria pursuant to this Section 2.5(a) shall be derived from (a) for
the periods beginning on the commencement of Period 1 and Period 2,
respectively, and ending on December 31 of such years, Matria's audited
consolidated financial statements for the years ended December 31, 2006 and
2007, respectively, and (b) for the periods beginning on January 1, 2006 and
2007, respectively, and ending on March 31, 2006 and 2007, respectively,
Matria's unaudited consolidated financial statements for the quarters ended
March 31, 2006 and 2007, respectively. Seller acknowledges that Matria shall
have no obligation pursuant to this Section 2.5(a) to provide Seller with
audited financials of the Business as a separate entity.
(b) Simultaneously with the delivery of each Mile Stone
Statement, Matria shall pay the Mile Stone Payment set forth therein, less any
set-offs asserted by Matria against the Mile Stone Payments pursuant to Section
10.3(c). Matria shall pay each Mile Stone Payment, fifty percent (50%) in cash
by wire transfer of immediately available funds in accordance with the written
instructions of the Seller and the balance, at Matria's option, in cash or in
shares of Common Stock, $.01 par value per share of Matria ("MATRIA COMMON
STOCK") valued at the Closing Stock Price on the date on which the Mile Stone
Payment is made by Matria or in combination of cash and Matria Common Stock. It
is contemplated that any shares of Matria Common Stock issued as a Mile Stone
Payment (the "MATRIA SHARES") will be issued by Matria to Seller pursuant to an
exemption from registration available under the Securities Act of 1993, as
amended (the "SECURITIES ACT") and will therefore be deemed "restricted
securities" as such term is defined in the rules promulgated under the
Securities Act.
Within thirty (30) days of the issuance of any Matria Shares, Matria
shall file a shelf registration statement with the Securities and Exchange
Commission (the "SEC") covering the resale of the Matria Shares and Matria shall
use its best efforts to cause such shelf registration statement to become
effective as soon as practicable following the filing thereof, and to use its
best efforts to keep the shelf registration statement effective until the
earlier of (i) all Matria Shares registered pursuant to such registration
statement having been sold pursuant thereto, or (ii) the expiration of the
holding period with respect to such Matria Shares under Rule 144(k) under the
Securities Act, or any successor provision. Matria shall have the right to
suspend the use of such
9
registration statement by Seller in the event Matria determines such suspension
is necessary as a result of pending corporate developments, filings with the SEC
or similar events; provided, that any such suspension period shall not (i)
exceed thirty days (30) in any three-month period; or (ii) an aggregate of
ninety (90) days for any twelve (12) month-period. In connection with the
registration of the Matria Shares, Matria shall (i) pay all expenses of the
shelf registration statement, (ii) as reasonably required by Seller, provide
Seller with copies of the prospectus relating to such registration statement,
(iii) notify Seller when the registration statement has become effective and of
any suspension thereof, and (iv) to take all other reasonable actions as are
necessary to permit unrestricted resales of the Matria Shares by Seller.
The "CLOSING STOCK PRICE" shall mean, per share of Matria Common
Stock, as of a given date (i) if such Matria Common Stock is listed on a
national securities exchange or traded on The Nasdaq National Market System
("NMS"), the average during the fifteen (15) consecutive trading days
immediately preceding such date of the last price at which the Matria Common
Stock shall have been sold on the national securities exchange (or if traded on
more than one such exchange, the principal exchange on which such shares are
traded) or the NMS on each such trading day, or (ii) if the Matria Common Stock
shall not be listed on a national securities exchange or traded on the NMS but
shall be traded in the over-the-counter market and quotations therefor are
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), the average during the fifteen (15) consecutive
trading days immediately preceding such date of the last price (if such last
price is then reported on a real-time basis) on each such trading day, or, if
the last price is not then so reported, the mean between the bid and asked
quotations last reported on each such day, by NASDAQ, or (iii) if at any time
quotations for the Matria Common Stock shall not be reported by NASDAQ for the
over-the-counter market and the Matria Common Stock shall not be listed on any
national securities exchange or traded on the NMS, the fair market value per
share of Matria Common Stock as determined by an independent investment banking
firm jointly selected by Matria and the Seller on the basis of available prices
for such Matria Common Stock or in such other manner as such investment banking
firm deems reasonable. No fractional shares shall be issued pursuant to this
Agreement, and if any amount payable hereunder in shares of Matria Common Stock
would result in a fractional share, the number of shares to be delivered
hereunder shall be rounded up to the next whole number of shares.
(c) Seller hereby agrees that its rights to receive Mile Stone
Payments shall be in all respects subordinate and subject in right of payment to
the payment of any and all indebtedness of Matria, whether outstanding on the
date hereof or hereafter incurred, created or assumed, which is owed to any
creditor under the Loan and Security Agreement with HFG Healthco 4, LLC, as such
agreement may be amended, supplemented, extended, renewed, refinanced, replaced
or otherwise modified from time to time (the "CREDIT AGREEMENT"). Seller agrees
to take any and all further actions, and to execute any and all further
agreements, instruments and other documents, as are reasonably requested by
Matria or Matria's applicable lenders in order to further evidence, clarify or
give effect to the foregoing subordination provisions.
10
In the event Matria is prohibited under the Credit Agreement as a
result of the subordination contemplated by this Section 2.5(c) from paying any
Mile Stone Payment to Seller when due hereunder (the "MILE STONE DATE"), such
Mile Stone Payment shall bear interest from the Mile Stone Date at a rate per
annum (on the basis of a 365-day year) equal to the Prime Rate on the Mile Stone
Date plus one percent (1%); provided, however, that, to the extent a Mile Stone
Payment remains unpaid, the rate of interest payable on a Mile Stone Payment
shall be increased by one half of one percent (.5%) on each anniversary of the
applicable Mile Stone Date (i.e. on the first anniversary of the Mile Stone
Date, the rate of interest would increase to the Prime Rate plus one and
one-half percent (1.5%).
(d) For a period of forty-five (45) days commencing on the
date of delivery by Matria of the applicable Mile Stone Statement (the "MILE
STONE OBJECTION PERIOD"), the Seller shall have the right to review (and Matria
shall during such period provide reasonable access during normal business hours
to) all books, records and supporting work papers of Matria related to the
calculation of the Mile Stone Payment made upon delivery of the Mile Stone
Statement to the Seller (the "ESTIMATED MILE STONE PAYMENT"). The Seller shall
have the right during the Mile Stone Objection Period to provide written notice
to Matria of any objections to any item or calculation in the Mile Stone
Statement (the "MILE STONE OBJECTION NOTICE"). If the Seller fails to timely
deliver to Matria the Mile Stone Objection Notice, then the Mile Stone
Statement, all amounts used in the calculation thereof and the Estimated Mile
Stone Payment previously delivered to the Seller in connection therewith shall
become final and binding on the parties. If the Seller shall timely deliver to
Matria the Mile Stone Objection Notice, then such dispute shall be resolved
fully, finally and exclusively, substantially in accordance with the procedures
set forth in Section 2.5(f).
(e) Promptly after the Mile Stone Statement and the resulting
Mile Stone Payment calculated with reference thereto become final and binding on
the parties, the Estimated Mile Stone Payment shall be recalculated by giving
effect to such final and binding amounts (as recalculated, the "FINAL MILE STONE
PAYMENT"). If the Estimated Mile Stone Payment is greater than the Final Mile
Stone Payment, then (A) in the event the Escrow Agreement has not been
terminated, the Escrow Agent shall remit to Matria, in accordance with the
Escrow Agreement, the amount which the Estimated Mile Stone Payment exceeds the
Final Mile Stone Payment amount (the "MILE STONE EXCESS AMOUNT") and Seller will
be required to deposit with the Escrow Agent, in accordance with the terms of
the Escrow Agreement, an amount equal to the Mile Stone Excess Amount and (B) in
the event the Escrow Agreement has been terminated or if the amounts escrowed
pursuant to the Escrow Agreement are insufficient to cover the Mile Stone Excess
Amount, Seller shall within ten (10) business days after the applicable Mile
Stone Statement becomes final and binding, make payment to Matria of the Mile
Stone Excess Amount or such portion of the Mile Stone Excess Amount that shall
not have been remitted to Matria by the Escrow Agent, as the case may be, by
wire transfer of immediately available funds equal to such amount. If the Final
Mile Stone Payment exceeds the Estimated Mile Stone Payment, Matria shall,
within ten (10) business days after the Mile Stone Statement becomes final and
binding, make payment to the Seller of
11
the amount by which the Final Mile Stone Payment exceeds the Estimated Mile
Stone Payment by wire transfer of immediately available funds equal to such
amount.
(f) If Matria and Seller are unable to resolve a
dispute within thirty (30) days after the date of delivery of the Mile Stone
Objection Notice (which 30-day period may be extended by written agreement of
the parties), such dispute shall be resolved fully, finally and exclusively
through the use of PricewaterhouseCoopers ("PWC") as an independent arbitrator,
and the determination of PWC shall be final and binding on the parties. The PWC
personnel performing such services shall be individuals who are independent of,
and impartial with respect to, Matria, Seller, their officers, directors, agents
and employees, and the officers, directors, agents and employees of their
respective Affiliates. If PWC shall not be willing to serve as an independent
accounting firm for this purpose, then another independent international
accounting firm (the "ALTERNATE ACCOUNTING FIRM") shall be selected to serve as
such by mutual agreement of Matria and Seller. If Seller and Matria cannot
mutually agree on the identity of the Alternate Accounting Firm, such dispute
shall be resolved fully and finally in Atlanta, Georgia, by an arbitrator
selected pursuant to, and an arbitration governed by, the Commercial Arbitration
Rules of the American Arbitration Association. The fees and expenses of PWC, the
Alternate Accounting Firm or the arbitrator (the "REVIEWING PARTY") incurred in
the resolution of such dispute shall be borne by the parties in such proportion
as is appropriate to reflect the relative benefits received by Seller on the one
hand and Matria on the other from the resolution of the dispute. For example, if
Seller challenges the calculation of the Mile Stone Payment by an amount of
$100,000, but the Reviewing Party determines that Seller has a valid claim for
only $40,000, Seller shall bear 60% of the fees and expenses of the Reviewing
Party and Matria shall bear the other 40% of such fees and expenses. Any
arbitration proceeding shall be commenced within sixty (60) days of the date of
delivery of the Mile Stone Objection Notice, or such period of time otherwise
agreed to by the parties, and the parties shall submit to the Reviewing Party
written submissions detailing the disputed items within twenty (20) days after
the commencement of such proceeding. The Reviewing Party shall determine (and
written notice thereof shall be given to Seller and Matria) as promptly as
practicable, but in all events within thirty (30) days of the date on which
written submissions detailing the disputed items have been forwarded to it, (x)
whether the audited financial statements delivered under Section 2.5(a)(i) and
the Mile Stone Statement were prepared in accordance with the terms of this
Agreement or, alternatively, (y) only with respect to the disputed items
submitted to the Reviewing Party, whether and to what extent (if any) such
audited financial statements and/or the Mile Stone Payment require adjustment.
The Reviewing Party's decision shall be based solely on the written submissions
of the parties and any oral presentations requested or approved by the Reviewing
Party. All negotiations pursuant to this Section 2.5(f) shall be treated as
compromise and settlement negotiations for purposes of Rule 408 of the Federal
Rules of Evidence and comparable state rules of evidence, and all negotiations,
submissions to the Reviewing Party, and arbitration proceedings under this
Section 2.5(f) shall be treated as confidential information. The Reviewing Party
shall be bound by a mutually agreeable confidentiality agreement. The procedures
of this Section 2.5(f) are exclusive, and each party acknowledges that it is
waiving its right to a court or jury trial with respect to any dispute arising
under this Section 2.5(f). The decision rendered pursuant to this Section 2.5(f)
12
may be filed as a judgment in any court of competent jurisdiction. Either party
may seek specific enforcement or take other necessary legal action to enforce
any decision under this Section 2.5(f). The provisions of this Section 2.5(f)
shall in all respects be governed by the Federal Arbitration Act.
2.6 Possession. The assignment to Matria of Seller's rights in the
Purchased Contracts, Intellectual Property Rights, Permits, Furniture, Fixtures
and Equipment and Inventory, and all other assets of Seller that are included
among the Assets, and assumption of the Assumed Liabilities to Matria, will be
effective as between Seller and Matria as of 12:01 a.m., Eastern Time on the
Closing Date.
2.7 Sales, Use and Transfer Tax. Seller shall be responsible for any
documentary transfer taxes and any sales, use or other taxes, duties, fees and
governmental exactions imposed by reason of the transfer of the Assets provided
hereunder and any deficiency, interest or penalty asserted with respect thereto.
2.8 Allocation of Purchase Price and Adjustments. The final Purchase
Price shall be allocated in relation to the Assets, which allocation shall be
delivered by Matria to Seller prior to Closing and shall be consented to by
Seller, which consent shall not be unreasonably withheld. Each party agrees that
it will not, in its Government Returns or elsewhere, take a position
inconsistent with the allocations provided for in this Section.
3. Closing. Subject to the fulfillment of the conditions precedent
specified in Sections 8.1, 8.2 and 8.3, the purchase and sale of the Assets
shall be consummated at a closing (the "CLOSING") to be held at the offices of
Troutman Sanders LLP, located at 600 Peachtree Street, N.E., Suite 5200,
Atlanta, Georgia on April 1, 2005, or on such other date or at such other time
as Seller and Matria shall mutually agree (such date and time being herein
referred to as the "CLOSING DATE").
4. Representations and Warranties of the Seller. As an inducement to
Matria to enter into this Agreement and to consummate the transactions
contemplated herein, the Seller hereby represents and warrants to Matria, as of
the date hereof and as of the Closing Date, as follows:
4.1 Title to Assets. Except for the leased Real Property set forth
on Schedule 1(a)(iii), the leased tangible real property set forth on Schedule
1(a)(viii) and any licensed Intellectual Property Rights set forth on Schedule
1(a)(i), the Seller has good, valid and marketable title to the Assets free and
clear of all Liens except (a) as set forth on SCHEDULE 4.1, and (b) Liens for
taxes not yet due. The Assets constitute all of the assets and other property
and rights necessary or desirable for the conduct of the Business as now
conducted and as proposed to be conducted.
4.2 Organization, Good Standing and Authority. The Seller is validly
existing as a limited liability company in good standing under the laws of the
State of Delaware, with full power and authority to own, operate and lease its
properties and to conduct the Business as currently conducted. The Seller is
qualified as a foreign limited
13
liability company in each jurisdiction set forth on SCHEDULE 4.2 which is each
jurisdiction in which the ownership, use or leasing of the Assets, or the
conduct or nature of the Business as and to the extent now conducted makes such
qualification necessary. The Seller has full power and authority to do and
perform all acts and things to be done by it under this Agreement or the
Collateral Agreements (defined below). The execution and delivery of this
Agreement and the documents, instruments and agreements executed in connection
herewith (the "COLLATERAL AGREEMENTS") by the Seller and the performance of its
obligations hereunder and thereunder have been, to the extent necessary, duly
and properly authorized and no other action or approval by the Seller or any
other Person is necessary for the execution, delivery or performance of this
Agreement or the Collateral Agreements by the Seller.
4.3 Execution and Delivery. All consents, approvals, authorizations
and orders necessary for the execution, delivery and performance by the Seller
of this Agreement and the Collateral Agreements have been duly and lawfully
obtained, and the Seller has, and at the Closing will have, full right, power,
authority and capacity to execute, deliver and perform this Agreement and the
Collateral Agreements. This Agreement and the Collateral Agreements have been
duly executed and delivered by the Seller and constitute legal, valid and
binding agreements of the Seller enforceable against the Seller in accordance
with their respective terms.
4.4 No Conflicts. Except as set forth on SCHEDULE 4.22, the
execution, delivery and performance of this Agreement and the Collateral
Agreements and the consummation of the transactions contemplated hereby and
thereby will not (a) conflict with or result in a breach or violation of any
term or provision of, or constitute a default under (with or without notice or
passage of time, or both), or otherwise give any Person a basis for accelerated
or increased rights of termination or nonperformance under, any Purchased
Contract or by which such Person is bound or affected or to which any of the
Assets is bound or affected, (b) result in the violation of the provisions of
the organizational documents of the Seller or any applicable statute, law,
ordinance, rule, regulation, permit, order, writ, judgment, injunction, decree
or award, whether foreign or domestic, federal, state or local ("LEGAL
REQUIREMENT"), (c) result in the creation or imposition of any Lien upon any
Asset or (d) require the Seller to make or obtain any consent, approval, order
or authorization of, notice to, or filing, recording, registration or
qualification with any Person or Governmental Entity. Except for this Agreement,
the Seller has no legal obligation, absolute or contingent, to sell the
Business, or substantially all of the assets of the Seller or to effect any
merger, consolidation or other reorganization of the Seller or to enter into any
agreement with respect thereto.
4.5 Records. The copies or originals of the books and records of the
Seller previously delivered to Matria are true, complete and correct in all
material respects. The Seller has, in accordance with good business practices,
maintained substantially complete and accurate books and records of the
Business, including financial records, which fairly represent its financial
condition and constitute substantially correct records of all its material
proceedings.
14
4.6 Financial Statements. The following financial statements have
been delivered to Matria (collectively, the "FINANCIAL STATEMENTS"): (i) the
balance sheet of the Seller as of December 31, 2004, (ii) statements of income
and cash flows of the Seller for the fiscal years ended December 31, 2004, (iii)
the balance sheet of Seller as of January 31, 2005 and (iv) statements of income
and cash flows of Seller for the month ended January 31, 2005. The balance sheet
of the Seller as of January 31, 2005 is hereinafter referred to as the "JANUARY
31 BALANCE SHEET." Except as set forth on SCHEDULE 4.6, the Financial Statements
(i) have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied as at the dates and during the periods
covered thereby (except for the absence of footnotes to the unaudited financial
statements), (ii) present fairly, in all material respects, the financial
position and results of operations and cash flows of the Seller as of the dates
and for the periods specified therein, (iii) have been derived from and are in
agreement with the books and accounting records of the Seller and represent only
actual, bona fide transactions, and (iv) contain and reflect adequate reserves,
in accordance with GAAP, for all reasonably anticipated losses, costs and
expenses.
4.7 No Undisclosed Liabilities; Trade Payables. Except (a) to the
extent set forth or provided for in the Financial Statements or the notes
thereto or (b) as set forth on SCHEDULE 4.7, the Seller has no material
liabilities or obligations, whether accrued, absolute, contingent or otherwise
(including, without limitation, unasserted claims) other than such incurred in
the Ordinary Course.
4.8 Absence of Certain Changes. Since January 31, 2005 (the "BALANCE
SHEET DATE"), except as contemplated by the Bonus Plan (as such term is defined
in the Escrow Agreement) or disclosed in SCHEDULE 4.8 the Seller, has not:
(a) incurred any material debts or liabilities (absolute,
accrued, contingent or otherwise), other than liabilities as set forth in the
January 31 Balance Sheet and current liabilities incurred in the ordinary course
of the Seller's Business, consistent with past practices ("ORDINARY COURSE");
(b) been subjected to or permitted a Lien upon or otherwise
encumbered any of the Assets, except any Lien for taxes not yet due;
(c) sold, transferred, licensed or leased any of its rights,
assets or properties;
(d) discharged or satisfied any Lien other than a Lien
securing, or paid any obligation or liability other than, current liabilities
shown on the January 31 Balance Sheet and current liabilities incurred prior to
the Closing Date, in each case in the Ordinary Course;
(e) canceled or compromised any debt owed to or by or claim of
or against it, or waived or released any right of material value other than in
the Ordinary Course;
15
(f) entered into any transaction or otherwise committed or
obligated itself to any capital expenditure other than in the Ordinary Course;
(g) made or suffered any change in its condition (financial or
otherwise), properties, profitability, prospects or operations, which
(individually or in the aggregate) has had, or may reasonably be expected to
have, a material adverse effect on the business, financial condition,
properties, profitability, prospects or operations of the Business ("MATERIAL
ADVERSE EFFECT");
(h) made any change in the accounting methods, principles or
practices followed by it;
(i) made or suffered any amendment or termination of any
material contract, agreement, lease or license, including the Purchased
Contracts, to which it is a party;
(j) paid, or agreed to pay, any increase in compensation
payable or to become payable (including any bonus or commission formula) of any
kind to any member of the Seller or, other than in the Ordinary Course, to any
other employee, officer, manager, director or consultant other than in the
Ordinary Course;
(k) changed or suffered any material change in any Benefit
Plan or labor agreement affecting any employee of the Seller otherwise than to
conform to Legal Requirements;
(l) purchased or otherwise acquired all or substantially all
of the business or assets of any other Person, or transferred or sold a
substantial portion of the Seller's business or assets to any Person;
(m) entered into any transaction with Seller or any Affiliate
of Seller;
(n) failed to pay or perform any of its material obligations
when and to the extent due other than pursuant to a good faith defense or right
of setoff;
(o) received notice (written or oral) from any Customer listed
in SCHEDULE 4.27 of such Person's intent to cease doing business with the Seller
or to substantially decrease the level of its business with the Seller;
(p) changed the compensation with respect to any class of
employees;
(q) incurred any material change in the normal operating
balances of its inventory;
(r) entered into any employment agreements or other agreement
to retain employees or independent contractors;
16
(s) received notice from any key employee or independent
contractor of any resignation or termination of their employment or engagement,
as the case may be;
(t) entered into any collective bargaining agreements;
(u) failed to renew any insurance policies material to its
business;
(v) received any notice from any Customer denying payment of
any invoice or claim submitted by the Seller for reason of non-compliance with
any Legal Requirement or any policy or procedure of such Customer;
(w) suffered any loss or suspension or received notice of any
adverse action, decision or finding with respect to the Permits;
(x) taken any action (covertly or overtly) which would be
reasonably expected to cause the termination of any Customer contract;
(y) entered into any agreement or otherwise obligated itself
to do any of the foregoing;
(z) there has been do declaration, setting aside or payment of
any distribution (whether in cash or property) to the members of Seller; and
(aa) there has been no change in the organizational documents
of Seller.
4.9 Property; Encumbrances. SCHEDULE 1(a)(iii) contains a list of
all real property leased by the Seller (the "REAL PROPERTY"). The Seller does
not own any Real Property. SCHEDULE 1(a)(viii) contains a list of all tangible
personal property owned by the Seller or held by the Seller for use in the
Business pursuant to leases or licenses. The leases and licenses listed on
SCHEDULES 1(a)(iii) AND 1(a)(viii) are in full force and effect without any
default, waiver or indulgence thereunder by the Seller or by any other party
thereto. True and complete copies of all leases and licenses listed on SCHEDULES
1(a)(iii) AND 1(a)(viii) have been provided to Matria.
4.10 Condition of Assets. Since the Balance Sheet Date there has
been no destruction or loss of or to any of the Assets, whether or not covered
by insurance, or any deterioration in the condition of the Assets. The Assets
are in good operating condition and repair, subject to ordinary wear and tear.
4.11 Condition of Real Property. The Real Property is supplied with
utilities and other services necessary for the operation of the Business. No
condemnation proceeding is pending or, to the knowledge of Seller, threatened,
which would impair the occupancy, use or value of any of the Real Property. The
Seller has the exclusive right to use and occupy the Real Property pursuant to
the terms of the real property leases listed on SCHEDULE 1(a)(iii).
17
4.12 Subleases. The Seller has not subleased, assigned or
transferred any of the Seller's rights with respect to the Real Property, nor
has the Seller entered into any agreement to do so.
4.13 Inventories. All inventories set forth or reflected in the
January 31 Balance Sheet or acquired by the Seller prior to the Closing Date are
of merchantable quality, and are recorded on the books at an amount not higher
than cost. All defective, obsolete or overstocked inventory held by the Seller
has been adequately reserved for in the January 31 Balance Sheet in accordance
with GAAP.
4.14 Intellectual Property and Proprietary Rights. SCHEDULE 1(a)(i)
contains a true and complete list of all patents, patent applications, trade
names, trademarks, service marks, trademark and service mark registrations and
applications, copyright registrations and applications, and grants of a license
or right to the Seller with respect to any of the foregoing, owned or claimed to
be owned by the Seller or used or proposed to be used by the Seller in the
conduct of the Business, whether or not registered. The Seller owns and the
Seller (or any successor to or assignee from the Seller) has the unrestricted
right to use the Intellectual Property Rights and every trade secret, know-how,
process, discovery, development, design, technique, customer and supplier list,
marketing and purchasing strategy, invention, process, confidential data and/or
other information (collectively, "PROPRIETARY INFORMATION") required for or
incident to the sale and use of all products and services sold or rendered or
proposed to be sold or rendered by the Seller, free and clear of any right,
equity or claim of others. The Seller has taken reasonable security measures to
protect the secrecy, confidentiality and value of all Proprietary Information.
The Seller has not sold, transferred, assigned, licensed or subjected to any
Lien any Intellectual Property Right or Proprietary Information or any interest
therein. The Seller is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner or licensor of,
or other claimant to, any Intellectual Property Right or Proprietary
Information. No Intellectual Property Right or Proprietary Information conflicts
with, infringes on or otherwise violates any rights of others or is subject to
any pending or, to Seller's knowledge, threatened litigation or other adverse
claim of infringement by any other Person. The Seller is not aware of any facts
that would lead the Seller to believe any other Person has infringed or
otherwise misappropriated the Intellectual Property Rights or the Proprietary
Information of the Seller.
4.15 Insurance. SCHEDULE 4.15 contains a true and complete list
(including the name of the insurer, policy number, coverage amount, deductible
amount, premium amount and expiration date) of all insurance policies and bonds
and self insurance arrangements currently in force that cover or purport to
cover risks or losses to or associated with the Seller's business, operations,
premises, properties, assets, employees, agents and directors. SCHEDULE 4.15
also contains a complete list of (i) all pending claims under any such policies
or bonds; (ii) all claims made within the last three (3) years under any such
policies or bonds; and (iii) any denial of coverage or reservation of rights to
contest any such claim asserted by any insurer. The insurance policies, bonds
and arrangements described on SCHEDULE 4.15 (the "POLICIES") are in full force
and effect. No facts or circumstances exist that would cause the Seller to be
unable to renew its
18
existing insurance coverage as and when the same shall expire upon terms at
least as favorable as those currently in effect, other than possible increases
in premiums that do not result from any act or omission of the Seller. The
Seller is not in breach of or in default under any of the Policies, the Seller
has not received any written notice of pending or threatened cancellation of any
Policy, and, to the Seller's knowledge, no claim or coverage under any Policy is
currently being disputed.
4.16 Receivables.
(a) SCHEDULE 4.16 contains a correct and complete list of all
notes receivable, accounts receivable and other obligations due and payable to
Seller as of the Balance Sheet Date and all such notes receivable, accounts
receivable, and other obligations due and payable to Seller are reflected in the
January 31 Balance Sheet. Except to the extent such receivables or other
obligations have been paid in the Ordinary Course since the date of the January
31 Balance Sheet, all notes receivable, accounts receivable and other
obligations and receivables shown on the January 31 Balance Sheet or arising
between the date of the January 31 Balance Sheet and the Closing Date
(collectively, the "RECEIVABLES") (i) represent and constitute genuine, legal,
valid and collectible obligations of and bona fide claims against the respective
makers thereof or debtors thereon for sales made, services performed or other
charges arising on or before the date hereof, and all of the goods delivered or
services performed complied in all material respects in accordance with the
applicable orders, contracts or client requirements therefor, and (ii) will be
collected in an amount not less than the aggregate amount thereof reflected on
the January 31 Balance Sheet (net of allowances and reserves reflected on the
January 31 Balance Sheet calculated in accordance with GAAP consistently
applied). None of such Receivables is subject to any defenses, counterclaims or
rights of off-set.
(b) Except as set forth on SCHEDULE 4.16, Seller has not
written off any Receivables since the date of the January 31 Balance Sheet,
except nonmaterial write-offs in the Ordinary Course of the Business consistent
with past practice. All receivables are evidenced by written agreements,
invoices or other instruments, true and correct copies of which, upon request,
will be made available to Matria for examination prior to the Closing. The
reserves relating to all Receivables set forth on the January 31 Balance Sheet
and the Closing Balance Sheet are (or will be) adequate, as of the respective
dates thereof, to cover all uncollectible amounts in respect of such
Receivables. Except as set forth in SCHEDULE 4.9, none of the Receivables is the
subject of a pledge or assignment to secure debt, is subject to any Lien, or has
been placed for collection with any attorney or collection agency or similar
individual or firm.
4.17 Judgments; Litigation. Except as set forth on SCHEDULE 4.17,
there is no (a) outstanding judgment, order, decree, award, stipulation or
injunction of any local, state, federal or foreign court, government or
governmental department, commission, instrumentality, board, agency or authority
("GOVERNMENTAL ENTITY") against the Seller, the Assets or the Business, (b)
action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or
investigation, whether civil, criminal or administrative ("ACTION"), by or
before any Governmental Entity or arbitrator or any appeal from any of
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the foregoing pending or, to the Seller's knowledge, threatened, against the
Seller, the Assets or the Business, or (c) fact or circumstance which the Seller
has recognized as reasonably likely to lead to the instigation of any Action.
4.18 Government Payments. All returns, declarations, reports and
statements ("GOVERNMENT RETURNS") relating to any federal, state, local or
foreign income, gross receipts, license, payroll, employment, real property,
personal property, escheated funds or property, sales, use, import, export or
other tax, assessment, duty, fee or charge of any kind whatsoever ("GOVERNMENT
PAYMENTS") required to be filed in connection with the operations of the
Business are true, complete and correct in all material respects, are in
compliance in all material respects with all Legal Requirements applicable
thereto and have been properly and timely filed, other than any such Government
Returns as to which an extension as to the time to file has been obtained. The
Seller has not requested any extension of time within which to file any
Government Return, which Government Return has not since been filed. Matria has
heretofore been furnished by the Seller with true, correct and complete copies
of each Government Return of the Seller and its predecessors with respect to the
past three (3) taxable years, and of all reports of, and communications from,
any Governmental Entities relating to Government Payments for such period. All
Government Payments required to be paid or withheld and deposited in connection
with the operations of the Business have been duly and timely paid or deposited
by the Seller. The Seller has properly withheld or collected all amounts
required by law for Government Payments relating to its employees, creditors,
independent contractors and other third parties, and for Government Payments on
sales, and has properly and timely remitted such withheld or collected amounts
to the appropriate Governmental Entity. The Seller's accruals for Government
Payments are adequate to cover all liabilities for Government Payments of the
Seller for all periods ending on or before the Closing Date and such accruals
would be adequate if the Seller were to file a Government Return on the Closing
Date covering all liabilities accrued through the Closing Date. Except as
disclosed in SCHEDULE 4.18, the Seller has never (a) had a tax deficiency
proposed, asserted or assessed against it, (b) executed any waiver of any
statute of limitations on the assessment or collection of any Government
Payments, or (c) been delinquent in the payment of any Government Payments,
within the last three (3) years. No Government Return relating to the Seller has
been audited or the subject of other Action by any Governmental Entity, nor are
there any Liens upon the Assets in favor of any Governmental Entity other than
Liens for taxes not yet due. The Seller has not received any notice nor is aware
of any notice from any Governmental Entity of any pending examination or any
proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Seller, the Assets or the Business. The Seller is
not a party to a tax allocation or tax sharing agreement.
4.19 Employee Benefit Matters.
(a) Except as set forth in SCHEDULE 4.19, the Seller has no
"employee benefit plans" (each, a "BENEFIT PLAN" and collectively, "BENEFIT
PLANS") (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, ("ERISA")), profit-sharing, deferred compensation,
bonus, stock option, stock purchase, vacation pay, holiday pay, pension,
retirement plans, medical or other
20
compensation or benefit arrangements maintained or contributed to or required to
be contributed to by the Seller for the benefit of its employees (or former
employees) and/or their beneficiaries.
(b) The Seller has delivered to Matria true and complete
copies of all documents pertaining to those items set forth on SCHEDULE 4.19.
The Seller, does not maintain, or contribute to, any Benefit Plans other than
those set forth on SCHEDULE 4.19. Each of the Benefit Plans is in compliance
with all applicable Legal Requirements.
(c) The Seller has no accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code of
1986, as amended (the "CODE")).
4.20 Permits, Licenses, etc.
(a) The Seller possesses, and is in compliance in all material
respects with, all Permits and all other franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities necessary to (i) occupy, maintain, operate and use the Real Property as
it is currently used and proposed to be used, (ii) conduct the Business as
currently conducted and as proposed to be conducted, and (iii) maintain and
operate the Benefit Plans. SCHEDULE 1(a)(v) contains a true and complete list of
all Permits. Each Permit has been lawfully and validly issued and is in full
force and effect, and no proceeding is pending or, to the Seller's knowledge,
threatened with respect to the revocation, suspension or limitation of any
Permit. The execution, delivery and performance of this Agreement and the
Collateral Agreements and the consummation of the transactions contemplated
hereby and thereby will not result in the revocation, suspension, limitation or
adverse modification of any Permit and, except as set forth in SCHEDULE 4.20,
all Permits are freely assignable to Matria at the Closing, no Permit will
require the consent of its issuing authority to, or as a result of the
consummation of, the transactions contemplated hereby.
(b) The Seller has not been notified nor does it currently
have reason to believe any of the Permits will not in the Ordinary Course be
renewed upon its expiration. The Seller is not in breach of, nor has the Seller
received notice in writing or, to the Seller's knowledge, otherwise of any claim
or assertion that the Seller has breached any of the terms or conditions of any
Permit.
4.21 Regulatory Filings. The Seller has made all required
registrations and filings with and submissions to all applicable Governmental
Entities relating to the operations of the Business as currently conducted and
as proposed to be conducted. All such registrations, filings and submissions
were in compliance in all material respects with all Legal Requirements and
other requirements when filed, no material deficiencies have been asserted by
any such applicable Governmental Entities with respect to such registrations,
filings or submissions and no facts or circumstances exist which would indicate
that a material deficiency may be asserted by any such authority with respect to
any such registration, filing or submission.
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4.22 Consents. SCHEDULE 4.22 sets forth all consents, authorizations
and approvals of, and all filings, notices and registrations with, any Person
to, or as a result of the consummation of, the transactions contemplated hereby
or the Collateral Agreements that are necessary or advisable in connection with
the operation of the Business as currently conducted and as proposed to be
conducted or are required to be obtained or made by the Seller. All such
consents and filings have been obtained or made or will be obtained or made by
the Seller prior to the Closing.
4.23 Purchased Contracts; No Defaults. SCHEDULE 1(a)(iii) contains a
true and complete list and description of all contracts, agreements,
understandings, arrangements and commitments, written or oral, attributable or
relating to the Business, the Assets or the Assumed Liabilities. True and
complete copies of such written Purchased Contracts and complete summaries of
such oral Purchased Contracts have been provided to Matria. Each Purchased
Contract is, and immediately after the Closing will be (on identical terms),
legal, valid, binding, enforceable and in full force and effect in the form
delivered to Matria. The Seller is not and to the Seller's knowledge no other
party is in breach of or default under any Purchased Contract, and the Seller
has not received in writing or otherwise any claim or assertion that the Seller
is in material breach of or default under any Purchased Contract. No event has
occurred or, based on facts presently known to exist, is reasonably anticipated
which with notice or lapse of time or both would constitute a breach or default,
or permit termination, acceleration or modification, under any Purchased
Contract. Except as set forth on SCHEDULE 4.22, the execution and delivery of
this Agreement or the Collateral Agreements and the consummation of the
transactions contemplated hereby or thereby will not result in any change or
modification of any of the rights or obligations of any party under or violate
or result in a breach or event of default under or result in termination of, any
of the Purchased Contracts.
4.24 Employee Matters.
(a) SCHEDULE 4.24(a) contains a true and complete list of all
employees, officers or consultants of Seller, including each such person's (i)
title/position, (ii) 2004 compensation and (iii) inception date of employment or
other relationship with Seller. SCHEDULE 4.24(a) also contains a true and
complete list of all contracts or commitments pertaining to terms of employment,
compensation, bonuses, profit sharing, acquisition or disposition of partnership
interests, commissions, incentives, loans or loan guarantees, severance pay or
benefits, use of the Seller's property and related matters of the Seller with
any current or former partner, member, officer, director, employee or
consultant, and true and complete copies of all such contracts, agreements,
plans, arrangements and understandings have been delivered to Matria. Except as
set forth on SCHEDULE 4.24(a) the Seller has not offered or promised any equity
interest in the Seller or the Business to any current or former partner, member,
officer, director, employee or consultant.
(b) Seller is in compliance in all material respects with all
Legal Requirements respecting employment and employment practices, terms and
22
conditions of employment, wages and hours and occupational safety, and has not
received notice of, and is not engaged in, any unfair labor practice.
(c) Except to the extent provided in SCHEDULE 4.24(c), there
are no claims, grievances or arbitration proceedings, workers' compensation
proceedings, labor disputes, governmental investigations or administrative
proceedings of any kind pending or, to the Seller's knowledge, threatened
against or relating to the Seller, its employees or employment practices, or
operations as they pertain to conditions of employment, nor is the Seller
subject to any order, judgment, decree, award or administrative ruling arising
from any such matter.
(d) No labor, collective bargaining, union or similar
agreement is currently in existence or is being negotiated by the Seller, and no
union or labor organization has been certified or recognized as the
representative of any employees of the Seller or, to the Seller's knowledge, is
seeking such certification or recognition or is attempting to organize any of
the employees of the Seller.
4.25 Affiliations. Except as disclosed on SCHEDULE 4.25, no member,
manager, officer or employee of the Seller has, directly or indirectly, (a) an
interest (other than the ownership of less than five percent of any class of
voting securities registered under the Securities Exchange Act of 1934, as
amended, of any issuer) in any Person that (i) furnishes or sells, or proposes
to furnish or sell, services or products that are furnished or sold by the
Seller or (ii) purchases from or sells or furnishes to, proposes to purchase
from or sell or furnish to, the Seller any goods or services or (b) a beneficial
interest in any contract or agreement to which the Seller is a party or by which
the Seller, the Assets or the Business is bound or affected, or (c) any claim
against the Seller, the Assets or the Business which could have a Material
Adverse Effect thereon or on the Seller's title to or its right to use the
Assets, or Matria's right to conduct the Business following the Closing. Except
as disclosed on SCHEDULE 4.25, none of the Assets include any receivables from
any member, manager, officer or employee of the Seller.
4.26 Compliance with Law. Except as set forth in SCHEDULE 4.26, the
Seller (a) currently is not, in any material respect, in violation of, or
conducting the Business or operations of the Seller in violation of, or using or
occupying the properties or assets used in the Business in violation of, any
Legal Requirement, (b) in the past, has not in any material respect violated,
conducted the Business or operations of the Seller in violation of, or used or
occupied the properties or assets used in the Business in violation of, any
Legal Requirement, and (c) has not received any notice of any alleged violation
of, nor any citation for noncompliance with, any Legal Requirement. To the
Seller's knowledge, there are no facts that are reasonably likely to give rise
to any violation by the Seller of any Legal Requirement.
4.27 Customers and Suppliers.
(a) SCHEDULE 4.27(a) contains a true and complete list of the
names and addresses of Seller's Customers ("CUSTOMERS") during each of calendar
years 2003 and 2004 and year-to-date 2005. Except as set forth on SCHEDULE
4.27(a), in the
23
last twelve (12) months, no such Customer (i) has cancelled, suspended or
otherwise terminated its relationship with Seller, (ii) has advised Seller of
its intention to cancel, suspend or otherwise terminate its relationship with
Seller, or to materially and adversely change the terms upon which it pays for
goods or services from Seller, or (iii) could reasonably be expected to cancel,
suspend or terminate its relationship with Seller, to suspend or terminate its
reimbursement to Seller or to materially and adversely change the terms upon
which it pays for goods or services from Seller as a result of the consummation
of the transaction contemplated by this Agreement or otherwise. Subject to the
receipt of all applicable consents, approvals and authorizations described in
SCHEDULE 4.22, except as described on SCHEDULE 4.27(a), Seller has maintained
and continues to maintain good relationships with its Customers and Seller is
not aware of any reason that such relationships will suffer any material adverse
changes in the foreseeable future (other than as a result of conditions
affecting the industry generally), including, without limitation, as a result of
the consummation of the transaction contemplated by this Agreement or the
Collateral Agreements, provided the Business of Seller continues to be conducted
in substantially the same manner as heretofore.
(b) SCHEDULE 4.27(b) contains a true and complete list of the
ten (10) largest suppliers of Seller as measured by Seller's purchases of goods
or services during each of calendar years 2003 and 2004 and year-to-date 2005.
No such supplier (i) has cancelled, suspended or otherwise terminated its
relationship with Seller, (ii) has advised Seller of its intention to cancel,
suspend or otherwise terminate its relationship with Seller, to increase its
pricing to Seller, to curtail its accommodations, sales or services to Seller or
to materially and adversely change the terms upon which it sells products to
Seller, or (iii) subject to the receipt of all applicable consents, approvals
and authorizations described in SCHEDULE 4.22, could reasonably be expected to
cancel, suspend or terminate its relationship with Seller, to increase its
pricing, to curtail its accommodations, sales or services to Seller or to
materially and adversely change the terms upon which it sells its products to
Seller as a result of the consummation of the transaction contemplated by this
Agreement or otherwise. To Seller's knowledge, there are no current threatened
or reasonably anticipated restrictions on the supply of goods and services to
Seller. The Seller has maintained and continues to maintain good relationships
with its suppliers and Seller has no knowledge that any supplier intends to
materially adversely change its relationship with Seller in the foreseeable
future (other than as a result of conditions affecting the industry generally),
including, without limitation, as a result of the consummation of the
transaction contemplated by this Agreement, provided the Business of Seller
continues to be conducted in substantially the same manner as heretofore, and
subject to the receipt of all applicable consents, approvals and authorizations
described in SCHEDULE 4.22.
4.28 Hazardous Materials. The Seller is in compliance in all
material respects with, and the Seller has no liability under any Legal
Requirement relating to the release, storage, generation, use, manufacture,
treatment, deposit or disposal of any hazardous or toxic substance, material or
waste ("ENVIRONMENTAL LAWS"). There are no consent decrees, consent orders,
judgments, judicial administrative orders, or Liens against the Seller relating
to Environmental Laws which regulate, obligate or bind the Seller. There are no
existing or pending or, to the Seller's knowledge, threatened claims,
24
suits, orders, actions, law suits, legal proceedings or other proceedings based
on, and neither the Seller nor any officer or director of the Seller has
directly or indirectly received any formal or informal notice of any claims
relating to Environmental Laws against the Seller or any Person or entity whose
liability for any claims the Seller has assumed or retained either contractually
or by operation of law arising under Environmental Laws. There has been no
storage or release by the Seller of any hazardous or toxic substance material or
waste in violation of Environmental Laws at any of the facilities owned,
operated or leased by the Seller, nor any property formerly owned, operated or
leased by the Seller during the period of such ownership, operation or tenancy.
4.29 Brokers' Fees. Except as set forth on SCHEDULE 4.29, no broker,
finder or similar agent has been employed by or on behalf of the Seller or any
Affiliate of Seller in connection with this Agreement or the transactions
contemplated hereby, and neither the Seller nor any Affiliate of Seller has
entered into any agreement, arrangement or understanding of any kind with any
Person for the payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions contemplated
hereby.
4.30 FIRPTA. The Seller is not and has never been a "United States
real property holding company" within the meaning of Section 897(c)(2) of the
Code.
4.31 Certain Payments. Seller has not, nor to the Seller's
knowledge, has any other person or entity, directly or indirectly, on behalf of
or with respect to the Seller: (a) made, received, or offered to make or
receive, any payments which was not legal to make, to receive, or to offer to
make or receive, including without limitation, payments prohibited under
applicable federal and state "fraud and abuse" or anti-referral or anti-kickback
statutes; (b) made an illegal political contribution; or (c) engaged in any
conduct constituting a violation of the Foreign Corrupt Practices Act of 1977.
4.32 HIPAA Compliance. Seller has undertaken all necessary surveys,
audits, inventories, reviews, analyses and/or assessments (including any
necessary risk assessments) of all areas of the Business that could be
materially adversely affected by the failure of Seller to be HIPAA Compliant (as
defined below). Seller is HIPAA Compliant as of the date hereof. For purposes
hereof, "HIPAA COMPLIANT" shall mean that Seller has developed and implemented
internal systems, policies and procedures in order to ensure that the Business
is and will continue to be in compliance with the Health Insurance Portability
and Accountability Act of 1996 and all rules and regulations promulgated
thereunder.
4.33 Bank Accounts. SCHEDULE 4.33 contains a true, correct and
complete list and description of all bank and or investment accounts used by
Seller.
4.34 Insolvency Proceedings. No insolvency proceedings of any kind
or nature, including, without limitation, bankruptcy, receivership,
reorganization, or other arrangements with creditors, whether voluntary or
involuntary, with respect to Seller are pending or threatened.
25
4.35 Securities Matters
(a) Seller is an "accredited investor," as that term is defined in
Rule 501(a) promulgated under the Securities Act, and Seller acknowledges that
Matria delivered to Seller all Reports (as defined in Section 5.4) and has made
available to Seller at a reasonable time prior to the date hereof the
opportunity to ask questions and receive answers concerning the terms and
conditions of this Agreement and the Matria Shares that may be received by
Seller pursuant to this Agreement and to obtain any additional information that
Matria possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information furnished to Seller.
(b) Seller has the knowledge and experience in financial and
business matters and is fully capable of evaluating the merits and risks of an
investment in the Matria Shares and has received all the information it
considers necessary or appropriate for deciding whether to acquire the Matria
Shares.
(c) Seller understands that, until such time as the Matria Shares
shall be registered for resale under the Securities Act, as required by Section
2.5(b), (i) the Matria Shares will be characterized as "restricted securities"
under the federal securities laws and that the Matria Shares, if and when
issued, will be acquired from Matria in a transaction not involving a public
offering, (ii) the Matria Shares have not been, and will not be prior to
issuance, registered under the Securities Act, the Georgia Securities Act of
1973, as amended (the "GEORGIA ACT"), or any other state securities laws, and
that Matria will issue the Matria Shares in a transaction exempt from the
registration requirements thereof, and (iii) the Matria Shares may not be
offered, sold or otherwise transferred unless such disposition is registered
under the Securities Act, the Georgia Act and/or any other applicable state
securities laws or is exempt from registration thereunder.
(d) Seller is acquiring the Matria Shares to be issued to it
hereunder for its own account, not as nominee or agent, for investment and not
with a view to the resale or distribution of all or any part thereof within the
meaning of the Securities Act except pursuant to an effective registration
statement.
(f) Seller acknowledges and agrees that any certificate evidencing
the Matria Shares will contain legends substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
BEEN (i) ACQUIRED FOR INVESTMENT; (ii) ISSUED AND SOLD IN RELIANCE ON THE
EXEMPTION FROM REGISTRATION UNDER THE GEORGIA SECURITIES ACT OF 1973 (THE
"ACT") PROVIDED BY SECTION 9(13) OF THE ACT; AND (iii) ISSUED AND SOLD IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT"). THE SECURITIES CANNOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OTHER THAN PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH
THE ACT; (ii) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR IN
A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH THE ACT; AND (iii)
EVIDENCE SATISFACTORY TO THE
26
ISSUER OF COMPLIANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO RELY UPON AN OPINION OF
COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE
LAWS."
4.36 Disclosure. No representation or warranty of the Seller in this
Agreement or any of the Collateral Agreements, and no information contained in
any Schedule or other writing delivered by Seller pursuant to this Agreement or
the Collateral Agreements or at the Closing, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to make the statements herein or therein not misleading. Seller has
delivered to Matria true, correct and complete copies of all documents, and any
and all amendments to any such documents, referred to in this Agreement or in
any Schedule delivered by Seller to Matria pursuant to this Agreement or the
Collateral Agreements.
5. Representations and Warranties of Matria. Matria hereby represents
and warrants to the Seller as of the date hereof and as of the Closing Date, as
follows:
5.1 Organization; Good Standing; Authority. Matria has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware, with full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Matria and the performance of its obligations
hereunder have been duly and properly authorized by the directors of Matria and
no other corporate action or approval by Matria is necessary for the execution,
delivery or performance of this Agreement.
5.2 Execution and Delivery. This Agreement has been duly authorized
by all necessary action on the part of Matria, has been duly executed and
delivered by Matria and constitutes the legal, valid and binding agreement of
Matria enforceable against Matria in accordance with its terms.
5.3 No Conflicts. Subject to receipt of the consents and approvals
set forth on SCHEDULE 5.3, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased rights
or termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which Matria is a party or by which Matria is bound or affected or to which any
of the property or assets of Matria are bound or affected, (b) result in the
violation of the provisions of the Certificate of Incorporation or Bylaws of
Matria or any Legal Requirement, or (c) result in the creation or imposition of
any Lien upon any property or asset of Matria.
5.4 Exchange Act Reports. Matria has delivered to Seller (i)
Matria's Annual Report on Form 10-K for the fiscal year ended December 31, 2003
containing consolidated balance sheets of Matria at December 31, 2003 and 2002
and consolidated
27
statements of operations, shareholders' equity and cash flows of Matria for the
three years ended December 31, 2003, (ii) Matria's Quarterly Reports on Form
10-Q for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004
and (iii) any Current Reports on Form 8-K filed by Matria since December 31,
2003 (collectively, the "REPORTS"). All Reports as of their respective dates (i)
comply in all material respects with the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder, and (ii) do 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, except to the extent
any such misstatement or omission has been superseded by a subsequent report or
other document filed with the SEC. All financial statements included in the
Reports, including the related notes and schedules, have been prepared in
accordance with GAAP, consistently applied (except as indicated therein) and
fairly represent the consolidated financial condition, assets and liabilities of
Matria at the dates thereof and the consolidated results of operations,
shareholders' equity and cash flows of Matria and its subsidiaries for the
periods stated therein.
5.5 Disclosure. No representation or warranty of Matria in this
Agreement or any of the Collateral Agreements, and no information contained in
any Schedule or other writing delivered by Matria pursuant to this Agreement or
the Collateral Agreements or at the Closing, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to make the statements herein or therein not misleading. Matria has
delivered to Seller true, correct and complete copies of all documents, and any
and all amendments to any such documents, required to be delivered to Seller
pursuant to this Agreement or any Schedule delivered by Matria to Seller
pursuant to this Agreement or the Collateral Agreements.
6. Conduct of Business Pending Closing. During the period commencing on
the date hereof and continuing through the Closing Date, the Seller covenants
and agrees to conduct its business as follows (except as otherwise expressly
contemplated by this Agreement or as otherwise consented to by Matria in
writing):
6.1 Qualification. The Seller shall maintain all qualifications to
transact business and remain in good standing in the State of Delaware and in
the foreign jurisdictions set forth on SCHEDULE 4.2.
6.2 Ordinary Course. The Seller shall conduct its business in, and
only in, the Ordinary Course and shall preserve intact its current business
organizations, use its best efforts to keep available the services of its
current officers and employees and preserve its relationships with Customers,
suppliers and others having business dealings with it to the end that its
goodwill and going business value shall be unimpaired at the Closing Date.
6.3 Organic Changes. Seller shall not (a) amend its organizational
document in any manner which could have an adverse impact on the transactions
28
contemplated by this Agreement, (b) merge or consolidate with any other Person,
(c) liquidate or dissolve, or (d) obligate itself to do any of the foregoing.
6.4 Liens. The Seller shall not grant any Liens on the Assets.
6.5 Maintenance of Assets. Seller will maintain the Assets in their
present operating condition, subject to ordinary wear and tear.
6.6 Accounting. The Seller shall not make any change in the
accounting principles, methods, records or practices followed by the Seller or
depreciation or amortization policies or rates theretofore adopted by the
Seller. The Seller shall maintain its books, records and accounts in accordance
with GAAP applied on a basis consistent with that of prior periods.
6.7 Compliance with Legal Requirements. The Seller shall comply in
all material respects promptly with all Legal Requirements applicable to it and
its operations.
6.8 Disposition of Assets. The Seller shall not sell, transfer,
license, lease or otherwise dispose of, or suffer or cause the encumbrance by
any Lien upon, any of the Assets, except for sales of inventory in the Ordinary
Course.
6.9 Compensation. Except (i) for any subsequent distribution by
Seller to its members of any Mile Stone Payment made to Seller or (ii) as
contemplated by the Escrow Agreement and agreed to in writing by Matria, the
Seller shall not do any of the following: (a) adopt or amend in any material
respect any collective bargaining, bonus, profit-sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other plan,
agreement, trust, fund or arrangement for the benefit of employees (whether or
not legally binding) other than to comply with any Legal Requirement, (b) pay,
or make any accrual or arrangement for payment of, any compensation or bonuses
or enter into any employment or loan or loan guarantee agreement with, any
current or former partner of the Seller or, except in the Ordinary Course, any
other officer, manager, director, employee or consultant of the Seller or (c)
enter into any severance or termination agreement with respect to any officer or
key employee of the Business.
6.10 Modification or Breach of Agreements; New Agreements. The
Seller shall not terminate or modify, or commit or cause or suffer to be
committed any act that will result in any breach or violation of or constitute a
default under (with or without notice or passage of time, or both) or otherwise
give any Person a basis for nonperformance under, any indenture, mortgage, deed
of trust, loan or credit agreement, lease, license or other agreement,
instrument, arrangement or understanding, written or oral, disclosed in this
Agreement or the Schedules hereto. The Seller shall not become a party to any
contract or commitment other than in the Ordinary Course. The Seller shall meet
all of its contractual obligations in accordance with their respective terms.
29
6.11 Capital Expenditures. The Seller shall make capital
expenditures in the Ordinary Course, in an amount of at least the amount
budgeted for and consistent with the needs of the Business.
6.12 Maintain Insurance. The Seller shall maintain its Policies in
full force and effect and shall not do or permit to be done any act by which any
of the Policies may be suspended, impaired or canceled.
6.13 Discharge. The Seller shall not cancel, compromise, release or
discharge any claim of the Seller upon or against any Person or waive any right
of the Seller of material value, and shall not discharge any Lien upon any asset
of the Seller or compromise any debt or other obligation of the Seller to any
Person other than Liens, debts or obligations with respect to current
liabilities of the Seller.
6.14 Distributions. The Seller shall not make any distributions or
payment to its members and shall not, directly or indirectly, redeem, purchase
or otherwise acquire any membership interests in the Seller.
6.15 Other Actions. Seller shall not take any action that would or
could be reasonably expected to result in any of the representations and
warranties of Seller set forth in this Agreement becoming untrue in any respect
at any time on or prior to the Closing Date or the date this Agreement
terminates.
6.16 Seller to Advise Matria of Changes. Seller shall promptly
advise Matria in writing of any change or event having or which can reasonably
be foreseen to have a Material Adverse Effect on the Assets or the Business.
7. Additional Covenants.
7.1 Consents. During the period from the date hereof through the
Closing Date, Matria and the Seller shall use their reasonable best efforts to
obtain, any consent, permit, authorization or approval of, or exemption by, any
Person required to be obtained by it in connection with the transactions
contemplated by this Agreement, including the items contained on SCHEDULE 4.20
and SCHEDULE 4.22. To the extent that the rights of Seller under or to any Asset
may not be assigned without the consent, permit, authorization or approval or,
or exemption by, another Person which has not been obtained by Seller prior to
the Closing, neither this Agreement nor the Assignment and Assumption Agreement
(as defined in Section 8.2(h)) shall constitute an agreement to assign the same
if an attempted assignment would constitute a breach or cause the termination
thereof or be unlawful. If any such consent has not been obtained or if any
attempted assignment would be ineffective or would impair Matria's rights under
the instrument in question so that Matria would not effectively acquire the
benefit of all such rights, then Seller, to the maximum extent permitted by law
and the instrument, shall, at Matria's request, act as Matria's agent in order
to obtain for Matria the benefits thereunder and cooperate, to the maximum
extent permitted by law and the instrument, with Matria in any other reasonable
arrangement designed to provide such benefits to Matria (including, without
limitation, by entering into an equivalent arrangement).
30
Notwithstanding Matria's decision to consummate the Closing in the absence of
any such consent, after the Closing Seller shall use its best efforts to obtain
all such consents, permits, authorizations, approvals or exemptions and, if and
when any is obtained, Seller shall promptly assign the instrument in question to
Matria. Matria covenants and agrees to indemnify Seller and each of its
officers, directors, employees, members and agents and to hold each of them
harmless against all fees, loss, liability, expense, claims, damages or
judgments (including reasonable attorney's fees and expenses) directly or
indirectly arising out of or in connection with Seller's service as Matria's
agent in connection with this Section 7.1.
7.2 Matria's Access to Information. During the period commencing on
the date hereof and continuing through the Closing Date, Seller shall (a) afford
to Matria and current and prospective Matria lenders and their respective
officers, directors, employees, accountants, counsel and other representatives
reasonable access to all of the Seller's properties, books, contracts,
commitments, records and personnel, and (b) furnish promptly to Matria all
information concerning the Seller's business, properties, books, contracts,
commitments, records and personnel as any Matria may reasonably request. The
foregoing shall include direct access to the Seller's Customers and suppliers.
7.3 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto will use all reasonable efforts to (i) perform,
comply with and fulfill all obligations, covenants and conditions required by
this Agreement to be performed, complied with or fulfilled by such party prior
to or as of the Closing Date, and (ii) take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Legal Requirements for it to consummate and make effective the
transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each party
hereto shall take or cause to be taken all such necessary or desirable action
and execute, deliver and file, or cause to be executed, delivered and filed, all
necessary or desirable documentation.
(c) If at any time after the Closing either party receives any
account receivable or other asset to which the other party hereto is entitled,
such receiving party shall forward such account receivable or other asset to
such other party.
7.4 Exclusive Period. Until the earlier of (a) the termination of
this Agreement under Section 9.1, or (b) the Closing under this Agreement (the
"EXCLUSIVE PERIOD"), the Seller agrees that (i) it will not sell or otherwise
transfer any significant asset of the Seller (other than in the Ordinary Course)
or enter into an agreement to sell or otherwise transfer any such asset; (ii)
none of the Seller or its representatives, trustees, employees or Affiliates
will, directly or indirectly, solicit any offers, bids or indications of
interest from, or initiate or continue negotiations with (other than to
terminate certain other preexisting negotiations), any Person other than Matria
with respect to the sale of
31
any interests in, the Business or material assets of the Seller or an interest
therein; and (iii) none of the Seller or its representatives, trustees,
employees or Affiliates will provide any information about the Business to any
Person other than Matria, its counsel and other advisors, and Matria's current
or proposed lending sources. In the event that any third-party approaches the
Seller regarding an interest in purchasing all or a substantial portion of the
interests in the Seller or assets of the Business, the Seller shall notify
Matria immediately as to the interest or proposal, its source and its terms, and
shall rebuff such offer.
7.5 Expenses. Each party will bear the costs of its agents,
attorneys, accountants, investment bankers, travel, lodging and entertainment
and associated expenses, except as provided in this Agreement. Any such costs of
the Seller arising from or relating to the preparation, negotiation, execution
and closing of the Confidentiality Agreement, Letter of Intent, this Agreement
and the Collateral Agreements shall be deemed to be costs of Seller.
7.6 No Public Announcements. Prior to the Closing, none of Matria or
the Seller or any of their respective Affiliates shall, without the express
written approval of Seller and Matria, make any press release or other public
announcements concerning the transactions contemplated by this Agreement, except
as and to the extent that any such party shall be so obligated by applicable
Legal Requirements, in which case the other parties shall be advised and the
parties shall use their best efforts to cause a mutually agreeable release or
announcement to be issued; provided, that (a) Matria may issue a press release
announcing the execution of this Agreement and discuss the proposed acquisition
in any conference with analysts, investors or other interested parties, (b)
Matria may file a Current Report on Form 8-K with respect to the execution of
this Agreement, and (c) the foregoing shall not preclude communications or
disclosures necessary to implement the provisions of this Agreement.
7.7 Notices of Certain Events.
(a) Seller shall promptly notify Matria of any notice or other
communication from (i) any Person alleging that the consent of such Person is or
may be required in connection with the transactions contemplated by this
Agreement or any Collateral Agreement and (ii) any Governmental Entity in
connection with the transactions contemplated by this Agreement or any
Collateral Agreement; and
(b) Seller shall promptly notify Matria of the Seller's
material breach of any obligation, representation, warranty or covenant under
this Agreement or any Collateral Agreement, or any fact that would cause any
representation or other fact contained in this Agreement or any Collateral
Agreement to be materially inaccurate or materially misleading.
7.8 Certain Filings. The Seller and Matria shall cooperate with each
other (i) in determining whether any action by or in respect of, or filing with,
any Governmental Entity is required in connection with the consummation of the
transactions
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contemplated by this Agreement and (ii) in taking such actions or
making any filings or furnishing information required in connection therewith.
7.9 Change of Seller Name. Promptly following the Closing, Seller
shall take all steps necessary to amend its organizational documents to change
the name of Seller to a name that is clearly distinguishable from "Miavita."
7.10 Insurance Matters. Prior to the Closing, Seller shall purchase,
to the extent available, tail insurance with a claims period of at least three
(3) years for each of the Policies covering Seller and the Persons who are
presently covered by the Policies with respect to matters or circumstances
occurring at or prior to the Closing Date, on terms which are no less favorable
to Seller and such Persons than the terms of such current insurance in effect
for the Seller on the date hereof.
7.11 Modification of Vendor Management Agreement. Without the prior
consent of Seller, which consent shall not be unreasonably withheld, Matria
shall not take any action to terminate or materially modify or amend the Vendor
Management Agreement except to add additional Program Attachments (as such term
is defined in the Vendor Management Agreement) thereto.
7.12 Payments under Bonus Plan at Closing. At Closing, Seller shall
distribute to its employees all bonus amounts owed by Seller at Closing pursuant
to the Bonus Plan attached as Exhibit A to the Escrow Agreement (the "BONUS
PLAN"). Seller covenants and agrees to indemnify Matria and each of its
officers, directors, employees and agents and to hold each of them harmless
against all fees, loss, liability, expense, claims, damages or judgments
(including reasonable attorney's fees and expenses) directly or indirectly
arising out of or in connection with (i) the payment of, or failure to pay, any
bonus amounts owed under the Bonus Plan and (ii) any withholding requirements
with respect to the payment of such bonus amounts under applicable federal,
state and local laws.
8. Conditions Precedent to Closing.
8.1 Conditions of Matria and the Seller. Notwithstanding any other
provision of this Agreement, the respective obligations of Matria and the Seller
to consummate the transactions contemplated hereby shall be subject to the
condition that there shall not be pending or threatened any Action before any
Governmental Entity challenging or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated hereby, which condition may be
waived by Matria and Seller, in each such party's sole discretion.
8.2 Conditions of Matria. Notwithstanding any other provision of
this Agreement, the obligation of Matria to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions, each of which may be waived by Matria
in its sole discretion:
(a) The representations and warranties of the Seller contained
in this Agreement and in all agreements, documents and instruments executed and
delivered pursuant hereto or in connection with the Closing shall be true and
correct in all
33
material respects as of the date hereof and as of the Closing Date as though
made on and as of the Closing Date, and the Seller shall have performed in all
material respects the agreements and obligations necessary to be performed by it
under this Agreement prior to the Closing Date;
(b) Matria shall have received from the Seller a closing
certificate dated the Closing Date certifying each of the matters set forth in
Section 8.2(a);
(c) No act, event or condition shall have occurred after the
date hereof, or shall have occurred prior to the date hereof which Matria later
becomes aware, which Matria reasonably determines has had or could have a
Material Adverse Effect, which shall include, without limitation, any material
adverse change between the Seller and any significant Customer;
(d) Matria shall have received evidence that the Seller has
received all consents, permits, authorizations, exemptions and approvals
(including, but not limited to, regulatory consents, permits, authorizations,
exemptions and approvals) required to be obtained in connection with the
consummation of the transactions contemplated hereunder the failure of which to
obtain would have Material Adverse Effect on the operations of the Seller as now
conducted and as to be conducted after the Closing, each of which are listed in
SCHEDULE 4.22;
(e) Matria shall have obtained all consents and waivers to
this Agreement and the transactions contemplated hereby required under the
Credit Agreement, on terms satisfactory to Matria;
(f) Matria shall have received the Escrow Agreement executed
by the Seller and the Escrow Agent, substantially in the Form of EXHIBIT A,
which Escrow Agreement shall set forth the terms of a post-Closing incentive
program to retain senior management of Seller at least through the end of Period
2, which incentive program shall be in a form and substance reasonably
acceptable to Matria;
(g) Matria shall have received the executed Vendor Management
Agreement, substantially in the form of EXHIBIT B hereto;
(h) Matria shall have received a Bill of Sale executed by
Seller, substantially in the form of EXHIBIT C attached hereto;
(i) Matria shall have received an executed Assignment and
Assumption Agreement, substantially in the form of EXHIBIT D attached hereto
(the "ASSIGNMENT AND ASSUMPTION AGREEMENT");
(j) Each of the following employees (the "KEY EMPLOYEES")
shall have accepted employment with Matria on terms reasonably satisfactory to
Matria:
Kathryn Creech - Chief Executive Officer
34
Kevin Howatt - Senior Vice President, Business Development
Will Micklin - Vice President, Technology
Steven Dean - Vice President, Product Development
Heather Zeitz - Vice President, Programming & Health
Services
Janet Alexander - Vice President, Client & Marketing
Services;
(k) Matria shall have received from Maron & Sandler, counsel
for the Seller, a written opinion dated the Closing Date and addressed to Matria
with respect to customary matters, such matters to be mutually agreed upon by
the parties prior to Closing;
(l) Matria shall have received evidence that Seller has
received consents to assignment of the contracts listed on SCHEDULE 8.2(k);
(m) Matria shall have received non-competition agreements
executed by such individuals and in such form as are agreed upon by Matria and
Seller;
(n) Matria shall have received a certificate dated the Closing
Date, executed by Seller, providing as attachments copies of resolutions
approved by the members of Seller, certifying that the resolutions as attached
to such certificate were duly adopted by the members of Seller and that such
resolutions remain in full force and effect, authorizing and approving the
execution by Seller of this Agreement and other documents related to this
transaction and approving the consummation by Seller of the transactions
contemplated by such agreements and documents; and
(o) Seller shall have delivered to Matria the Estimated
Balance Sheet.
8.3 Conditions of Seller. Notwithstanding any other provision of
this Agreement, the obligations of Seller to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing, of the following conditions, each of which may be waived by Seller in
his sole discretion:
(a) The representations and warranties of Matria contained in
this Agreement and in all agreements, documents and instruments executed and
delivered pursuant hereto or in connection with the Closing shall be true and
correct in all material respects as of the date hereof and as of the Closing
Date as though made on and as of the Closing Date, and Matria shall have
performed in all material respects the agreements and obligations necessary to
be performed by it under this Agreement prior to the Closing Date;
35
(b) Seller shall have received from Matria a closing
certificate dated the Closing Date certifying each of the matters set forth in
Section 8.3(a);
(c) Seller shall have received the Estimated Initial Purchase
Price, less the Six Hundred Sixty-Seven Thousand Dollars ($687,000.00) to be
deposited in escrow pursuant to Section 2.2(b), by wire transfer to an account
designated by Seller;
(d) Matria shall have deposited the sum of Six Hundred
Sixty-Seven Thousand Dollars ($687,000.00) with the Escrow Agent;
(e) Seller shall have received the Assignment and Assumption
Agreement, executed by Matria;
(f) Seller shall have received the Escrow Agreement executed
by Matria and the Escrow Agent, substantially in the Form of EXHIBIT A, which
Escrow Agreement shall set forth the terms of a post-Closing incentive program
to retain senior management of Seller at least through the end of Period 2,
which incentive program shall be in a form and substance reasonably acceptable
to Seller;
(g) The Vendor Management Agreement, substantially in the Form
of EXHIBIT B, shall have been executed and delivered by each of Matria and a
wholly owned subsidiary of Matria created to operate the Business after Closing;
and
(h) Seller shall have received evidence that Matria has
received all consents and approvals, if any, of third parties required to be
obtained by Matria in connection with the consummation of the transactions
contemplated hereunder.
9. Termination, Amendment and Waiver.
9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by written consent of Matria and the Seller;
(b) by Matria, on the one hand, or by Seller, on the other
hand, by written notice to the other party if the Closing shall not have been
consummated on or before April 30, 2005, unless such date is extended upon
mutual agreement of such parties, provided that the party terminating this
Agreement under this clause (b) shall not then be in material breach of any of
its obligations under this Agreement;
(c) by Matria if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by Seller under this
Agreement, or (ii) any of the conditions precedent to Closing set forth in
Section 8.1 or Section 8.2 have not been met by April 30, 2005 through no fault
of Matria; or
(d) by Seller (i) if there has been a material
misrepresentation, breach of warranty or breach of covenant by Matria under this
Agreement, or (ii) any of
36
the conditions precedent to Closing set forth in Section 8.1 or Section 8.3 have
not been met by April 30, 2005 through no fault of Seller.
9.2 Effect of Termination.
(a) If this Agreement is terminated for any reason, the
provisions of Section 7.5 (Expenses) and Section 12.11 (Arbitration), as well as
the provisions of the letter agreement dated January 3, 2005 between Seller and
Matria (the "Confidentiality Agreement") shall remain in full force and effect.
(b) If this Agreement is terminated as provided in Section
9.1(a) this Agreement shall forthwith become void (except as stated in
subsection 9.2(a) above) and there shall be no liability or obligation hereunder
on the part of any party hereto or their respective managers, directors,
officers, employees, agents or other representatives.
(c) If this Agreement is terminated as provided in Section
9.1(b), (c) or (d) hereof, such termination shall be without prejudice to any
rights that the terminating party may have against any breaching party or any
other Person under the terms of this Agreement or otherwise.
9.3 Amendment. This Agreement may be amended at any time by a
written instrument executed by Matria and the Seller. Any amendment effected
pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude the exercise of any
other right, power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or subsequent
breach of the same or any other covenant or agreement. The rights and remedies
of each party under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the other
parties.
10. Indemnification.
10.1 Survival Provisions.
(a) The representations and warranties, covenants and
agreements of the parties hereto contained in this Agreement and the Collateral
Agreements shall survive the Closing and the consummation of the transactions
contemplated hereby (and any examination, or knowledge of, or investigation by
or on behalf of any party hereto).
(b) Claims for indemnification arising from breaches of
representations and warranties must be made by delivery of written notice to the
party
37
against whom the indemnification claim is made, setting forth in general terms
the basis for the indemnification claim, no later than June 30, 2007 (the
"TERMINATION DATE"); provided, however, (A) if the applicable statute of
limitations with respect to claims arising from any breach of the
representations and warranties contained in Section 4.1 (Title to Assets),
Section 4.18 (Government Payments), Section 4.28 (Hazardous Materials), Section
4.31 (Certain Payments) or Section 4.32 (HIPAA Compliance) extends beyond the
Termination Date, such claims may be made at any time until expiration of the
applicable statute of limitations, or indefinitely if no such statute of
limitations exists and (B) to the extent any representation or warranty involved
fraud or was willfully inaccurate such claim may be made at any time and shall
not be subject to the Termination Date or the applicable statute of limitations
(the period from the Closing Date until the Termination Date or the applicable
later date pursuant to clauses (A) or (B) is referred to herein as the "CLAIMS
PERIOD"). The matters referred to in Section 10.1(b)(A) and (B) shall be
referred to herein as the "SPECIFIED MATTERS".
10.2 Indemnification.
(a) The Seller hereby covenants and agrees to defend,
indemnify and hold harmless Matria, its Affiliates and their respective
officers, directors, employees and agents (collectively, the "MATRIA
INDEMNITEES") from and against any and all claims, actions, losses, obligations,
costs, expenses, settlement payments, awards, damages, judgments, fines,
penalties and other liabilities of any kind or nature whatsoever, including,
without limitation, reasonable attorneys', accountants' and experts' fees
(collectively, "DAMAGES") arising out of or resulting from: (i) any inaccuracy
in or breach of any representation or warranty made by the Seller in this
Agreement, in the Collateral Agreements or in any certificate delivered pursuant
to this Agreement; (ii) the failure of the Seller to perform or observe any
covenant, agreement or condition to be performed or observed by the Seller
pursuant to this Agreement or any Collateral Agreement; (iii) the Excluded
Assets or Excluded Liabilities, including the potential litigation set forth on
SCHEDULE 4.17; (iv) any inaccuracy in the calculation of the amount of the
Assumed Vacation Pay ; (v) the failure to repay Matria the Mile Stone Excess
Amount pursuant to Section 2.5(e); or (vi) failure to obtain the required
consent with respect to the Blue Martini Software License and Services Agreement
listed on SCHEDULE 4.22.
(b) Matria hereby covenants and agrees to defend, indemnify
and hold harmless the Seller from and against any and all Damages arising out of
or resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Matria in this Agreement, in the Collateral Agreements, or in
any certificate delivered pursuant to this Agreement; and (ii) the failure of
Matria to perform or observe any covenant, agreement or condition to be
performed or observed by Matria pursuant to this Agreement or any Collateral
Agreement.
10.3 Limitations on Indemnification.
(a) Notwithstanding any other provision of this Section 10 to
the contrary, the Indemnifying Party shall not be obligated to defend, indemnify
and hold
38
harmless any Indemnified Party for breaches of representations or
warranties unless and until the aggregate amount of Damages incurred by the
Indemnified Parties exceeds an amount equal to $100,000 (the "THRESHOLD"), in
which event the Indemnifying Party shall be obligated to defend, indemnify and
hold harmless the Indemnified Parties from and against all Damages incurred by
the Indemnified Parties, including Damages included in reaching the Threshold;
provided, however, that the Indemnifying Party shall not be entitled to the
benefit of the Threshold with respect to any Specified Matter.
(b) The Indemnifying Party shall not be obligated to indemnify
the Indemnified Parties for breaches of representations or warranties resulting
in Damages in excess of a maximum amount equal to the sum of $1,000,000 and any
Mile Stone Payments that are or become due and have not been paid by Matria on
the date on which a claim for Damages is made by the Indemnified Party (the "CAP
AMOUNT"); provided, however, that the Indemnifying Party shall not be entitled
to the benefit of the Cap Amount with respect to any Specified Matter.
(c) Without limiting the availability or enforcement of any
other remedies available to Matria, Matria shall have the right, in its sole
discretion, to set off the amount of any Damages for which the Matria
Indemnitees may be entitled under Section 10.2(a) against the Mile Stone
Payments.
10.4 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to
Section 10.2 (an "INDEMNIFIED PARTY") receives notice of the assertion by any
third party of any claim or of the commencement by any such third party of any
Action (any such claim or Action being referred to herein as an "INDEMNIFIABLE
CLAIM") with respect to which another party hereto (an "INDEMNIFYING PARTY") is
or may be obligated to provide indemnification, the Indemnified Party shall
promptly notify the Indemnifying Party in writing (the "CLAIM NOTICE") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall not
relieve or otherwise affect the obligation of the Indemnifying Party to provide
indemnification hereunder, except to the extent that any Damages directly
resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after
receipt of the Claim Notice (unless the claim or Action requires a response
before the expiration of such thirty-day period, in which case the Indemnifying
Party shall have until the date that is ten (10) days before the required
response date) to acknowledge responsibility for the entire amount of the
Indemnifiable Claim and undertake, conduct and control, through counsel of its
own choosing, and at its expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party, provided, that the fees and expenses of such
counsel shall not be borne by the Indemnifying Party, (ii) the Indemnifying
Party shall not settle any Indemnifiable Claim without the Indemnified Party's
consent if the settlement requires the Indemnified Party to admit wrongdoing,
pay any fines or refrain from any action and
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(iii) if, in the written opinion of counsel to the Indemnified Party, the
Indemnified Party has separate defenses from the Indemnifying Party or there is
a conflict of interest between the Indemnified and Indemnifying Parties or if
there is any danger of criminal liability of the Indemnified Party, then the
Indemnified Party shall be permitted to retain special counsel of its own
choosing at the expense of the Indemnifying Party. So long as the Indemnifying
Party has taken responsibility for and is vigorously contesting any such
Indemnifiable Claim in good faith, the Indemnified Party shall not pay or settle
such claim without the Indemnifying Party's consent, which consent shall not be
unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days after receipt of the Claim Notice (or before the
date that is ten (10) days before the required response date, if the claim or
Action requires a response before the expiration of such thirty (30) day
period), that it acknowledges responsibility for the entire amount of the
Indemnifiable Claim and elects to undertake the defense of the Indemnifiable
Claim described therein, the Indemnified Party shall have the right to contest,
settle or compromise the Indemnifiable Claim in the exercise of its reasonable
discretion at the expense of the Indemnifying Party; provided, that the
Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
11. Covenants Not to Compete.
11.1 Covenant Not To Compete. Except for the members of Seller set
forth on SCHEDULE 11.1, Seller hereby agrees for a period of five (5) years
following the Closing Date, Seller shall not, directly or indirectly, own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as a shareholder, member, manager,
director, officer, employee, partner, consultant or otherwise with, any profit
or non-profit business, firm, entity or organization, which competes with the
Business anywhere in the United States.
11.2 No Solicitation. Seller hereby agrees for a period of five (5)
years following the Closing Date, Seller shall not (i) solicit or attempt to
influence any of Matria's or its Affiliate's then-current employees to become
employees or render services to any business or employer other than Matria or
such Affiliate or to terminate their employment with Matria or such Affiliate,
or (ii) solicit or attempt to influence any of Matria's or its Affiliate's
then-current customers or clients to purchase goods or services from a
competitor of Matria or such Affiliate.
11.3 Severability. In the event any of the covenants in this Section
11 shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too great a period of time, or over
too great a geographical area, or by reason of its being too extensive in any
other respect, it shall be interpreted to extend only over the maximum period of
time for which it may be enforceable, and/or over the maximum geographical area
as to which it may be enforceable and/or to the maximum extent in all other
respects as to which it may be enforceable, all as determined by such court in
such action.
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11.4 Specific Performance. Seller acknowledges that a breach of the
covenants contained in this Section 11 will cause irreparable damage to Matria,
the exact amount of which will be difficult to ascertain, and that the remedies
at law for any such breach will be inadequate. Accordingly, Seller agrees that
if Seller breaches the covenants contained in this Section 11 in addition to any
other remedy which may be available at law or in equity, Matria shall be
entitled to specific performance and injunctive relief, without, in the event of
a final judgment, posting a bond or other security.
12. General Provisions.
12.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally, upon delivery, (b) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (c) if given by telecopy, upon confirmation
of transmission by telecopy, in each case to the parties at the following
addresses:
(a) If to Matria, addressed to:
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
Facsimile: (770) 767-7769
With an additional copy to:
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
Attention: James L. Smith, III
Facsimile: (404) 885-6687
(b) If to Seller, addressed to:
Miavita LLC
1250 Fourth Street, Suite 580
Santa Monica, California 90401
Attention: Andrew Benson
Facsimile: (310) 570-4531
With an additional copy to:
Maron & Sandler
1250 Fourth Street, Suite 550
Santa Monica, California 90401
Attention: Stanley E. Maron, Esq.
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Facsimile: (310) 570-4901
12.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable such term or provision in any
other jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.
12.3 Third Party Rights. Notwithstanding any other provision of this
Agreement, this Agreement shall not create benefits on behalf of any other
Person not a party to this Agreement (including, without limitation, any broker
or finder), and this Agreement shall be effective only as between the parties
hereto, their successors and permitted assigns.
12.4 Entire Agreement. This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, and the
Confidentiality Agreement, contain the entire understanding of the parties
hereto with respect of their subject matter and supersede all prior and
contemporaneous agreements and understandings, oral and written, between the
parties with respect to such subject matter.
12.5 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement and the rights and obligations
hereunder shall not be assignable by any party, other than to its lenders,
without the written consent of the other party and any such purported assignment
by any party without such consent shall be void. Matria may without obtaining
the consent of any party hereto, assign all of the rights and remedies of Matria
with respect to the representations, warranties, covenants and indemnities of
Seller under this Agreement to any current or prospective holder of Indebtedness
of Matria and further provided that Matria may assign this Agreement in whole or
in part to an Affiliate of Matria, without the consent of the Seller, in which
case Matria shall nonetheless remain liable for the performance of all of its
obligations hereunder.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, including electronically transmitted counterparts, each of which
shall be deemed an original, but all such counterparts together shall constitute
but one and the same Agreement.
12.7 Recitals, Schedules and Annexes. The recitals, schedules,
exhibits and annexes to this Agreement are incorporated herein and made a part
hereof as if fully set forth at length herein.
12.8 Construction. The article, section and subsection headings used
herein are inserted for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. As used in this Agreement, the
masculine,
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feminine or neuter gender, and the singular or plural, shall be deemed to
include the others whenever and wherever the context so requires. Neither this
Agreement nor any provision contained in this Agreement will be interpreted in
favor of or against any party hereto because such party or its legal counsel
drafted this Agreement or such provision.
12.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
12.10 Attorneys' Fees. In the event of any dispute related to or
based upon this Agreement, the prevailing party shall be entitled to recover
from the other party its reasonable attorneys' fees and costs.
12.11 Arbitration. Except as provided in Section 2.1(c), any
unresolved controversy or claim arising from or relating to this Agreement or
breach thereof shall be settled by arbitration administered by the American
Arbitration Association in accordance with its Commercial Arbitration Rules,
then in effect. The decision of arbitration unless clearly erroneous, shall be
final and conclusive upon the parties, and judgment upon the award rendered by
the arbitrator may be entered in any court having competent jurisdiction. The
arbitration proceedings shall be held in the State of Georgia. The arbitration
proceedings shall be conducted before one (1) neutral arbitrator who shall be a
member of the Georgia Bar who has been actively engaged in the practice of
corporate and business law for at least fifteen (15) years, and shall proceed
under any expedited procedures of the Commercial Arbitration Rules. The
arbitrator shall have authority to award only (i) money damages, (ii) attorneys'
fees, costs and expert witness fees to the prevailing party, and (iii) sanctions
for abuse or frustration of the arbitration process. The arbitrator's
compensation, and the administrative costs of the arbitration, shall be borne by
the parties in the manner set forth in the arbitration award, as determined by
the arbitrator. Notwithstanding the foregoing provisions of this Section 12.11,
the parties are not required to arbitrate any issue for which injunctive relief
is sought by any party hereto and both parties may seek injunctive relief in any
federal or state court having jurisdiction.
12.12 No Reliance. Seller has not relied upon Matria, or its
Affiliates, agents, members, officers or employees (collectively the "OTHER
PARTIES") for any advice concerning federal or state tax consequences to Seller
resulting from the sale of the Assets or assumption of Assumed Liabilities.
Seller will be responsible for the full amount of any federal or state tax
liability resulting from the sale of the Assets and Assumption of Liabilities
and will not look to the Other Parties for any reimbursement, offset or gross-up
to the Purchase Price as a result of such liability.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
"MATRIA" "SELLER"
MATRIA HEALTHCARE, INC. MIAVITA LLC,
a Delaware corporation a Delaware limited liability company
By: _________________________________ By: ____________________________________
Its: ________________________________ Its: ___________________________________