Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Merger Agreement" or "Agreement") dated
as of April 28, 2007, by and among ENPATH MEDICAL, INC. ("Enpath") , a Minnesota
corporation having its principal executive office at 2300 Berkshire Lane North,
Minneapolis, Minnesota, 55441, GREATBATCH, LTD. ("Purchaser"), a New York
corporation having its principal executive office at 9645 Wehrle Drive,
Clarence, New York 14031; CHESTNUT ACQUISITION CORPORATION ("Merger Sub"), a
Minnesota corporation and a wholly-owned subsidiary of Purchaser having its
offices at 9645 Wehrle Drive, Clarence, New York 14031.
WITNESSETH:
WHEREAS, it is proposed that Merger Sub shall commence a tender offer
(as it may be amended from time to time in accordance with this Agreement, the
"Offer") to purchase all of the outstanding shares of Enpath Common Stock (as
defined herein), at a price of $14.38 per share (such amount, or any different
amount per share offered pursuant to the Offer in accordance with the terms of
this Agreement, the "Offer Price"), on the terms and subject to the conditions
set forth herein;
WHEREAS, it is also proposed that, following the consummation of the
Offer, Merger Sub will merge with and into Enpath with Enpath surviving as a
wholly-owned subsidiary of Purchaser (the "Merger"), and each share of Enpath
Common Stock that is not tendered and accepted pursuant to the Offer will
thereupon be canceled and converted into the right to receive cash in an amount
equal to the Offer Price, on the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of each of Enpath, Purchaser and Merger
Sub have approved this Agreement and deem it advisable and in the best interests
of their respective shareholders to consummate the Offer, the Merger and the
other transactions contemplated hereby, on the terms and subject to the
conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Purchaser's and Merger Sub's
willingness to enter into this Agreement, certain shareholders of Enpath are
entering into a Tender and Support Agreement substantially in the form attached
as Exhibit A (the "Tender and Support Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth or as referenced below:
1.1 "Acquisition Proposal" means (i) any proposal or offer for a
merger, consolidation, dissolution, recapitalization or other business
combination involving Enpath, (ii) any proposal or offer for the issuance by
Enpath of over 10% of its equity securities as consideration for the assets or
securities of another Person, or (iii) any proposal or offer to acquire in any
manner, directly or indirectly, over 10% of the equity securities or
consolidated total assets of Enpath, in each case other than the Merger.
1.2 "Affiliates" means with respect to a specified Person, a Person who
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
1.3 "Business Day" means a day, other than Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized or required
by any applicable Legal Requirement to close.
1.4 "Cleanup" means all actions required to (a) cleanup, remove, treat
or remediate Hazardous Materials in the indoor or outdoor environment; (b)
prevent the Release of Hazardous Materials so that they do not migrate, endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment; (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care; or (d) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of Hazardous
Materials in the indoor or outdoor environment.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Disclosure Schedule" means the Disclosure Schedule delivered by
Enpath to Purchaser dated the date of this Agreement. Any information with
respect to a matter that is disclosed by Enpath to Purchaser for any purpose in
the Disclosure Schedule shall be deemed to be disclosed with respect to each
other representation or warranty to the extent such relationship is reasonably
apparent on the face of disclosure in the Disclosure Statement. The inclusion of
any item in the Disclosure Schedule shall not be deemed an admission that such
item is a material fact, event or circumstance or that such item has or had,
individually or in the aggregate, a Material Adverse Effect.
1.7 "Enpath Common Stock" means Enpath common stock with $0.01 par
value.
1.8 "Enpath Credit Agreement" means the Revolving Credit and Term Loan
Agreement, dated as of October 17, 2003, between Enpath and M&I Marshall &
Ilsley Bank, as amended.
1.9 "Environmental Claim" means any claim, action, cause of action,
investigation or written notice by an Person alleging potential liability
(including, without limitation, potential liability for investigatory costs,
Cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or resulting
from (a) the presence or Release of any Hazardous Materials at any location
operated by Enpath, or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
2
1.10 "Environmental Law" means any and all applicable Legal
Requirements, and without limiting the foregoing, any regulations, orders,
decrees, judgments or injunctions promulgated or entered into by any
Governmental Entity, relating to the preservation or reclamation of natural
resources, or to the management, Release (as hereinafter defined) or threatened
Release of Hazardous Material (as hereinafter defined), including but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss.ss. 9601 et seq. ("CERCLA"), the Federal Water Pollution
Control Act, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act, 42 U.S.C. ss.
7401 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the
Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq., the Emergency
Planning and Community Right to Know Act of 1986, 42 U.S.C. ss. 11001 et. seq.,
the Safe Drinking Water Act, 42 U.S.C. ss. 300(f) et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. ss.ss. 1801 et seq., and any similar or
implementing state or local law, and all amendments or regulations promulgated
thereunder.
1.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
1.12 "GAAP" means generally accepted accounting principles and
practices in effect in the United States from time to time, applied consistently
throughout the time periods involved.
1.13 "Governmental Authorization" means any permit, license, franchise,
approval, consent, permission, confirmation, endorsement, waiver, certification,
registration, qualification, clearance or other authorization issued, granted,
given or otherwise made available by or under the authority of any Governmental
Entity or pursuant to any Legal Requirement.
1.14 "Governmental Entity" means any nation, state, municipality and
any federal, state, local, foreign, provincial or supranational court or
governmental agency, authority, instrumentality or regulatory body.
1.15 "Hazardous Material" means all explosive or regulated radioactive
materials or substances; petroleum and petroleum products (including crude oil
or any fraction thereof); asbestos or asbestos-containing materials; and any
hazardous or toxic materials, wastes or chemicals designated, defined, listed or
regulated as such pursuant to any Environmental Law.
1.16 "HSR Act" means Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
1.17 "Intellectual Property Rights" means all U.S. and foreign (i)
patents, patent applications, patent disclosures, and all related continuations,
continuations-in-part, divisionals, reissues, re-examinations, substitutions,
and extensions thereof ("Patents"), (ii) trademarks, service marks, trade names,
Internet domain names, logos, slogans, trade dress, and other similar
designations of source or origin, together with the goodwill symbolized by any
of the foregoing ("Trademarks"), (iii) copyrights and copyrightable subject
matter ("Copyrights"), (iv) rights of publicity, (v) computer programs (whether
in source code, object code, or other form), databases, compilations and data,
technology supporting the foregoing, and all documentation, including user
manuals and training materials, related to any of the foregoing ("Software"),
(vi) trade secrets and all confidential information, know-how, inventions,
proprietary processes, formulae, models, and methodologies, (vii) all rights in
the foregoing and in other similar intangible assets, (viii) all applications
and registrations for the foregoing and (ix) all rights and remedies against
infringement, misappropriation, or other violation thereof with respect to the
foregoing.
3
1.18 "Leased Real Property" means all of the real property currently
leased by Enpath, whether or not used in its business, all of which is disclosed
in more detail in the Disclosure Schedule.
1.19 "Legal Requirement" means any applicable federal, state, county,
municipal, local or foreign statute, constitution, principle of common law,
resolution ordinance, code, rule regulation, permit, consent, waiver, notice,
approval, registration, license, judgment, order, decree, injunction or other
authorization issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity or under
the authority of The NASDAQ Stock Market, LLC.
1.20 "Material Adverse Effect" means any effect, change, fact, event,
occurrence, development or circumstance (any such item, an "Effect") that,
individually or together with any other Effect that has occurred prior to the
date of determination of the Material Adverse Effect, that (i) is materially
adverse (financial or otherwise), to the properties, business, operations,
financial condition, results of operations, assets or liabilities of Enpath,
taken as a whole or (ii) prohibits, or materially impedes the timely
consummation of the Merger; provided, however, that in no event shall any of the
following occurring after the date hereof, alone or in combination, be deemed to
constitute, nor be taken into account in determining whether there has been or
will be, a Material Adverse Effect:
(A) any change in Enpath's stock price or trading volume, or any
failure by Enpath to meet published or internal revenue or earnings projections
(it being understood that, except as set forth in clauses B, C, E, G and H of
this definition, any cause of any such failure may be deemed to constitute, in
and of itself, a Material Adverse Effect and may be taken into consideration
when determining whether a Material Adverse Effect has occurred),
(B) any Effect that results from changes affecting Enpath's industry
generally (to the extent such Effect is not disproportionate with respect to
Enpath in any material respect) or the United States economy generally (to the
extent such Effect is not disproportionate with respect to Enpath in any
material respect),
(C) any Effect that results from changes affecting general worldwide
economic or capital market conditions,
(D) any Effect resulting from compliance with the terms and conditions
of this Agreement,
(E) any Effect caused by an impact to Enpath's relationships with its
employees, customers, suppliers or partners as a result of the announcement or
pendency of the of the Offer or the Merger, or the transactions contemplated by
this Agreement,
4
(F) any Effect resulting from the litigation filed as Pressure
Products, Inc. v. Enpath Medical, Inc., Civil Action No. 9:06-CV-121, filed in
U.S. Dist. Ct. for Eastern District of Texas, Lufkin Division,
(G) any Effect resulting from any change in any Legal Requirement after
the date hereof, or
(H) any shareholder litigation arising from allegations of a breach of
fiduciary duty relating to this Agreement and the transactions contemplated
hereby.
1.21 "Permitted Lien" means (a) liens for Taxes that are not yet due or
delinquent or are being contested in good faith by appropriate proceedings and
for which adequate reserves have been taken on the financial statements
contained in Enpath's SEC Reports; (b) statutory liens or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's or repairmen's liens
arising in the ordinary course of business with respect to amounts not yet
overdue or are being contested in good faith by appropriate proceedings and for
which adequate reserves have been taken on the financial statements contained in
Enpath's SEC Reports; (c) with respect to any Leased Real Property, a Lien
affecting solely the interest of the landlord thereunder and not the interest of
the tenant thereunder, which does not materially impair the value or use of such
Leased Real Property; (d) purchase money liens and liens securing rental
payments under capital lease arrangements; and (e) liens securing indebtedness
under the Enpath Credit Agreement.
1.22 "Person" means any individual and any corporation, partnership,
limited liability company, firm, trust, or other business entity and any
Governmental Entity.
1.23 "Proceeding" means any claim, action, suit, arbitration,
grievance, proceeding or investigation.
1.24 "Product Liability" means any liability, claim or expense
(including attorneys' fees) arising in whole or in part out of a breach of any
product warranty (whether express or implied), strict liability in tort,
negligent design or manufacture of product, negligent provision for services,
product recall, or any other liability, claim or expense arising from the
manufacturing, packaging, labeling (including instructions for use), marketing,
or sale of products.
1.25 "Release" shall have the same meaning as in CERCLA.
1.26 "Representatives" means, with respect to any Person, the
directors, officers, employees, financial advisors, attorneys, accountants,
consultants, agents and other authorized representatives of such Person, acting
in such capacity.
1.27 "Rights" means options, warrants, and all other rights,
convertible securities and arrangements or commitments which obligate Enpath to
issue or dispose of any of its capital stock, and stock appreciation rights,
performance units and other similar stock-based rights whether they obligate
Enpath to issue stock or other securities or to pay cash.
5
1.28 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
1.29 "Subsidiary" or "Subsidiaries" means with respect to any party,
any corporation, company, partnership or other organization, whether
incorporated or unincorporated, which is or was consolidated with such party for
financial reporting purposes.
1.30 "Superior Acquisition Proposal" means any proposal made by a third
party to acquire directly or indirectly more than 50% of the voting power of the
equity securities of Enpath then outstanding or all or substantially all of the
assets of Enpath, pursuant to a purchase, tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recapitalization, a sale of all
or substantially all of its assets or otherwise, which Enpath's Board of
Directors determines in good faith, after consultation with Greene Holcomb &
Fisher or other independent financial advisor of nationally recognized
reputation and consultation with outside legal counsel, to be (i) on terms more
favorable from a financial point of view to the holders of Enpath Common Stock
than the Offer, the Merger, and the other transactions contemplated by this
Agreement, taking into account all the terms and conditions of such proposal and
this Agreement (including any proposal by Purchaser to amend the terms of the
Offer, the Merger and the other transactions contemplated by this Agreement),
(ii) is not subject to any financing condition or, if financing is required,
such financing is then fully committed to the Third Party or reasonably
determined to be available by Enpath's Board of Directors, and (iii) reasonably
capable of being completed, taking into account all financial, regulatory,
legal, timing and other aspects of such proposal.
1.31 "Tax," collectively, "Taxes" means all federal, state, local or
foreign taxes, however denominated, including any interest, penalties, criminal
sanctions or additions to tax (including, without limitation, any underpayment
penalties for insufficient estimated tax payments) or other additional amounts
that may become payable in respect thereof (or in respect of a failure to file
any Tax Return when and as required), imposed by any Governmental Entity, which
taxes shall include, without limiting the generality of the foregoing, all
income taxes, payroll and employment taxes, withholding taxes (including
withholding taxes in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other person or entity),
unemployment insurance taxes, social security (or similar) taxes, sales and use
taxes, excise taxes, franchise taxes, gross receipts taxes, occupation taxes,
real and personal property taxes, stamp taxes, value added taxes, transfer
taxes, profits or windfall profits taxes, licenses in the nature of taxes,
estimated taxes, severance taxes, duties (custom and others), workers'
compensation taxes, premium taxes, environmental taxes (including taxes under
Section 59A of the Code), disability taxes, registration taxes, alternative or
add-on minimum taxes, estimated taxes, and other fees, assessments, charges or
obligations of the same or of a similar nature.
1.32 "Tax Return," collectively, "Tax Returns" means all returns,
reports, estimates, information statements or other written submissions, and any
schedules or attachments thereto, required or permitted to be filed pursuant to
Legal Requirements of any Governmental Entity Tax authority, including but not
limited to, original returns and filings, amended returns, claims for refunds,
information returns, ruling requests, administrative or judicial filings,
accounting method change requests, responses to revenue agents' reports
(federal, state or local) and settlement documents.
6
1.33 "Triggering Event" shall occur if:
(A) a tender offer or exchange offer relating to the securities of
Enpath shall have commenced by a Third Party and Enpath shall not have sent to
securityholders, within ten business days after the commencement of such tender
offer or exchange offer, a statement disclosing that Enpath's Board of Directors
recommends rejection of such tender offer or exchange offer;
(B) an Acquisition Proposal is announced, and Enpath fails to issue a
press release announcing its opposition to the Acquisition Proposal within ten
business days after such Acquisition Proposal is announced;
(C) Enpath's Board of Directors fails to reaffirm, unanimously and
without qualification, its recommendation, or fails to publicly state,
unanimously and without qualification, that the Merger is in the best interests
of Enpath's shareholders within ten business days after Purchaser requests in
writing that such action be taken; or
(D) Enpath's fails to file the Schedule 14D-9 as provided in Section
2.2.3 of this Agreement.
1.34 "Third Party" means any Person or "group" as defined in Section
13(d) of the 1934 Act, other than Purchaser or any of its Affiliates or
Representatives.
1.35 "Warrants" means the right to purchase, in the aggregate, 10,000
shares of Enpath Common Stock, at a price of $8.36 per share, granted by Enpath
pursuant to a Warrant Agreements dated October 23, 2003 and issued to Joseph W.
Caruso and Burton F. Meyers, III in connection with Enpath's acquisition of the
operating assets of BIOMEC Cardiovascular, Inc. on October 23, 2003.
1.36 The following terms have the meaning set forth in the Sections set
forth below:
7
Defined Term Location of Definition
---------- -------------------
Adverse Recommendations Change.....................................ss. 6.21
Affiliate Transaction..............................................ss. 4.19
Agreement..........................................................ss. Preamble Board
Recommendation.....................................................ss. 2.2.1
CERCLA.............................................................ss. 1.10
Certificate(s).....................................................ss. 3.6.2
Certifications.....................................................ss. 4.7.1
Closing............................................................ss. 3.10
Closing Date.......................................................ss. 3.10
Compensation Committee.............................................ss. 4.12.13
Confidential Information...........................................ss. 7.4.1
Confidentiality Agreement..........................................ss. 6.2.2
Contemplated Transactions..........................................ss. 4.4.1
Continuing Directors...............................................ss. 2.3.3
Continuing Employees...............................................ss. 7.8.1
Copyrights.........................................................ss. 1.17
Dissenting Shares..................................................ss. 3.8
EDGAR..............................................................ss. 4.7.1
Effect.............................................................ss. 1.20
Effective Time.....................................................ss. 3.10
Employee Plans.....................................................ss. 4.12.1
Employment Compensation Arrangement................................ss. 4.12.13
End Date...........................................................ss. 9.1.4
Enpath.............................................................ss. Preamble
Enpath Board Recommendation........................................ss. 7.2.2
Enpath Compensation Approvals......................................ss. 4.12.13
Enpath Compensation Arrangement....................................ss. 4.12.13
Enpath Disclosure Documents........................................ss. 4.7.9
Enpath Shareholder Approval........................................ss. 4.4.1
Enpath Shareholders' Meeting.......................................ss. 7.1.1
ERISA..............................................................ss. 4.12.1
ERISA Affiliate....................................................ss. 4.12.1
Exchange Agent.....................................................ss. 3.6.1
Exchange Fund......................................................ss. 3.6.1
Existing Policy....................................................ss. 7.7.2
FDA................................................................ss. 4.6.2
Filed SEC Reports..................................................ss. 4.7.1
Financial Statements...............................................ss. 4.7.4
Foreign Competition Laws...........................................ss. 7.6.2
Indemnified Parties................................................ss. 7.7.1
Lien...............................................................ss. 4.5.1
Material Contracts.................................................ss. 4.16.1
Maximum Amount.....................................................ss. 7.7.2
MBCA...............................................................ss. 2.2.1
Merger.............................................................ss. Preamble
Merger Agreement...................................................ss. Preamble
Merger Consideration...............................................ss. 3.5.1
Merger Sub.........................................................ss. Preamble
Minimum Condition..................................................ss. 2.1.1
Off-Balance Sheet Arrangements.....................................ss. 4.7.4
Offer..............................................................ss. Preamble
Offer Documents....................................................ss. 2.1.2
Offer Price........................................................ss. Preamble
Options............................................................ss. 3.7.1
Patents............................................................ss. 1.17
Permits............................................................ss. 4.13
Proxy Statement....................................................ss. 4.7.9
Purchaser..........................................................ss. Preamble
Required Approvals.................................................ss. 7.6.1
Restricted Stock Grant.............................................ss. 3.7.1
Restricted Stock Incentive Plan....................................ss. 4.2.1
Sarbanes-Oxley.....................................................ss. 4.7.1
Schedule 14D-9.....................................................ss. 2.2.3
Schedule TO........................................................ss. 2.1.2
SEC Reports........................................................ss. 4.7.1
Software...........................................................ss. 1.17
Stock Plans........................................................ss. 3.7
Subsequent Offering Period.........................................ss. 2.1.1
Trademarks.........................................................ss. 1.17
90% Top-Up Option..................................................ss. 2.4.1
90% Top-Up Option Shares...........................................ss. 2.4.1
In addition, the following terms shall be interpreted as set forth
below:
(A) The words "hereof," "herein," and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provisions of this Agreement.
(B) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice-versa.
(C) References to the "knowledge" of Enpath shall refer to (i) the
actual knowledge of any fact or matter by any member of Enpath's Board of
Directors, or (ii) the actual knowledge, after a reasonable inquiry in
connection with the preparation of the Disclosure Schedule, by Enpath's officers
and Enpath's executive level employees listed on Section 1.36(C) of the
Disclosure Schedule hereto, of any fact or matter.
(D) References to an "Exhibit" or to a "Schedule" are, unless otherwise
specified, to one of the Exhibits or Schedules attached to or referenced in this
Agreement, and references to an "Article" or a "Section" are, unless otherwise
specified, to one of the Articles or Sections of this Agreement.
8
ARTICLE 2
THE OFFER
2.1 THE OFFER
2.1.1 Provided that nothing shall have occurred that, had the Offer
been commenced, would give rise to the right to terminate the Offer pursuant to
any of the conditions set forth in Annex I, as promptly as practicable after the
date hereof (and in any event no later than seven Business Days after the date
hereof), Merger Sub shall, and Purchaser shall cause Merger Sub to, commence
(within the meaning of Rule 14d-2 under the Exchange Act) the Offer. The Offer
shall be subject to the condition that there shall be validly tendered in
accordance with the terms of the Offer, prior to the scheduled expiration of the
Offer (as it may be extended hereunder) and not withdrawn, a number of shares of
Enpath Common Stock that, together with the shares of Enpath Common Stock then
directly or indirectly owned by Purchaser, represents at least a majority of all
Enpath Common Stock then outstanding on a fully-diluted basis (the "Minimum
Condition") and to the other conditions set forth in Annex I, Merger Sub
expressly reserves the right to waive any of the conditions to the Offer and to
make any change in the terms of or conditions to the Offer; provided that unless
otherwise provided by this Agreement or previously approved by Enpath in
writing,
(A) the Minimum Condition may not be waived,
(B) no change may be made that changes the form of consideration to be
paid pursuant to the Offer, decreases the Offer Price or the number of shares of
Enpath Common Stock sought in the Offer, imposes conditions to the Offer in
addition to those set forth in Annex I, or otherwise amends or modifies the
Offer in any manner materially adverse to the holders of Enpath Common Stock,
and
(C) the Offer may not be extended except as set forth in this Section
2.1.1.
Subject to the terms and conditions of this Agreement, the Offer shall expire at
midnight, New York City time, on the date that is 20 Business Days (for this
purpose calculated in accordance with Section 14d-1(g)(3) under the Exchange
Act) after the date that the Offer is commenced. Merger Sub shall extend the
Offer for successive periods of up to twenty (20) Business Days each:
(i) if, at the scheduled or extended expiration date of the Offer, any
of the conditions to the Offer shall not have been satisfied or waived, from
time to time, until the earliest to occur of:
(a) the satisfaction or waiver of such conditions,
(b) the reasonable determination by Purchaser that any such
condition to the Offer is not capable of being satisfied on or prior to the End
Date, provided that the inability to satisfy such condition does not result from
any breach of any provision of this Agreement by Purchaser or Merger Sub, and
(c) the End Date, and
9
(ii) for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer or any period
set forth by any applicable Legal Requirement.
Following expiration of the Offer, Merger Sub may, in its sole discretion,
provide one or more subsequent offering periods (each, a "Subsequent Offering
Period") in accordance with Rule 14d-11 of the Exchange Act, if, as of the
commencement of each such period, there shall not have been validly tendered and
not withdrawn pursuant to the Offer and any prior Subsequent Offering Period
that number of shares of Enpath Common Stock necessary to permit the Merger to
be effected without a meeting of shareholders of Enpath, in accordance with
Section 302A.621 of the Minnesota Business Corporation Act ("MBCA"). Subject to
the foregoing, including the requirements of Rule 14d-11, and upon the terms and
subject to the conditions of the Offer, Merger Sub shall, and Purchaser shall
cause Merger Sub to, accept for payment and pay for, as promptly as practicable,
all shares of Enpath Common Stock that were either:
(A) validly tendered and not withdrawn pursuant to the Offer after the
final expiration of the Offer, or
(B) validly tendered in any Subsequent Offering Period.
The Offer Price payable in respect of each share of Enpath Common Stock validly
tendered and not withdrawn pursuant to the Offer or validly tendered in any
Subsequent Offering Period shall be paid net to the holder thereof in cash,
subject to reduction for any applicable withholding Taxes.
2.1.2 As soon as practicable on the date of the commencement of the
Offer, Purchaser and Merger Sub shall:
(A) file with the SEC a Tender Offer Statement on Schedule TO with
respect to the Offer (together with all amendments and supplements thereto and
including exhibits thereto, the "Schedule TO") that shall include the summary
term sheet required thereby and, as exhibits or incorporated by reference
thereto, the Offer to Purchase and forms of letter of transmittal and summary of
advertisement, if any, in respect of the Offer (collectively, together with any
amendments or supplements thereto, the "Offer Documents").
(B) cause the Offer Documents to be disseminated to the holders of
Enpath Common Stock. Enpath shall promptly furnish to Purchaser and Merger Sub
in writing all information concerning Enpath that may be required by applicable
securities laws or reasonably requested by Purchaser or Merger Sub for inclusion
in the Schedule TO or the Offer Documents.
(C) Parent and Merger shall timely file with the Commissioner of the
State of Minnesota any registration statement relating to the Offer required to
be filed pursuant to Chapter 80B of the Minnesota Statutes and shall disseminate
to the holders of Enpath Common Stock via the Offer Documents the information
set forth in any such registration statement to the extent and within the time
period required by Chapter 80B of the Minnesota Statutes.
Each of Purchaser, Merger Sub and Enpath agrees promptly to correct any
information provided by it for use in the Schedule TO or the Offer Documents if
and to the extent that such information shall have become false or misleading in
any material respect. Purchaser and Merger Sub agree to take all steps necessary
to cause the Schedule TO as so corrected to be filed with the SEC and the Offer
Documents as so corrected to be disseminated to holders of Enpath Common Stock,
in each case as and to the extent required by applicable U.S. federal securities
laws. Enpath and its counsel shall be given a reasonable opportunity to review
and comment on the Schedule TO and the Offer Documents each time before any such
document is filed with the SEC, and Purchaser and Merger Sub shall give
reasonable and good faith consideration to any comments made by Enpath and its
counsel.
10
Purchaser and Merger Sub shall promptly provide Enpath and its counsel with:
(i) any comments or other communications, whether written or oral, that
Purchaser or Merger Sub or their counsel may receive from time to time from the
SEC or its staff with respect to the Schedule TO or Offer Documents promptly
after receipt of those comments or other communications, and
(ii) a reasonable opportunity to participate in the response of
Purchaser and Merger Sub to those comments and to provide comments on that
response (to which reasonable and good faith consideration shall be given),
including by participating with Purchaser and Merger Sub or their counsel in any
discussions or meetings with the SEC.
2.2 ACTIONS BY ENPATH
2.2.1 Enpath hereby consents to the Offer and represents that at a
meeting duly called and held prior to the execution of this Agreement at which
all directors of Enpath were present, Enpath's Board of Directors duly and
unanimously adopted resolutions:
(A) declaring that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are fair to and in the best
interests of Enpath's shareholders,
(B) approving and declaring advisable this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, and
(C) recommending that the shareholders of Enpath accept the Offer,
tender their shares of Enpath Common Stock to Merger Sub pursuant to the Offer
and grant Enpath Shareholder Approval (such recommendation, the "Enpath Board
Recommendation").
At a meeting duly called and held prior to the execution of this Agreement at
which all "disinterested directors" (as defined in Section 302A.673 of the MBCA)
of Enpath were present, a duly authorized special committee of Enpath's Board of
Directors duly and unanimously adopted resolutions approving this Agreement and
the transactions contemplated hereby for purposes of Section 302A.673 of the
MBCA. Enpath hereby consents to the inclusion of the foregoing determinations
and approvals in the Offer Documents and, to the extent that no Adverse
Recommendation Change shall have occurred in accordance with Section 6.2, Enpath
hereby consents to the inclusion of the Enpath Board Recommendation in the Offer
Documents.
2.2.2 Enpath shall cause its transfer agent to promptly furnish
Purchaser with a list of its shareholders, mailing labels and any available
listing or computer file containing the names and addresses of all record
holders of Enpath Common Stock and lists of securities positions of Enpath
Common Stock held in stock depositories, in each case true and correct as of the
most recent practicable date, and shall provide to Purchaser such additional
information (including updated lists of shareholders, mailing labels and lists
of securities positions) and such other assistance as Purchaser may reasonably
request in connection with the Offer. Purchaser and Merger Sub shall treat the
information contained in such labels, listing or files and any additional
information referred to in the preceding sentence as Confidential Information,
as defined in Section 7.4.1 herein.
11
2.2.3 As soon as practicable on the day that the Offer is commenced,
Enpath shall file with the SEC and disseminate to the holders of Enpath Common
Stock, in each case, as to the extent required by applicable U.S. federal
securities laws, a Solicitation/Recommendation Statement of Schedule 14D-9
(together with any amendments or supplements thereto, the "Schedule 14D-9")
that, subject to Section 6.2.2, shall reflect the Enpath Board Recommendation.
Each of Purchaser and Merger Sub shall promptly furnish to Enpath in writing all
information concerning Purchaser and Merger Sub that may be required by
applicable securities laws or reasonably requested by Enpath for inclusion in
the Schedule 14D-9. Each of Enpath, Purchaser and Merger Sub agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material
respect. Enpath agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
Enpath Common Stock, in each case as and to the extent required by applicable
U.S. federal securities laws. Purchaser and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 each time
before it is filed with the SEC, and Enpath shall give reasonable and good faith
consideration to any comments made by Purchaser, Merger Sub and their counsel.
Enpath shall promptly provide Purchaser, Merger Sub and their counsel with:
(A) any comments or other communications, whether written or oral, that
Enpath or its counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after receipt of those comments or
other communications, and
(B) a reasonable opportunity to participate in Enpath's response to
those comments and to provide comments on that response (to which reasonable and
good faith consideration shall be given), including by participating with Enpath
or its counsel in any discussions or meetings with the SEC.
2.3 DIRECTORS
2.3.1 Effective upon the acceptance for payment by Merger Sub of Enpath
Common Stock equal to at least a majority of the then outstanding shares of
Enpath Common Stock entitled to vote on any matter at a meeting of the
shareholders of Enpath pursuant to the Offer, Purchaser shall be entitled to
designate the number of directors, rounded up to the next whole number, on the
Enpath Board of Directors that equals the product of:
(a) the total number of directors on Enpath's Board of Directors
(giving effect to the election of any additional directors pursuant to this
Section), and
12
(b) the percentage that the number of shares of Enpath Common Stock
beneficially owned by either Purchaser or Merger Sub (including shares of Enpath
Common Stock accepted for payment) bears to the total number of shares of Enpath
Common Stock outstanding, and Enpath shall take all action necessary to cause
Purchaser's designees to be elected or appointed to Enpath's Board of Directors,
including increasing the number of directors, and seeking and accepting
resignations of incumbent directors. At such time, Enpath shall use all
reasonable best efforts to cause individuals designated by Purchaser to
constitute the number of members, rounded up to the next whole number, on each
committee of the Enpath Board that represents the same percentage as such
individuals represent on the Enpath Board, to the fullest extent permitted by
any applicable Legal Requirements. Notwithstanding the foregoing, until
Purchaser and Merger Sub together acquire a majority of the outstanding shares
of Enpath Common Stock on a fully diluted basis, Enpath shall use its reasonable
best efforts to ensure that all members of the Enpath Board and such committees
as of the date hereof who are not officers or employees of Enpath shall remain
members of Enpath's Board and such committees and boards.
2.3.2 Enpath's obligations to appoint Purchaser's designees to Enpath's
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Enpath shall promptly take all actions, and shall
include in the Schedule 14D-9 such information with respect to Enpath and its
officers and directors, as Section 14(f) and Rule 14f-1 require in order to
fulfill its obligations under this Section. Purchaser shall supply to Enpath in
writing any information with respect to itself and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
2.3.3 Following the election or appointment of Purchaser's designees
pursuant to Section 2.3.1 and until the Effective Time, the approval of a
majority of the directors of Enpath then in office who were not designated by
Purchaser (the "Continuing Directors") (or the approval of the sole Continuing
Director if there shall be only one Continuing Director) shall be required to
authorize (and such authorization shall constitute the authorization of the
Enpath Board and no other action on the part of Enpath, including any action by
any other director of Enpath, shall be required to authorize) any termination of
this Agreement by Enpath, any amendment of this Agreement, any extension of time
for performance of any obligation or action hereunder by Purchaser or Merger
Sub, any waiver of compliance with any of the agreements or conditions contained
herein for the benefit of Enpath, and any amendment or change to Section 7.7.
Following the election of appointment of Purchaser's designees pursuant to
Section 2.3.1 and until the Effective Time, any actions with respect to the
enforcement of this Agreement by Enpath shall be effected only by the action of
a majority of the Continuing Directors (or the approval of the sole Continuing
Director if there shall be only one Continuing Director). Between the time
Merger Sub becomes entitled to designate directors pursuant to this Section 2.3
and the Effective Time, none of Purchaser, Merger Sub or their respective
Affiliates shall take any action to remove a Continuing Director from office.
2.4 90% TOP-UP OPTION
2.4.1 Subject to the terms and conditions set for herein, Enpath hereby
irrevocably grants to Merger Sub an option (the "90% Top-Up Option"),
exercisable upon the terms and conditions set forth in this Section 2.4, to
purchase that number of shares of Enpath Common Stock (the "90% Top-Up Option
Shares") equal to the lowest number of newly issued shares of Enpath Common
Stock that, when added to the number of shares of Enpath Common Stock directly
or indirectly owned by Purchaser at the time of such exercise, shall constitute
one share more than 90% of shares of Enpath Common Stock then outstanding
(taking into account the issuance of the 90% Top-Up Option Shares) at a cash
price per share equal to the Offer Price; provided that:
13
(i) in no event may the 90% Top-Up Option be exercisable unless
following the time of acceptance by Purchaser of Enpath Common Stock tendered in
the Offer or after a Subsequent Offering Period, more than 80% of the then
outstanding shares of Enpath Common Stock have been validly tendered and not
withdrawn pursuant to the Offer;
(ii) in no event shall the 90% Top-Up Option be exercisable for a
number of shares of Enpath Common Stock (a) which exceeds that number which is
equal to nineteen and nine-tenths percent (19.9%) of the shares of Enpath Common
Stock outstanding on the date of this Agreement, (b) that would require Enpath
to obtain shareholder approval under any applicable Legal Requirement, or (c) in
excess of Enpath's then authorized and unissued shares of Enpath Common Stock
(giving effect to shares of Enpath Common Stock reserved for issuance under the
Warrants and Stock Plans (both as defined herein) as if such shares were
outstanding); and
(iii) the 90% Top-Up Option may not be exercised if any provision of
any Legal Requirement or any judgment, injunction, order or decree of any
Governmental Entity shall prohibit, or require any action, consent, approval,
authorization or permit of, action by, or filing with or notification to, any
Governmental Entity or Enpath's shareholders in connection with the exercise of
the 90% Top-Up Option or the delivery of the 90% Top-Up Option Shares in respect
of such exercise, which action, consent, approval, authorization or permit,
action, filing or notification has not theretofore been obtained or made, as
applicable.
2.4.2 Subject to the terms and conditions herein, Merger Sub may
exercise the 90% Top-Up Option, in whole but not in part, at any time after the
time of acceptance of Enpath Common Stock tendered in the Offer or after a
Subsequent Offering Period and prior to the earlier to occur of (a) the
Effective Time and (b) the termination of this Agreement in accordance with its
terms.
2.4.3 If Merger Sub wishes to exercise the 90% Top-Up Option, Merger
Sub shall send to Enpath a written notice (a "90% Top-Up Exercise Notice, and
the date of receipt of such notice the "90% Top-Up Notice Date") specifying the
place for the closing of the purchase and sale of shares of Enpath Common Stock
pursuant to the 90% Top-Up Option (the "90% Top-Up Closing"). Enpath shall,
promptly after receipt of the 90% Top-Up Exercise Notice, deliver a written
notice to Merger Sub confirming (i) the number of shares of Enpath Common Stock
then outstanding on a fully-diluted basis, and (ii) the number of 90% Top-Up
Shares and the aggregate purchase price therefor.
2.4.4 At the 90% Top-Up Closing, subject to the terms and conditions of
this Agreement, Enpath shall deliver to Merger Sub a certificate or certificates
evidencing the applicable number of 90% Top-Up Option Shares, and Merger Sub
shall purchase each Top-Up Option Share from Enpath at a price per share equal
to the Offer Price. Payment by Merger Sub of the purchase price for the 90%
Top-Up Option Shares may be made, at Merger Sub's option, by delivery of
immediately available funds by wire transfer to an account designated by Enpath.
The parties shall cooperate to ensure that the issuance of the 90% Top-Up Option
Shares is accomplished consistent with all applicable Legal Requirements,
including all federal and state securities laws.
14
2.4.5 Upon the delivery by Merger Sub to Enpath of the 90% Top-Up
Exercise Notice, and the tender of the consideration described in Section 2.4.4,
Merger Sub shall be deemed to be the holder of record of the 90% Top-Up Option
Shares issuable upon that exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing
those 90% Top-Up Option Shares shall not then be actually delivered to Merger
Sub or Enpath shall have failed or refused to designate the account described in
Section 2.4.4.
2.4.6 Purchaser and Merger Sub acknowledge that the shares of Enpath
Common Stock which Merger Sub may acquire upon exercise of the 90% Top-Up Option
will not be registered under the 1933 Act and will be issued in reliance upon an
exemption thereunder for transactions not involving a public offering. Purchaser
and Merger Sub represent and warrant to Enpath that Merger Sub is, or will be
upon the purchase of the 90% Top-Up Option Shares, an "accredited investor", as
defined in Rule 501 of Regulation D under the Securities Act. Merger Sub agrees
that the 90% Top-Up Option and the 90% Top-Up Option Shares to be acquired upon
exercise of the 90% Top-Up Option are being and will be acquired by Merger Sub
for the purpose of investment and not with a view to, or for resale in
connection with, any distribution thereof (within the meaning of the Securities
Act). Any certificates evidencing 90% Top-Up Option Shares may include any
legends required by applicable securities Laws.
ARTICLE 3
THE PLAN OF MERGER; CLOSING
3.1 THE MERGER
Subject to the terms and conditions of this Agreement, at the Effective
Time (as hereinafter defined), Merger Sub shall be merged with and into Enpath,
pursuant to the provisions of, and with the effect provided in the MBCA. At the
Effective Time, the separate existence of Merger Sub shall cease and Enpath, as
the Surviving Corporation, shall possess all the rights, powers, privileges,
immunities and franchises and be subject to all of the duties, obligations, and
liabilities of Enpath and Merger Sub, all as provided under the MBCA.
3.2 ARTICLES OF INCORPORATION AND BY-LAWS
(A) The Articles of Incorporation of Enpath in effect immediately prior
to the Effective Time shall be amended to read as set forth on Exhibit B and, as
so amended, shall be the Articles of Incorporation of the Surviving Corporation
until amended in accordance with applicable law.
(B) The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter amended in accordance with applicable law.
15
3.3 BOARD OF DIRECTORS
The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and Bylaws
of the Surviving Corporation.
3.4 MERGER SUB STOCK
At the Effective Time, each issued and outstanding share of the common
stock, $.01 par value per share, of Merger Sub shall be automatically converted
into one validly issued, fully paid and nonassessable share of common stock,
$.01 par value per share, of the Surviving Corporation. Each stock certificate
of Merger Sub evidencing ownership of any such shares of common stock of the
Merger Sub shall continue to evidence ownership of such shares of common stock
of the Surviving Corporation.
3.5 MERGER CONSIDERATION
The manner and basis of converting the Enpath Common Stock in
conjunction with the Merger shall be as set forth in this Section 3.5.
3.5.1 At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Enpath Common Stock that
is issued and outstanding immediately prior to the Effective Time (other than
any shares of Enpath Common Stock to be cancelled in accordance with Section
3.5.3) shall be converted into the right to receive from the Surviving
Corporation or the Purchaser (through the Exchange Agent), and become
exchangeable for, $14.38 in cash or any different amount as may have been paid
per share of Enpath Common Stock in the Offer, without interest, (the "Merger
Consideration"). As of the Effective Time, all shares of Enpath Common Stock
upon which the Merger Consideration is payable pursuant to this Section 3.5
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares of Enpath Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration.
3.5.2 At the Effective Time, each share of common stock, par value $.01
per share, of Merger Sub that is issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
non-assessable share of common stock, $.01 par value per share, of the Surviving
Corporation.
3.5.3 All shares of Enpath Common Stock owned by Purchaser, Merger Sub
or any subsidiary of Purchaser or Merger Sub shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and retired
and shall cease to exist, and no cash or other consideration shall be delivered
or deliverable in exchange therefor.
3.6 EXCHANGE OF SHARES
3.6.1 Prior to the Effective Time, Purchaser shall deposit or shall
cause to be deposited with a bank or trust company designated by Purchaser after
consultation with Enpath (the "Exchange Agent"), for the benefit of the holders
of shares of Enpath Common Stock that have been converted into the right to
receive, and become exchangeable for, the Merger Consideration pursuant to
Section 3.5, for exchange in accordance with this Article 3, an amount equal to
the aggregate Merger Consideration (such consideration being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions of the Surviving Corporation, and in accordance with
the provisions of Section 3.6.2 make payments of the Merger Consideration out of
the Exchange Fund. The Exchange Fund shall not be used for any purpose other
than as described in this Section 3.6.
16
3.6.2 As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of shares of Enpath Common Stock that are represented by either (a) a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Enpath Common Stock (the "Certificates") or
(b) an entry to that effect in the shareholder records maintained on behalf of
the Company Stock transfer agent (the "Book Entry Shares") whose shares were
converted into the right to receive the Merger Consideration pursuant to Section
3.5.1:
(A) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates (if any) shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other customary provisions as the Surviving Corporation
may reasonably specify); and
(B) instructions for use by such holders in effecting the surrender of
the Certificates or authorizing transfer and cancellation of Book Entry Shares
in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by the Surviving Corporation, or
authorizing transfer of Book Entry Shares, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such shares of Enpath Common Stock
shall be entitled to receive in exchange therefor the Merger Consideration into
which the shares of Enpath Common Stock shall have been converted pursuant to
Section 3.5.1 (less any withholding Taxes pursuant to Section 3.6.7), and any
Certificate so surrendered shall forthwith be marked as cancelled. In the event
of a transfer of ownership of such Enpath Common Stock which is not registered
in the transfer records of Enpath, payment may be made to a Person other than
the Person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or other
Taxes required by reason of the payment to a Person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such Taxes have been paid or are not applicable. Until
surrendered as contemplated by this Section 3.6.2, each Certificate (other than
a Certificate representing shares of Enpath Common Stock that has been cancelled
in accordance with Section 3.5.3) and any Book Entry Shares shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration, without interest, to be paid in
consideration therefor upon surrender of such Certificate or transfer of the
Book Entry Shares, as the case may be, pursuant to Section 3.5.1. No interest
will be paid or will accrue on the Merger Consideration payable upon the
surrender of any Certificate or transfer of Book Entry Shares.
17
3.6.3 At the Effective Time (a) all holders of Certificates and Book
Entry Shares that were outstanding prior to the Effective Time shall cease to
have any rights as shareholders of Enpath other than the right to receive the
Merger Consideration and (b) the stock transfer books of Enpath shall be closed
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Enpath Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, the Certificates (other than Certificates cancelled in
accordance with Section 3.5.3) or Book Entry Shares are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
cancelled and exchanged as provided in this Article 3, except as otherwise
provided by any Legal Requirement. The Merger Consideration paid upon the
surrender of Certificates or transfer of Book Entry Shares in accordance with
the terms of this Article 3 shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Enpath Common Stock
surrendered.
3.6.4 Any portion of the Exchange Fund which remains undistributed to
the former shareholders of Enpath for six months after the Effective Time shall
be delivered to the Surviving Corporation and any former shareholders who have
not theretofore complied with this Article 3 shall thereafter look only to the
Surviving Corporation and only as general creditors thereof for payment of their
claim for the Merger Consideration. To the extent permitted by applicable law,
all rights of any former holder of Enpath Common Stock to receive the Merger
Consideration from the Surviving Corporation, to the extent the Merger
Consideration remains unclaimed, terminate on the later of the date on which the
Surviving Corporation is obligated to, and transfer payment to a public official
pursuant to any applicable abandoned property, escheat or similar Legal
Requirement.
3.6.5 None of Enpath, Merger Sub, Purchaser, the Surviving Corporation
or the Exchange Agent, or any of their respective employees, officers,
directors, shareholders, agents or affiliates, shall be liable to any Person in
respect of any unclaimed Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Legal
Requirement.
3.6.6 The Exchange Agent shall invest any cash included in the Exchange
Fund, as directed by the Surviving Corporation, on a daily basis. Any interest
and other income resulting from such investments shall be paid to the Surviving
Corporation. To the extent that there are losses with respect to such
investments, or the Exchange Fund diminishes for other reasons below the level
required to make prompt payments of the Merger Consideration as contemplated
hereby, Purchaser and /or the Surviving Corporation shall promptly replace or
restore the portion of the Exchange Fund lost through investments or other
events so as to ensure that the Exchange Fund is, at all times, maintained at a
level sufficient to make such payments. In the event this Agreement is
terminated, the Exchange Fund, including any interest and other income earned
thereon, shall be paid to Purchaser.
3.6.7 The Surviving Corporation and the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of Enpath Common Stock such
amounts as the Surviving Corporation is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so deducted and
withheld by the Surviving Corporation and the Exchange Agent and paid to the
applicable taxing authority when due, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of Enpath Common Stock or Enpath Stock Option in respect of which such deduction
and withholding was made by the Surviving Corporation.
18
3.6.8 If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such Person of a bond in such reasonable amount as
the Surviving Corporation may require as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will pay to
such Person in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration payable pursuant to this Agreement in respect of the shares
of Enpath Common Stock represented by such Certificate (less any withholding
Taxes pursuant to Section 3.6.7).
3.7 WARRANT; STOCK PLANS; RESTRICTED STOCK GRANTS
Enpath's Board of Directors (or, if appropriate, any committee thereof
administering any of Enpath's stock option and equity incentive plans listed in
Section 4.2 of the Disclosure Schedule, each as amended (collectively, the
"Stock Plans")) shall adopt such resolutions or take such other actions as may
be required to effect the following:
3.7.1 Prior to the Effective Time, Enpath shall take all actions
necessary to provide that, at the Effective Time,
(A) the Warrant and each then outstanding option granted under any
Stock Plan, or granted other than pursuant to such Stock Plans (collectively,
the "Options"), whether or not then exercisable or vested, shall automatically
accelerate so that each outstanding Option shall, immediately prior to the
Effective Time become fully vested and fully exercisable for all the shares of
Enpath Common Stock at the time subject to such Option and may be exercised by
the holder thereof for any and all of such shares as fully vested shares of
Enpath Common Stock and to the extent not exercised immediately prior to the
Effective Time, shall be cancelled in exchange for the right to receive from the
Surviving Corporation an amount in cash in respect thereof equal to the product
of (i) as applicable, the excess, if any, of the Merger Consideration over the
per share purchase price of the Warrant or the per share exercise price of such
Option, multiplied by (ii) the number of shares of Enpath Common Stock subject
to the Warrant or such Option, and
(B) if any shares of Enpath Common Stock outstanding immediately prior
to the Effective Time granted under any Stock Plan ("Restricted Stock Grant") is
unvested or subject to a repurchase option or forfeiture in favor of Enpath,
each then outstanding Restricted Stock Grant shall be cancelled in exchange for
the right to receive from the Surviving Corporation an amount in cash in respect
thereof equal to the Merger Consideration. All amounts payable pursuant to this
Section 3.7.1 shall be subject to any required withholding of Taxes and shall be
paid without interest.
19
3.7.2 Except as provided herein or as otherwise agreed to by the
parties, Enpath shall (a) cause the Stock Plans to terminate as of the Effective
Time and cause the provisions in any other plan, program or arrangement
providing for the issuance or grant by Enpath of any interest in respect of the
capital stock of Enpath, including the Warrant, to terminate and have no further
force or effect as of the Effective Time, and (b) ensure that following the
Effective Time no holder of Options, the Warrant, Restricted Stock Grants or
other awards or any participant in the Stock Plans or anyone other than
Purchaser shall hold or have any right to acquire any equity securities of
Enpath or the Surviving Corporation.
3.8 DISSENTING SHARES
Notwithstanding anything in this Agreement to the contrary, shares of
Enpath Common Stock outstanding immediately prior to the Effective Time and held
by a holder who has not voted in favor of the Merger and who has delivered a
written demand for appraisal of such shares in accordance with Section 302A.473
of the MBCA (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration pursuant to Section 3.5.1, unless and until
such holder fails to perfect or effectively withdraws or otherwise loses such
holder's right to appraisal and payment under the MBCA. Such holder shall be
entitled to receive payment of the appraised value of such shares of Enpath
Common Stock in accordance with the provisions of the MBCA, provided that such
holder complies with the provisions of Section 302A.473 of the MBCA. If, after
the Effective Time, any such holder fails to perfect or effectively withdraws or
otherwise loses such holder's right to appraisal, such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration, without interest thereon. Enpath
shall give Purchaser and Merger Sub prompt notice of any demands received by
Enpath for appraisal of shares of Enpath Common Stock, and, prior to the
Effective Time, Purchaser and Merger Sub shall have the right to participate in
all negotiations and proceedings with respect to such demands. Prior to the
Effective Time, Enpath shall not, except with the prior written consent of
Purchaser, make any payment with respect to, or settle or offer to settle, any
such demands.
3.9 ADJUSTMENTS TO OUTSTANDING EQUITY INTERESTS
If during the period between the date of this Agreement and the
Effective Time, any change in the outstanding shares of capital stock of Enpath
shall occur by reason of any stock split (including reverse stock split), or any
stock dividend thereon with a record date during such period, the Offer Price,
the Merger Consideration and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted.
3.10 THE CLOSING
The Merger and the transactions contemplated by this Agreement (the
"Closing"), subject to and in accordance with all of the terms and conditions
contained therein, shall be consummated at a closing to be held at 10:00 a.m.
New York City time, as soon as practicable (and in any event within two Business
Days) following satisfaction of the conditions to consummation of the Merger set
forth in Article 7 hereof (the "Closing Date"). In connection with such Closing,
Merger Sub and Enpath shall execute Articles of Merger in the form required by
and executed in accordance with the MBCA and Articles of Merger in the form
required by and executed in accordance with the MBCA, and shall cause to be
delivered and filed, as soon as practicable on the Closing Date, the Articles of
Merger to the Minnesota Secretary of State in accordance with the MBCA. The
Merger shall be effective at the time and on the date (the "Effective Time") not
later than two Business Days after the Closing Date, specified in such Articles
of Merger.
20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ENPATH
Except as set forth in the Enpath Disclosure Schedule, Enpath hereby
represents and warrants to Purchaser and Merger Sub as follows:
4.1 ORGANIZATION AND QUALIFICATION
Enpath is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority necessary to own, possess, license,
operate or lease the properties that it purports to own, possess, license,
operate or lease and to carry on its business as it is now being conducted.
Enpath is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where its business or the
character of its properties owned, possessed, licensed, operated or leased, or
the nature of its activities, makes such qualification necessary, except for
such failure which, when taken together with all other such failures, would not
constitute a Material Adverse Effect.
4.2 CAPITALIZATION
4.2.1 The authorized capital stock of Enpath consists of (i) 20,000,000
shares of Enpath Common Stock, and (ii) 1,000,000 shares of undesignated
preferred stock. As of the date of this Agreement: (a) 6,361,727 shares of
Enpath Common Stock are issued and outstanding, of which 47,440 shares are
Restricted Stock Grants under Enpath's 1999 Incentive Plan; (b) no shares of
preferred stock are issued and outstanding; (c) 10,000 shares of Enpath Common
Stock are subject to the Warrant; (d) no shares of Enpath Common Stock are
subject to issued and outstanding Options granted under Enpath's 1989 Incentive
Plan; (e) 7,500 shares of Enpath Common Stock are subject to issued and
outstanding Options granted under Enpath's 1991 Non-Qualified Plan; (f)
1,100,000 shares of Enpath Common Stock are reserved for issuance under Enpath's
1999 Incentive Plan, of which 628,150 shares of Enpath Common Stock are subject
to issued and outstanding Options granted under Enpath's 1999 Incentive Plan;
and (g) 400,000 shares of Enpath Common Stock are reserved for issuance under
Enpath's 1999 Non-Employee Director and Medical Advisory Board Plan, of which
148,500 are subject to issued and outstanding Options granted under Enpath's
1999 Non-Employee Director and Medical Advisory Board Plan. Set forth on Section
4.2 of the Disclosure Schedule is a correct and complete list of each Stock
Plan, each Option, each Restricted Stock Grant, the Warrant, and each other
equity award, including the holder, date of grant, exercise price, if
applicable, vesting schedule and number of shares of Enpath Common Stock subject
thereto. Other than the Warrant, all Options or other grants were granted under
the Stock Plans and not under any other plan, program or agreement (other than
any individual award agreements, forms of which have been made available to
Parent). The shares of Enpath Common Stock issuable pursuant to the Stock Plans
and the Warrant have been duly reserved for issuance by Enpath, and upon any
issuance of such shares in accordance with the terms of the Stock Plans or
Warrant, such shares will be duly authorized, validly issued, fully paid and
non-assessable and free and clear from any preemptive or other similar rights.
Since December 31, 2006, Enpath has not issued any shares of its capital stock
or Rights in respect thereof, except for 95,000 Stock Options and 16,695 shares
subject to Restricted Stock Grants under the 1999 Incentive Plan and 3,500 Stock
Options under the 1999 Non-Employee Director and Medical Advisory Board Plan and
except upon the conversion of the securities or the exercise of the Options
referred to above. The outstanding equity securities or other securities of
Enpath were issued in compliance in all material respects with the Securities
Act or any other applicable federal and state securities laws. All outstanding
shares of Enpath Common Stock are duly authorized, validly issued, fully paid
and non-assessable and free and clear from any preemptive or other similar
rights.
21
4.2.2 Except as disclosed in Section 4.2 of the Disclosure Schedule,
there are (a) no other Rights, agreements, arrangements, restrictions, or
commitments of any character obligating Enpath to issue, sell, redeem,
repurchase, acquire or exchange any shares of capital stock of or other equity
interests in Enpath or any securities convertible into or exchangeable for any
capital stock or other equity interests, or any debt securities of Enpath or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) and (b) no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Enpath may vote (whether or not dependent on conversion or other trigger event).
Except as disclosed in Section 4.2 of the Disclosure Schedule, there are no
existing registration covenants with respect to Enpath Common Stock or any other
securities of Enpath.
4.2.3 Enpath is not a party to, nor does it hold shares of Enpath
Common Stock or other equity securities of Enpath bound by or subject to, any
voting agreement, voting trust, proxy or similar arrangement. To Enpath's
knowledge, no shareholder is a party to or holds shares of Enpath Common Stock
or other equity securities of Enpath bound by or subject to any voting
agreement, voting trust, proxy or similar arrangement.
4.3 NO SUBSIDIARIES
Enpath has no Subsidiaries and does not own, directly or indirectly,
five percent (5%) or more of the outstanding capital stock or other voting
securities of any corporation or other Person.
4.4 AUTHORITY
4.4.1 The execution, delivery and performance by Enpath of this
Agreement and the consummation by Enpath of the Merger and the other
transactions contemplated hereby (the "Contemplated Transactions") are within
Enpath's corporate authority and powers, and, except for obtaining the Enpath
Shareholder Approval (as defined below), if required, have been duly authorized
by all necessary corporate action on the part of Enpath. The affirmative vote of
the holders of a majority of the outstanding shares of Enpath Common Stock in
favor of the approval and adoption of this Agreement and the Merger (the "Enpath
Shareholder Approval") is the only vote of the holders of any of the Company's
capital stock necessary in connection with the consummation of the Merger and
the other transactions contemplated by this Agreement. This Agreement
constitutes a valid and binding agreement of the Company enforceable against
Enpath in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium and other similar applicable Legal
Requirements affecting creditors rights generally and by general principles of
equity.
22
4.5 NO CONFLICT; GOVERNMENTAL AUTHORIZATION; REQUIRED FILINGS AND
CONSENTS
4.5.1 Except as set forth in Section 4.5.1 of Enpath Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of any of the Contemplated Transactions do, or will, directly or
indirectly (with or without notice or lapse of time or both), (a) contravene,
violate or conflict with the Articles of Incorporation or By-Laws of Enpath, (b)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or terminate or cancel
or give to others any rights of termination, acceleration or cancellation of
(with or without notice or lapse of time or both), or result in the creation of
a lien, security interest, pledge, claim, charge or encumbrance of any nature
whatsoever ("Lien"), except for Permitted Liens, on any of the properties or
assets of Enpath pursuant to, any of the terms, conditions or provisions of any
Material Contract except for breaches, defaults or violations that would not
reasonably be expected to have a Material Adverse Effect.
4.5.2 The execution and delivery of this Agreement by Enpath does not,
and the performance of this Agreement and the consummation of the Contemplated
Transactions by Enpath will not, require any consent of or filing with or
notification to, any Governmental Entity, except (a) for applicable requirements
of the Exchange Act, including the filing of the Proxy Statement (as defined in
Section 4.7.9), the Securities Act, State securities laws or "blue sky laws,"
(b) the pre-merger notification requirements of the HSR Act and the expiration
or termination of any applicable waiting period thereunder, (c) registration of
the Offer pursuant to Section 80B.03 of the Minnesota Statutes, and (d) the
filing of the Articles of Merger under the MBCA, except where such failure would
not reasonably be expected to have a Material Adverse Effect.
4.6 COMPLIANCE WITH LAW
4.6.1 To the knowledge of Enpath and except as set forth in Section 4.6
of the Disclosure Schedule, Enpath has been, and is now being, operated in
compliance with applicable Legal Requirements for any instances of
non-compliance which could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Enpath. This Section 4.6.1 does
not apply to environmental or pollution-related Legal Requirements or matters,
it being the intent and agreement of the Parties that such matters be
exclusively the subject of Section 4.14.
4.6.2 Without limiting the provisions of Sections 4.5.2 above, Enpath
has complied in all material respects with all requirements pursuant to the
Federal Food Drug and Cosmetic Act, regulations promulgated thereunder by the
U.S. Food and Drug Administration ("FDA"), and all Legal Requirements
administered or issued by any other Governmental Entity having regulatory
authority over products developed, tested, manufactured, distributed or sold by
Enpath in the United States, including without limitation applicable FDA,
premarket approval and premarket notification requirements. All required
notifications and applications have been filed with the FDA and any other such
Governmental Entity and have been cleared or approved, as applicable, by the FDA
and each such Governmental Entity, for any products tested, distributed or sold
by Enpath. Except as set forth in Section 4.6 of the Disclosure Schedule, no
Governmental Entity having regulatory authority over Enpath's products has
issued any notice, warning letter or other similar communication to Enpath
stating that it is in violation of any Legal Requirements. Except as set forth
in Section 4.6 of the Disclosure Schedule, none of Enpath's products have been
recalled, whether voluntary or otherwise, or are or have been subject to device
removal or correction reporting requirements, and Enpath has not received
notice, either completed or pending or to Enpath's knowledge, of any proceeding
seeking a recall, removal, or corrective action of any products. To Enpath's
knowledge, no employees or agents of Enpath have made an untrue statement of
material fact to any Governmental Entity with respect to any product tested,
manufactured, distributed, or sold by Enpath, or failed to disclose a material
fact required to be disclosed to any Governmental Entity. Except as set forth in
Section 4.6 of the Disclosure Schedule, there has been and is no pending or, to
Enpath's knowledge, threatened or anticipated FDA or other Government Entity
proceeding, investigation, review, or inquiry relating to Enpath's development,
testing, manufacture distribution, or sale of its products.
23
4.7 SEC FILINGS; FINANCIAL STATEMENTS
4.7.1 Except as set forth in Section 4.7.1 of the Disclosure Schedule,
Enpath has timely filed or otherwise furnished all forms, reports, registration
statements, schedules, all certifications and statements required by Rules
13a-14 and 15d-14 under the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), and the rules and regulations
promulgated thereunder, and other documents required to be filed by it with the
SEC since January 1, 2004 (the "SEC Reports").
To Enpath's knowledge, except as disclosed in the SEC Reports or Section 4.7.1
of the Disclosure Schedule, each director and officer (as defined in Rule
16a-1(f) of the Exchange Act) of Enpath has filed with the SEC on a timely basis
all statements required by Section 16(a) of the Exchange Act and the rules and
regulations thereunder since the beginning of January 1, 2004.
As used in this Section 4.7.1, the term "file" or "filed" shall be broadly
construed to include any manner in which a document or information is furnished,
transmitted or otherwise made available to the SEC. Each of Enpath's SEC
Reports:
(i) complied in all material respects, as of its respective date of
filing with the SEC, with the requirements of the Securities Act, and the
Exchange Act, as the case may be, and, to the extent then applicable,
Sarbanes-Oxley, including in each case, the rules and regulations promulgated
thereunder, and
(ii) did not at the time its were filed and on the date it was amended
and supplemented, if applicable, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
24
4.7.2 The financial statements contained in the SEC Reports complied as
to form in all material respects, as of their respective dates of filing with
the SEC, with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto have been prepared in accordance
with GAAP (except, in the case of unaudited financial statements, subject to
normal year-end adjustments consistent with GAAP), and fairly present, in all
material respects, the financial condition of Enpath as of the respective dates
indicated and the statements of operations, cash flows and changes in
shareholders' equity of Enpath for the periods that ended, except in the case of
unaudited quarterly financial statements that were or are subject to normal
year-end adjustments consistent with GAAP.
4.7.3 Except as set forth in Section 4.7.3 of the Disclosure Schedule,
Enpath has no liabilities or obligations of any nature whatsoever (whether
accrued, absolute, contingent, known, unknown or otherwise), except for (a)
liabilities disclosed in the consolidated balance sheet of Enpath dated December
31, 2006 (including the notes thereto) or in the SEC Reports filed prior to the
date of this Agreement; (b) transaction expenses and other liabilities incurred
on behalf of Enpath under this Agreement; (c) liabilities under any Material
Contracts; (d) liabilities or obligations incurred since December 31, 2006 in
the ordinary course of business consistent with past practice that would not
reasonably be expected to have a Material Adverse Effect; (e) liabilities not
required by GAAP to be set forth or reserved on a consolidated balance sheet of
Enpath or in the notes thereto.
4.7.4 Enpath is not a party to any Off-Balance Sheet Arrangements. As
used herein, "Off-Balance Sheet Arrangements" means with respect to any Person,
any securitization transaction to which that Person or its Subsidiaries is a
party and any other transaction, agreement or other contractual arrangement to
which an entity unconsolidated with that Person is a party, under which that
Person or its Subsidiaries, whether or not a party to the arrangement, has, or
in the future may have, (a) any obligation under a direct or indirect guarantee
or similar arrangement; (b) a retained or contingent interest in assets
transferred to an unconsolidated entity or similar arrangement; (c) derivatives
to the extent that the fair value thereof is not fully reflected as a liability
or asset in the financial statements included in Enpath's Form 10-K for the
period ended December 31, 2006 (the "Financial Statements"); or (d) any
obligation or liability, including a contingent obligation or liability, to the
extent that it is not fully reflected in the Financial Statements.
4.7.5 Enpath is, and since January 1, 2004, has been, in compliance
with (a) the applicable listing and corporate governance rules and regulations
of The NASDAQ Stock Market, LLC and its predecessors, and (b) the applicable
provisions of Sarbanes-Oxley and the related rules and regulations promulgated
thereunder. Enpath has previously made available to Purchaser copies of all
certificates delivered by officers and employees of Enpath, including the
Certifications relating to Enpath's 2006 Form 10-K. The Certifications complied
with Rules 13a-14 and 15d-14 under the Exchange Act and Sections 302 and 906 of
Sarbanes-Oxley, and the rules and regulations promulgated thereunder, and the
statements contained in the Certifications were true and correct as of the date
of the filing thereof. The management of Enpath has implemented and maintains
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Exchange Act) designed to ensure (and such controls and procedures are
effective to ensure) that material information relating to Enpath is accumulated
and communicated to the management of Enpath, including its chief executive
officer and chief financial officer, as appropriate, by others within those
entities to allow timely decisions regarding required disclosure.
25
4.7.6 Enpath has implemented and maintains a system of internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) sufficient to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including, without limitation,
that (a) transactions are executed in accordance with management's general or
specific authorizations, (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (c) access to assets is permitted only in accordance with
management's general or specific authorization, and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
4.7.7 Since January 1, 2004, Enpath has not, nor, to the knowledge of
Enpath, has any director, officer, employee, auditor, accountant or
representative of Enpath, received or has otherwise had or obtained knowledge of
any complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or
methods of Enpath or their internal control over financial reporting, including
any complaint, allegation, assertion or claim that Enpath has engaged in
questionable accounting or auditing practices.
4.7.8 Each document to be filed by Enpath with the SEC or required to
be distributed or otherwise disseminated to Enpath's shareholders in connection
with the transactions contemplated by this Agreement (the "Enpath Disclosure
Documents"), including the Schedule 14D-9, the proxy or information statement of
Enpath (the "Proxy Statement"), if any, to be filed with the SEC for use in
connection with the solicitation of proxies from Enpath's shareholders in
connection with the Merger and the Enpath Shareholder Meeting, and any amendment
or supplements thereto, when filed, distributed or disseminated, as applicable
will comply as to form in all material respects with the applicable requirements
of the Exchange Act. The representations and warranties contained in this
Section 4.7.8 will not apply to statements or omissions included in the Enpath
Disclosure Documents based upon information furnished to Enpath in writing by
Purchaser or Merger Sub specifically for use therein.
4.7.9 The Proxy Statement, as supplemented or amended, if applicable,
at the time such Proxy Statement or any amendment or supplement thereto is first
mailed to shareholders of Enpath and at the time such shareholders vote on
adoption of this Agreement, and any Enpath Disclosure Document (other than the
Proxy Statement), at the time of the filing of such Disclosure Document or any
supplement or amendment thereto and at the time of any distribution or
dissemination thereof, will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 4.7.9
will not apply to statements or omissions included in the Enpath Disclosure
Documents based upon information furnished to the Enpath in writing by Purchaser
or Merger Sub specifically for use therein.
26
4.7.10 The information with respect to Enpath that Enpath furnishes to
Purchaser in writing specifically for use in the Schedule TO and the Offer
Documents, at the time of filing of the Schedule TO, at the time of any
distribution or dissemination of the Offer Documents and at the time of the
consummation of the Offer, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
From December 31, 2006 to the date hereof, except as set forth in
Section 4.8 of the Disclosure Schedule, Enpath has conducted its business in all
material respects in the ordinary course and consistent with past practice and
there has not been:
4.8.1 Any material loss, damage or destruction to, or any material
interruption in the use of, any of the assets of Enpath (whether or not covered
by insurance) that constitutes a Material Adverse Effect;
4.8.2 Any declaration, accrual, set aside or payment of any dividend or
any other distribution in respect of any shares of capital stock of Enpath, or
any repurchase, redemption or other acquisition by Enpath of any shares of
capital stock or other securities;
4.8.3 Any sale, issuance or grant, or authorization of the issuance of,
(a) any capital stock or other security of Enpath (except for Enpath Common
Stock issued upon the valid exercise of Options granted under any of the Stock
Plans or upon exercise of the Warrant), (b) any Options, warrants or Rights to
acquire any capital stock or any other security of Enpath (except for Options
described in Section 4.2), or (iii) any instrument convertible into or
exchangeable for any capital stock or other security of Enpath;
4.8.4 Any amendment or waiver of any of the rights of Enpath under, or
acceleration of vesting under, (a) any provision of any of the Stock Plans, (b)
any provision of any contract evidencing any outstanding Options or the Warrant,
or (c) any restricted stock purchase agreement;
4.8.5 Any amendment to any organizational document of Enpath, and any
merger, consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction involving Enpath;
4.8.6 Any creation of any Subsidiary of Enpath or acquisition by Enpath
of any equity interest or other interest in any other Person;
4.8.7 Any capital expenditure by Enpath which, when added to all other
capital expenditures made on behalf of Enpath since December 31, 2006, exceeds
$250,000 in the aggregate;
27
4.8.8 Any action by Enpath to (a) enter into, or suffer any of the
assets owned or used by it to become bound by, any Material Contract (as defined
in Section 4.16), or (b) amend or terminate, or waive any material right or
remedy under, any Material Contract;
4.8.9 Any (a) acquisition, lease or license by Enpath of any material
right or other material asset from any other Person, (b) sale or other disposal
or lease or license by Enpath of any material right or other material asset to
any other Person, or (c) waiver or relinquishment by Enpath of any right, except
for rights or other assets acquired, leased, licensed or disposed of in the
ordinary course of business and consistent with past practices;
4.8.10 Any write-off as uncollectible, or establishment of any
extraordinary reserve with respect to, any account receivable or other
indebtedness of the Enpath in excess of $250,000;
4.8.11 Any pledge of any assets of or sufferance of any of the assets
of Enpath to become subject to any Lien, except for Permitted Liens or pledges
of immaterial assets made in the ordinary course of business and consistent with
past practices;
4.8.12 Any (a) loan by Enpath to any Person, or (b) incurrence or
guarantee by Enpath of any indebtedness for borrowed money;
4.8.13 Any (a) adoption, establishment, entry into or amendment by
Enpath of any Employee Plans (as defined in Section 4.12.1 below), or (b)
payment of any bonus or any profit sharing or similar payment to, or material
increase in the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of the directors, officers or
employees of Enpath;
4.8.14 Any change of the methods of accounting or accounting practices,
business or manner of conducting business of Enpath;
4.8.15 Any material Tax election by Enpath;
4.8.16 Any commencement or settlement of any legal proceeding by
Enpath; or
4.8.17 Any agreement or commitment to take any of the actions referred
to in clauses 4.8.1 through 4.8.16 above, or any other event or development that
has had, or would have individually or in the aggregate, a Material Adverse
Effect.
4.9 PROPERTIES
4.9.1 Except as set forth in Section 4.9 of the Disclosure Schedule,
Enpath does not currently own, nor has it ever owned, any real property.
4.9.2 Set forth in Section 4.9 of the Disclosure Schedule is a list of
all Leased Real Property. With respect thereto:
28
(A) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, each of the leases relating to Leased Real Property
creates a valid and subsisting leasehold interest in favor of Enpath, is a
valid, binding and subsisting obligation of Enpath and each other party thereto,
enforceable against Enpath and each other party thereto in accordance with its
terms;
(B) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, there are no disputes with respect to any Leased Real
Property; and neither Enpath nor any other party to each lease relating to the
Leased Real Property is in breach or default under such lease, and no event has
occurred or failed to occur and no circumstance exists which, with the delivery
of notice, the passage of time or both, would constitute such a breach or
default, or permit the termination, modification or acceleration of rent under
any such lease relating to the Leased Real Property;
(C) Except as disclosed on Section 4.9 of the Disclosure Schedule or as
would not, individually or in the aggregate, have a Material Adverse Effect, no
consent by the landlord or any other party under any lease relating to the
Leased Real Property is required in connection with the consummation of the
transaction contemplated herein; and
(D) None of the Leased Real Property has been pledged or assigned by
Enpath or is subject to any Liens (other than pursuant to this Agreement or
Permitted Liens).
4.9.3 Except as would not, individually or in the aggregate, have a
Material Adverse Effect, Enpath has good and marketable fee title to, or, in the
case of leased assets, has good and valid leasehold interests in, all of its
tangible and intangible assets, used or held for use in, or which are necessary
to conduct, the business of Enpath as currently conducted, free and clear of any
Liens, except Permitted Liens.
4.10 LEGAL PROCEEDINGS
Except as set forth in Section 4.10 of the Disclosure Schedule, there
are no actions, suits or proceedings instituted, pending or, to the knowledge of
Enpath, threatened against Enpath or against any asset, interest or right of
Enpath. There are no actions, suits or proceedings instituted, pending or, to
the knowledge of Enpath, threatened which present a claim to restrain or
prohibit the transactions contemplated herein or to impose any material
liability in connection therewith. There are no actions, suits or proceedings
instituted, pending or, to the knowledge of Enpath, threatened against any
present or, to Enpath's knowledge, former director or officer of Enpath, that
would reasonably be expected to give rise to a claim for indemnification.
4.11 TAXES
Except as set forth in Section 4.11 of the Disclosure Schedule:
4.11.1 Enpath has duly and timely filed all Tax Returns required to be
filed by it (taking into account extensions), and all such Tax Returns were
true, correct and complete in all material respects and were prepared in
substantial compliance with all applicable laws and regulations;
29
4.11.2 Enpath has timely paid all material Taxes required to be paid by
it (whether or not shown due on any Tax Return);
4.11.3 Enpath has made adequate provision in the financial statements
contained in SEC Reports discussed in Section 4.7 for all unpaid Taxes of
Enpath;
4.11.4 Enpath has complied with all applicable Legal Requirements
relating to the payment and withholding of Taxes and has, within the time and
manner prescribed by such Legal Requirements, withheld and paid over to the
proper tax authorities all amounts required to be withheld and paid over by it;
4.11.5 No pending or, to Enpath's knowledge, threatened audit,
proceeding, examination or litigation or similar claim has been commenced or is
presently pending with respect to any Taxes or Tax Return of Enpath;
4.11.6 No written claim has been made by any tax authority in a
jurisdiction where Enpath does not file a Tax Return that Enpath is or may be
subject to taxation in that jurisdiction;
4.11.7 No outstanding written agreements, consents or waivers to extend
the statutory period of limitations applicable to the assessment of any Taxes or
deficiencies against Enpath, and no power of attorney granted by Enpath with
respect to any Taxes is currently in force;
4.11.8 Enpath is not a party to any agreement providing for the
allocation or sharing of any Taxes imposed on or with respect to any individual
or other person, and Enpath (a) has not been a member of an affiliated group (or
similar state, local or foreign filing group) filing a consolidated U.S. federal
income tax return, or (b) has no liability for the Taxes of any person under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign law), or as a transferee or successor;
4.11.9 The federal income Tax Returns of Enpath have been examined by
and settled with the Internal Revenue Service (or the applicable statutes of
limitation have lapsed) for all years through December 31, 2002. All assessments
for Taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid;
4.11.10 Enpath has not participated in a "reportable transaction"
within the meaning of Treasury Regulations Section 1.6011-4(b);
4.11.11 There are no Liens for Taxes upon the assets or properties of
Enpath, except for Liens which arise by operation of law with respect to current
Taxes not yet due and payable;
4.11.12 Enpath has previously delivered or made available to Purchaser
complete and accurate copies of (a) all material Tax Returns of Enpath for the
prior three tax years; (b) all audit reports, letter rulings, technical advice
memoranda and similar documents issued by any tax authority relating to the
United States federal, state, local or foreign Taxes due from or with respect to
Enpath, and (c) any closing agreements entered into by Enpath with any tax
authority in each case existing on the date hereof;
30
4.11.13 Enpath is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
4.11.14 Enpath has not been required to include in income any
adjustment pursuant to Section 481 of the Code by reason of a voluntary change
in accounting method initiated by Enpath, and the IRS has not initiated or to
Enpath's knowledge proposed any such adjustment or change in accounting method;
4.11.15 Enpath has not been a "distributing corporation" or a
"controlled corporation" in a distribution intended to qualify under Section 355
of the Code within the past five years;
4.11.16 Enpath has disclosed on all relevant Tax Returns any positions
taken therein that could give rise to a substantial understatement of Taxes
within the meaning of Section 6662 of the Code; and
4.11.17 For all fiscal years ending prior to the Effective Time, Enpath
is not a party to any agreement, contract, arrangement or plan that has resulted
or could result in the payment of any amount that will not be fully deductible
as a result of Section 162(m) of the Code (or any corresponding provision of
state, local or foreign law).
4.12 EMPLOYEE BENEFIT PLANS
4.12.1 Section 4.12.1 of the Disclosure Schedule sets forth a list of
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), whether or not
subject to ERISA and all other employment, compensation, consulting, bonus,
stock option, restricted stock grant, stock purchase, other cash or stock-based
incentive, profit sharing, savings, retirement, disability, insurance,
severance, retention, change in control, deferred compensation and other
compensatory plans, policies, programs, agreements or arrangements sponsored,
maintained, contributed to or required to be contributed to by Enpath or any
other entity, whether or not incorporated, that together with Enpath would be
deemed a "single employer" for purposes of Section 414 of the Code or Section
4001 of ERISA (an "ERISA Affiliate") with or for the benefit of, or relating to,
any current or former employee, director or other independent contractor of, or
consultant to, Enpath and with respect to which Enpath or any Subsidiary has or
may have any direct or indirect liability (exclusive of base salary, base wages
and any benefit, in each case, required solely under the laws of any state)
(together, the "Employee Plans").
4.12.2 Enpath has made available to Purchaser true and complete copies
of (a) all written governing documents with respect to Employee Plans, together
with all amendments thereto, (b) the latest Internal Revenue Service
determination letters obtained with respect to any Employee Plan intended to be
qualified under Section 401(a) or 501(a) of the Code, (c) the two most recent
annual actuarial valuation reports, if any, (d) the two most recently filed
Forms 5500 together with all related schedules, if any, (e) the "summary plan
description" (as defined in ERISA), if any, and all modifications thereto
communicated to employees, with respect to any Employee Plans subject to ERISA,
(f) any trust or other funding governing documents for vehicles maintained as
part of any Employee Plan, and (g) the two most recent annual and periodic
accountings of related plan assets required under any applicable law or
governmental regulation.
31
4.12.3 Neither Enpath nor any of its directors, officers, employees or
agents has, with respect to any Employee Plan, engaged in or been a party to any
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA), which could result in the imposition of either a material penalty
assessed pursuant to Section 502(i) of ERISA or a material tax imposed by
Section 4975 of the Code, in each case applicable directly or indirectly
(through an indemnification obligation or otherwise) Enpath or any Employee
Plan.
4.12.4 All Employee Plans have been administered in accordance with
their terms and in compliance in all material respects with the requirements,
including, but not limited to, ERISA and the Code. Except as set forth in
Section 4.12.4 of the Disclosure Schedule, no compensation paid or required to
be paid under any Employee Plan is or will be subject to additional tax under
Section 409A(1)(B) of the Code. All equity compensation awards issued by Enpath
have been made, accounted for, reported and disclosed in accordance with all
applicable Legal Requirements, accounting rules and stock exchange requirements.
4.12.5 There are no pending or, to the knowledge of Enpath, threatened
claims, arbitrations, regulatory or other proceedings (other than routine claims
for benefits), relating to any of the Employee Plans, or the assets of any trust
for any Employee Plan.
4.12.6 Each Employee Plan intended to qualify under Section 401(a) of
the Code, and the trusts created thereunder intended to be exempt from tax under
the provisions of Section 501(a) of the Code has received a favorable
determination or opinion letter from the Internal Revenue Service which is
currently in effect. To the knowledge of Enpath, nothing has occurred since the
date of the determination letter that would adversely affect the qualification
or tax exempt status of such Plan and its related trust, other than with respect
to written amendments to governing documents, the date for adopting such
amendment will not have expired as of the Effective Time.
4.12.7 All contributions or payments required to be made or accrued
before the Effective Time under the terms of any Employee Plan will have been
made or accrued by the Effective Time.
4.12.8 Neither Enpath nor any of its ERISA Affiliates contributes, nor
within the six-year period ending on the date hereof has any of them contributed
or been obligated to contribute, to any plan, program or agreement which is a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or which is subject
to Section 412 of the Code or Section 302 or Title IV of ERISA.
4.12.9 No Employee Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for current or former
employees, directors, consultants or other personnel of Enpath for periods
extending beyond their retirement or other termination of service, other than
group health plan continuation coverage mandated by applicable Legal
Requirements.
32
4.12.10 Except as set forth in any governing documents or as required
by Applicable Law, no condition exists that would prevent Enpath from amending
or terminating any Employee Plan providing health or medical benefits in respect
of any active employee of Enpath.
4.12.11 Except as set forth in Section 4.12.11 of the Disclosure
Schedule, or as otherwise set forth in this Agreement, the consummation of the
Contemplated Transactions will not, either alone or in combination with any
other event, (i) entitle any current or former employee, director or officer of
Enpath to severance pay or any other payment or benefit, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
employee, director or officer or (iii) require Enpath to place in trust or
otherwise set aside any amounts in respect of severance pay or any other payment
or benefit.
4.12.12 There are no agreements between Enpath and any director,
officer or employee pursuant to which Enpath would be required to make a
"parachute payment" (within the meaning of Section 280G(b)(2) of the Code) as a
result of the consummation of the Contemplated Transactions (whether alone or in
combination with a termination of employment or other event), the payment of
which would be nondeductible by Enpath as a result of Section 280G of the Code.
4.12.13 On or prior to the date hereof, the Compensation Committee of
Enpath's Board of Directors (the "Compensation Committee") has (a) approved each
Employee Plan pursuant to which consideration is payable to any officer,
director or employee (each, an "Enpath Compensation Arrangement") as an
"employment compensation, severance or other employee benefit arrangement"
within the meaning of Rule 14d-10(d)(2) under the Exchange Act (an "Employment
Compensation Arrangement"), and (b) taken all other action necessary to satisfy
the requirements of the non-exclusive safe harbor with respect to such Enpath
Compensation Arrangements in accordance to Rule 14d-10(d)(2) under the Exchange
Act (the approvals and actions referred to in clauses (a) and (b) above, the
"Enpath Compensation Approvals"). Enpath's Board of Directors has determined
that each of the members of the Compensation Committee are, and the members of
the Compensation Committee are, "independent directors" as defined in The Nasdaq
Marketplace Rules.
4.13 PERMITS
The permits, licenses, approvals, certifications and authorizations
from any Governmental Entity (collectively, "Permits") held by Enpath and set
forth in Section 4.13 of the Disclosure Schedule are in full force and effect
and sufficient for all business presently conducted by Enpath, except as would
not, individually or in the aggregate, have a Material Adverse Effect. The
Permits currently held by Enpath constitute all of the Permits that Enpath is
required to own, hold and possess and that are necessary to conduct the business
presently conducted by Enpath, except where the failure to hold would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 4.13 of the Disclosure Schedule or as would not, individually or in the
aggregate, have a Material Adverse Effect, none of the Permits will lapse,
terminate or otherwise cease to be valid as a result of the consummation of the
transactions contemplated hereby.
33
4.14 ENVIRONMENTAL MATTERS
Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:
4.14.1 Except as set forth in Section 4.14.1 of the Disclosure
Schedule: (a) to the knowledge of Enpath, Enpath is, and for the past five years
has been, in compliance with all applicable Environmental Laws; and (b) Enpath
has not received any written communication, whether from a Governmental Entity,
citizens group, employee or otherwise, alleging that Enpath is not in such
compliance, and, to the knowledge of Enpath, there are no past or present
actions, activities, circumstances, conditions, events or incidents that are
reasonably likely to prevent or interfere with such compliance in the future.
4.14.2 There is no Environmental Claim pending or, to the knowledge of
Enpath, threatened, against Enpath or against any Person whose liability for any
Environmental Claim Enpath has or may have retained or assumed either
contractually or by operation of law.
4.14.3 Except as set forth in Section 4.14.3 of the Disclosure
Schedule, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the Release or
presence of any Hazardous Material which could form the basis of any
Environmental Claim against Enpath, or to the knowledge of Enpath, against any
Person whose liability for any Environmental Claim Enpath has or may have
retained or assumed either contractually or by operation of law.
4.14.4 Enpath has made available to Purchaser true, complete and
correct copies and results of any reports, studies, analyses, tests or
monitoring possessed by Enpath pertaining to Hazardous Materials in, on, beneath
or adjacent to any property currently or formerly owned, operated, occupied or
leased by Enpath, or regarding Enpath's compliance with applicable Environmental
Laws.
4.15 INTELLECTUAL PROPERTY
4.15.1 To the knowledge of Enpath, (a) all Trademark registrations,
Trademark applications, and any other material Trademarks (including domain
names) owned by or licensed to Enpath are identified in Section 4.15 of the
Disclosure Schedule, and except as set forth in Section 4.15 of the Disclosure
Schedule, such Trademarks are valid and enforceable and have not been abandoned;
(b) all Copyright registrations, Copyright applications, and any other material
Copyrights owned by or licensed to Enpath are identified in Section 4.15 of the
Disclosure Schedule, and such Copyrights are valid and enforceable; and (c) all
issued Patents owned by or licensed to Enpath and pending applications for
Patents are identified in Section 4.15 of the Disclosure Schedule.
4.15.2 Except as disclosed in Section 4.15 of the Disclosure Schedule:
34
(A) To the knowledge of Enpath, Enpath is the sole and exclusive owner
of all right, title and interest in or has valid and enforceable rights to use,
by license or other agreements, all of the Intellectual Property Rights that are
currently used in the conduct of the business of Enpath;
(B) No Proceeding has commenced, been brought or heard by or before any
Governmental Entity or arbitrator or is pending or, to Enpath's knowledge, is or
has been threatened in written or oral communication by any third Person with
respect to any Intellectual Property Rights owned or used by Enpath in
connection with its business as currently conducted, including any claim or suit
that alleges that any such conduct or Intellectual Property Right infringes,
impairs, misappropriates, dilutes or otherwise violates the rights of others,
and Enpath is not the subject of any outstanding injunction, judgment, order,
decree, ruling, charge, settlement, or other dispute involving any third
Person's Intellectual Property Rights;
(C) Enpath has not threatened or initiated any claim or action or
Proceeding against any third Person with respect to any Intellectual Property
Rights;
(D) To the knowledge of Enpath, the conduct of the business of Enpath
does not conflict with or infringe any Intellectual Property Rights of any third
Person;
(E) To the knowledge of Enpath, there is no unauthorized use,
unauthorized disclosure, infringement, misappropriation or other violation by
another Person of any Intellectual Property owned by Enpath;
(F) Enpath has secured, or is in the process of securing based on the
timing of the current pending IP applications, valid written assignments from
all Persons (including, without limitation, consultants and employees) who
contributed to the creation or development of Intellectual Property Rights
created or developed for use by Enpath that Enpath does not already own by
operation of law; and
(G) Enpath has taken commercially reasonable steps to protect and
preserve the confidentiality and integrity of all trade secrets, know-how,
source codes, databases, confidential and proprietary information, and similar
Intellectual Property Rights owned or used in the conduct of the business of
Enpath and all use, disclosure or appropriation thereof by or to any third
Person has been pursuant to the terms of a written agreement between such third
Person and Enpath.
4.16 MATERIAL CONTRACTS
4.16.1 Section 4.16 of the Disclosure Schedule sets forth a list of all
Material Contracts. "Material Contracts" means all written or oral agreements or
arrangements to which Enpath is a party to or bound by and that constitute:
(A) Any "material contract" (as defined in Item 601(b)(10) of
Regulation S-K of the SEC);
35
(B) Any contract or agreement for the purchase of materials or personal
property from any supplier or for the furnishing of services to Enpath that
involves future aggregate annual payments by Enpath of $25,000 or more;
(C) Any contract or agreement for the sale, license or lease (as
lessor) by Enpath of services, materials, products, supplies or other assets,
owned or leased by Enpath;
(D) Any non-competition agreement, profit-sharing agreement or any
other agreement or obligation which purports to restrict the conduct of any
business by Enpath, or the ability of Enpath to operate in any geographic area;
(E) Any contract or plan, including any employment, compensation,
non-competition, non-solicitation, incentive, retirement, loan or severance
arrangements, with any current or former shareholder, director, officer or
employee of Enpath;
(F) Any agreement, joint venture, product development, research and
development or limited partnership agreements or arrangements involving a
sharing of profits, losses, costs or liabilities by Enpath with any other
Person;
(G) Mortgages, indentures, loan or credit agreements, security
agreements and other agreements and instruments relating to the borrowing or
guarantee of money or extension of credit in any case in excess of $25,000;
(H) Any standby letter of credit, performance or payment bond,
guarantee arrangement or surety bond of any nature involving amounts in excess
of $25,000;
(I) Other contracts not in the ordinary course of business involving
annual payments made to or by Enpath in excess of $25,000;
(J) Any contract for the sale of any of the assets of Enpath (whether
by merger, sale of stock, sale of assets or otherwise) or for the grant to any
Person of any preferential rights to purchase any of its assets (whether by
merger, sale of stock, sale of assets or otherwise), in each case, for
consideration in excess of $25,000 individually, or $50,000 in the aggregate;
(K) Any contract relating to the ownership, management or control of
any Person in which Enpath owns any equity interest;
(L) Any contract pursuant to which the Contemplated Transactions would
amend or modify such contract, or would trigger the payment of revenues or fees
to the counterparty of such contract;
(M) Any contract (i) relating to the acquisition, issuance, voting,
registration, sale or transfer of any securities, (ii) providing any Person with
any preemptive right, right of participation, right of maintenance or any
similar right with respect to any securities, or (iii) providing Enpath with any
right of first refusal with respect to, or right to repurchase or redeem, any
securities, except for contracts evidencing Enpath Options;
36
(N) Any contract imposing any confidentiality obligation on Enpath or
containing "standstill" or similar provisions (i) to which any Governmental
Entity is a party or under which any Governmental Entity has a right or
obligation, or (ii) directly or indirectly benefiting any Governmental Entity
(including any subcontract or other contract between Enpath and any contractor
or subcontractor to any Governmental Entity);
(O) Requiring that Enpath give any notice or provide any information to
any Person prior to considering or upon accepting any Acquisition Proposal or
similar proposal, or prior to entering into any discussions, agreement,
arrangement or understanding relating to any Acquisition Proposal or similar
transaction;
(P) Any contract, agreement or arrangement to allocate, share or
otherwise indemnify for Taxes; or
(Q) Any contract, agreement, license or arrangement (i) granting or
obtaining any right to use any Intellectual Property Rights (other than
contracts, agreements, licenses or arrangements granting rights to use readily
available commercial Software having an acquisition price of less than $25,000
per contract, agreements, license or arrangement); (ii) restricting Enpath's
right, or permitting third Persons to use, any material Intellectual Property
Rights; or (iii) setting forth the terms of co-existence pertaining to any
Intellectual Property Rights.
4.16.2 Except as set forth on Schedule 4.16 of the Disclosure Schedule,
(a) each Material Contract is legal, valid and binding on Enpath and, to the
knowledge of Enpath, each other party thereto, and is in full force and effect,
except for such failures to be valid and binding or to be in full force and
effect would not, individually or in the aggregate, have a Material Adverse
Effect; (b) Enpath and, to the knowledge of Enpath, each other party thereto,
has performed all material obligations required to be performed by it to date
under each Material Contract, except where such failure to perform would not
result in a Material Adverse Effect; and (c) neither Enpath nor, to the
knowledge of Enpath, has any other party thereto, violated or defaulted in any
material respect or terminated, nor has Enpath or, to the knowledge of Enpath,
any other party thereto, given or received notice of, any material violation or
default or any termination under or non-renewal of (nor, to the knowledge of
Enpath, does there exist any condition which with the passage of time or the
giving of notice or both would result in such a violation, default, termination
or non-renewal under) any Material Contract, except where such violation or
default would not individually or in the aggregate, have a Material Adverse
Effect. Enpath has provided, or made available, to Purchaser true and correct
copies of each Material Contract.
4.17 INSURANCE
Section 4.17 of the Disclosure Schedule sets forth a list of each
insurance policy carried and owned by Enpath (including self-insurance). All
such policies are in full force and effect, all premiums due thereon have been
paid, Enpath is not in default under any policy which is material to Enpath's
operations. Enpath has not been advised of any defense to coverage in connection
with any claim to coverage asserted or noticed by Enpath under or in connection
with any of their extant insurance policies. Enpath has not received any written
notice from or on behalf of any insurance carrier issuing policies or binders
relating to or covering Enpath that there will be a cancellation or non-renewal
of existing policies or binders, or that alteration of any equipment or any
improvements to real estate occupied by or leased to or by Enpath, purchase of
additional equipment or material modification of any of the methods of doing
business, will be required. Such insurance policies provide coverage on such
terms and of such kinds and amounts as is reasonably for businesses of the type
conducted by Enpath.
37
4.18 COLLECTIVE BARGAINING; LABOR DISPUTES; COMPLIANCE
Enpath is not now, nor has it been, a party to any collective
bargaining agreement or other labor contract and (a) Enpath has not received
notice of any unionization or organizational activity taking place by the
employees of Enpath; and (b) to the knowledge of Enpath there is not threatened
any strike, slowdown, picketing, work stoppage, work slowdown or employee
grievance process involving Enpath. Enpath has not received a petition for an
election of or for certification of a collective bargaining agent; is not
engaged in a grievance proceeding; and has not received an unfair labor practice
charge or engaged in any arbitration proceeding. There is no lockout of any
employees by Enpath, and no such action is contemplated by Enpath. Enpath has
not received a charge of discrimination or any claim in writing threatening to
file a change against Enpath with the EEOC or similar Governmental Entity; nor
the knowledge of Enpath is there any basis for a claim against Enpath under
federal and state laws respecting employment that could reasonably be expected
to have a Material Adverse Effect on Enpath for actual or alleged gender, race,
disability, national origin or age discrimination, child labor, equal pay, the
Occupational Safety and Health Act of 1970, as amended, the Family and Medical
Leave Act of 1993, as amended, the Immigration and Nationality Act, the Worker
Adjustment and Retraining Notification Act of 1988 and federal and state laws
regarding wages and hours.
4.19 TRANSACTIONS WITH AFFILIATES
Except for compensation and benefits received in the ordinary course of
business as an employee or director of Enpath, no director, officer or other
Affiliate of Enpath or any entity in which, to the knowledge of Enpath, any such
director, officer or other Affiliate owns any beneficial interest (other than a
beneficial interest in a publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 5%
of the stock of which is beneficially owned by any such Persons) is currently a
party to or has any interest in (i) any partnership, joint venture, contract,
arrangement or understanding with, or relating to, the business or operations of
Enpath, (ii) any loan, arrangement, understanding, agreement or contract for or
relating to indebtedness of Enpath or (iii) any property (real, personal or
mixed), tangible or intangible, used or currently intended to be used in the
business or operations of Enpath.
4.20 PRODUCT WARRANTIES
Purchaser has been provided copies of the forms of product warranty
relating to the three primary product lines currently produced or sold by
Enpath. In addition:
4.20.1 Section 4.20.1 of the Disclosure Schedule sets forth a true and
complete list of (a) all products designed, manufactured, marketed or sold by
Enpath that have been recalled or withdrawn (whether voluntarily or otherwise)
at any time during the past five years (for purposes of this Section 4.20.1, a
product shall have been recalled or withdrawn if all or a substantial number of
products in a product line were recalled or withdrawn) and (b) Proceedings (or
to the knowledge of Enpath, any investigation) by any Governmental Entity
(whether completed or pending) at any time during the past five years seeking
the recall, withdrawal, suspension or seizure of any product sold by Enpath.
38
4.20.2 Enpath has received no notice of claims for Product Liability
under contractual requirements or warranties, express or implied, applicable to
products sold by Enpath, except for ordinary course warranty claims that are
addressed by replacement of the product.
4.21 INVENTORY
Except as set forth in Section 4.21 of the Disclosure Schedule, (a) the
Inventory is in the physical possession of Enpath, and (b) none of the Inventory
is held on consignment by others. The Inventory has been determined and valued
on a first-in first-out basis (but not in excess of net realizable value), in
accordance with GAAP applied on a basis consistent with the Financial
Statements. The Inventory was acquired or produced by Enpath in the ordinary
course of business. Except as reflected in the reserve for obsolete inventory
reflected in the Financial Statements, the Inventory is good and merchantable
and is of a quality and quantity presently useable and salable by Enpath in the
ordinary course of business consistent with past practice.
4.22 EMPLOYEES
4.22.1 Section 4.22 of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee of Enpath whose
compensation in 2006 exceeded $50,000.00 (US), including each employee on leave
of absence or layoff status: employer, name, job title, current compensation
paid or payable and any change in compensation since December 31, 2006, vacation
accrued and service credited for purposes of vesting and eligibility to
participate under any Employee Plan.
4.22.2 To Enpath's knowledge, no director, officer or other executive
level employee of Enpath intends to terminate his or her employment with such
company as a result of the Merger.
4.23 BROKERS AND FINDERS
Except for Greene, Holcomb & Fisher LLC, neither Enpath nor any of its
shareholders, respective officers, directors or employees, has employed any
broker, finder or financial advisor or incurred any liability for any fees or
commissions in connection with the transactions contemplated herein.
4.24 [Intentionally left blank]
4.25 OPINION OF FINANCIAL ADVISOR
The Board of Directors has received the written opinion (or oral
opinion to be confirmed in writing) of Greene, Holcomb & Fisher LLC, dated April
27, 2007, to the effect that, as of such date, the consideration paid to or to
be received by holders of Enpath Common Stock in the Offer and the Merger is
fair, from a financial point of view, to such holders. A copy of that opinion
has been made available to Purchaser solely for informational purposes.
39
4.26 ANTITAKEOVER STATUTES
No further action is required by Enpath's Board of Directors or the
shareholders of Enpath to render inapplicable to this Agreement and the
Contemplated Transactions the restrictions on (i) "control share acquisition"
(as defined in Section 302A.011 of the MBCA) set forth in Section 302A.671 of
the MBCA, and (ii) "business combinations" with an "interested shareholder"
(each as defined in Section 302A.011 of the MBCA) set forth in Section 302A.673
of the MBCA, and, accordingly, neither Section nor any other antitakeover or
similar applicable law applies or purports to apply to any such transactions,
other than Section 302A.675 of the MBCA and Chapter 80B of the Minnesota
Statutes. Except as set forth in the immediately preceding sentence, no other
"control share acquisition," "fair price," "moratorium" or other antitakeover
laws under U.S. state or federal laws apply to this Agreement or any of the
Contemplated Transactions.
4.27 NO ADDITIONAL REPRESENTATIONS
Enpath does not make, and has not made, any representations or
warranties relating to it or the business of Enpath or otherwise in connection
with the Contemplated Transactions other than those expressly set forth in this
Agreement that are made by Enpath. Without limiting the generality of the
foregoing, Enpath has not made, and shall not be deemed to have made, any
representations and warranties in any presentation of the business of Enpath in
connection with the Contemplated Transactions and, accordingly, no statement
made in any such presentation shall be deemed a representation or warranty
hereunder or otherwise. It is understood that any cost estimates, projections or
other predictions, any data, any financial information or any memoranda or
offering materials or presentations are not, and shall not be deemed to be or to
include, representations or warranties of Enpath. No person has been authorized
by Enpath to make any representation or warranty relating to Enpath, the
business of Enpath or otherwise in connection with the transactions contemplated
hereby and, if made, such representation or warranty not be relied upon as
having been authorized by Enpath.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND MERGER SUB
Purchaser and Merger Sub, jointly and severally, hereby represent and
warrant to Enpath as follows:
5.1 ORGANIZATION
Each of Purchaser and Merger Sub is a corporation, duly organized or
formed, validly existing and in good standing under the laws of the jurisdiction
in which it is organized or formed and has the requisite corporate power and
authority to own, operate or lease the properties that it purports to own,
operate or lease and to carry on its business in all material respects as it is
now being conducted.
40
5.2 AUTHORITY
Each of Purchaser and Merger Sub has all requisite corporate power and
authority to execute and deliver into this Agreement, to perform their
respective obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement by each of Purchaser and Merger Sub and the
consummation by each of Purchaser and Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of Purchaser and Merger Sub and no other vote or approval or
corporate proceeding is necessary for the execution and delivery of this
Agreement by either Purchaser and Merger Sub, the performance by each of
Purchaser and Merger Sub of their respective obligations hereunder and the
consummation by each of Purchaser and Merger Sub of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of Purchaser and Merger Sub and assuming the due authorization, execution and
delivery by Enpath, constitutes a legal, valid and binding obligation of each of
Purchaser and Merger Sub, enforceable against each of Purchaser and Merger Sub
in accordance with their terms, except that (i) such enforcement may be subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, relating to creditors' rights
generally and (ii) equitable remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS
5.3.1 The execution and delivery of this Agreement by each of Purchaser
and Merger Sub do not, and the performance of this Agreement by each of
Purchaser and Merger Sub and the consummation of the transactions contemplated
hereby will not, (a) subject to the requirements, filings, consents and
approvals referred to in Section 5.3.2 conflict with or violate any Legal
Requirement, regulation, court order, judgment or decree applicable to Purchaser
and Merger Sub or by which any of their respective properties are bound or
subject, (b) violate or conflict with the organizational documents of Purchaser
and Merger Sub, or (c) subject to the requirements, filings, consents and
approvals referred to in Section 5.3.2, result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or cancellation of,
or result in the creation of a Lien on any of the property or assets of
Purchaser and Merger Sub pursuant to, any contract, agreement, indenture, lease
or other instrument of any kind, permit, license or franchise to which Purchaser
and Merger Sub is a party or by which either Purchaser and Merger Sub or any of
their respective properties are bound or subject, except, in the case of clause
(c), for such breaches, defaults, rights or Liens which would not materially
impair the ability of Purchaser and Merger Sub to timely consummate the
transactions contemplated hereby.
5.3.2 Except for applicable requirements, if any, of the Exchange Act,
the Securities Act, the pre-merger notification requirements of the HSR Act and
the filing of the Articles of Merger under the DGCL and the MBCA, neither
Purchaser and Merger Sub is required to submit any notice, report or other
filing with any Governmental Entity in connection with the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby, except for such of the foregoing, including under
applicable Legal Requirements, as are required by reason of the legal or
regulatory status or the activities of Enpath or by reason of facts specifically
pertaining to it. No waiver, consent, approval or authorization of any
Governmental Entity is required to be obtained or made by Purchaser and Merger
Sub in connection with their execution, delivery or performance of this
Agreement, except for such of the foregoing as are required by reason of the
legal or regulatory status or the activities of Enpath or its Subsidiaries or by
reason of facts specifically pertaining to any of them.
41
5.4 FINANCING ARRANGEMENTS
Purchaser and Merger Sub have or will have available on the Closing
Date sufficient funds to enable them to consummate the transactions contemplated
hereby.
5.5 DISCLOSURE DOCUMENTS
5.5.1 The information with respect to Purchaser and any of its
Subsidiaries that Purchaser furnishes to Enpath in writing specifically for use
in any Enpath Disclosure Document will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading (a) in the case of the
Proxy Statement, as supplement or amended, if applicable, at the time such Proxy
Statement or any amendment or supplement thereto is first mailed to shareholders
of Enpath and at the time such shareholders vote on the adoption of this
Agreement, and (b) in the case of any Enpath Disclosure Document other than the
Proxy Statement, at the filing of such Enpath Disclosure Document or any
supplement or amendment thereto and at the time of any distribution or
dissemination thereof and at the consummation of the Offer.
5.5.2 The Schedule TO, when filed, and the Offer Documents, when
distributed or disseminated, will comply as to form and substance in all
material respects with the applicable requirements of the Exchange Act and, at
the time of such filing, at the time of such distribution or dissemination and
at the time of the consummation of the Offer, will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading; provided that this representation and warranty
will not apply to statements or omissions included in the Schedule TO and the
Offer Documents based upon information furnished to Purchaser or Merger Sub in
writing by Enpath specifically for use therein.
5.6 Litigation. There are no suits, actions or proceedings pending or,
to the Knowledge of Purchaser, threatened against Purchaser or any of its
Subsidiaries, including Merger Sub, that would reasonably be expected to have a
material adverse effect on Purchaser's or Merger Sub's ability to consummate to
the transactions contemplated by this Agreement.
5.7 Brokers. Except for Banc of America Securities, whose fees will be
borne by Purchaser, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with this
Agreement, the Offer, the Merger or the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Purchaser or Merger
Sub or any of their respective directors, officers or employees, for which
Enpath may become liable.
42
5.8 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement, and
Merger Sub has engaged in no business other than in connection with the
transactions contemplated by this Agreement.
5.9 Ownership of Shares. During the period three (3) years prior to the
date hereof (other than by reason of the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby and
thereby), neither Purchaser nor any of its Affiliates, including Merger Sub, was
an "interested shareholder" of the Company as such term is defined in Section
302A.011, Subd. 49 of the MBCA.
5.10 Compliance. Neither Purchaser nor Merger Sub, nor any of their
respective Affiliates, is: (a) a direct competitor of the party listed on
Section 5.10 of the Disclosure Schedule, (b) under an investigation which has
been made public or sanctioned (within a twelve (12) month period prior to the
date of this Agreement) by the Securities and Exchange Commission or United
States Department of Justice; or (c) subject to Title 11 proceedings of the
United States Code.
ARTICLE 6
COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS BY ENPATH PENDING THE MERGER
Enpath covenants and agrees that, between the date of this Agreement
and the Effective Time, except as contemplated by this Agreement or as required
by any Legal Requirement, or unless Purchaser shall otherwise consent in
writing, the businesses of Enpath shall be conducted only in, and Enpath shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice. Enpath further covenants and agrees that it will:
(a) use its commercially reasonable efforts to preserve
substantially intact the business organization of Enpath,
(b) use its commercially reasonable efforts to keep available
the services of the present officers, employees and consultants of Enpath (which
efforts may include, following the prior approval of both Purchaser and Enpath's
Compensation Committee, the issuance of stay bonuses or arrangements), and to
preserve the present relationships of Enpath with customers, clients, suppliers
and other Persons with which Enpath has significant business relations,
(c) pay all applicable Taxes when due and payable (other than
those Taxes the payment of which Enpath challenges in good faith in appropriate
proceedings),
(d) operate the business of Enpath in compliance in all
material respects with all Legal Requirements, and
43
(e) maintain in full force and effect all Permits necessary
for the conduct of the business of Enpath as it is currently conducted.
Without limiting the foregoing, except as set forth in Section 6.1 of the
Disclosure Schedule, Enpath shall not, without the prior written consent of
Purchaser:
6.1.1 Amend or propose to amend (a) its Articles of Incorporation or
By-Laws or (b) any term of any outstanding security issued by Enpath or effect
or become a party to any merger, consolidation, share exchange, business
combination, recapitalization or similar transaction;
6.1.2
(A) Declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock or other
equity or voting interests,
(B) redeem, purchase or otherwise acquire, directly or indirectly, any
of its capital stock or other equity or voting interests,
(C) issue, sell, pledge, dispose of or encumber any (i) shares of its
capital stock or other equity or voting interests, (ii) securities convertible
into or exchangeable for, or Rights of any kind to acquire or receive, any
shares of its capital stock, interests, securities or any stock appreciation
rights, phantom stock awards or other rights that are linked in any way to the
price of Enpath Common Stock, or (iii) other securities of Enpath, other than
shares of Enpath Common Stock issued upon the exercise of Options outstanding on
the date hereof in accordance with the Stock Plans as in effect on the date
hereof or upon the exercise of the Warrant, or
(D) split, combine or reclassify any of its outstanding capital stock
or issue or authorize or propose the issuance of any of other securities in
respect of, in lieu of or in substitution for, shares of its capital stock or
other equity or voting interests;
6.1.3 Acquire or agree to acquire (a) by merging or consolidating with,
or by purchasing a substantial portion of the equity interests of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, or (b) any
assets, including real estate, except, with respect to clause (b) above,
purchases of equipment and supplies in the ordinary course of business
consistent with past practice in an amount not to exceed $100,000;
6.1.4 Amend, enter into, alter, modify or terminate any Material
Contract, or waive, release or assign any material rights or claims thereunder;
6.1.5 Enter into, amend or otherwise alter any lease or sublease of
real property (other than a sublease of Enpath's former Bloomington, or change,
terminate or fail to exercise any right to renew any lease or sublease of real
property;
6.1.6 Transfer, lease, license, sell, mortgage, pledge, dispose of,
encumber or subject to any Lien any property or assets, or cease to operate any
assets, other than sales of excess or obsolete assets in the ordinary course of
business consistent with past practice;
44
6.1.7 Except as required to comply with applicable Legal Requirements
and except for salary increases or bonuses described in Section 6.1 of the
Disclosure Schedules, (a) adopt, enter into, terminate, amend, or increase the
amount or accelerate the payment or vesting of any benefit or award or amount
payable under, any Employee Plan or other arrangement for the current or future
benefit or welfare of any current or former director, officer or employee, other
than to the extent necessary to avoid adverse tax consequences under Section
409A of the Code and the proposed regulations and guidance thereunder, (b)
increase or enhance in any manner the compensation or fringe benefits of, or pay
any bonus to, any director, officer or employee, (c) pay any benefit not
provided for under any Employee Plan as in effect on the date hereof, (d) grant
any awards under any bonus, incentive, performance or other compensation plan or
arrangement or Employee Plan (other than any stay or retention bonus deemed
reasonable and approved in advance by both Purchaser and Enpath's Compensation
Committee); (e) grant or award to any director, officer or employee stock
options, restricted stock, stock appreciation rights, stock based or stock
related awards, performance units, units of phantom stock or restricted stock,
or any removal of existing restrictions in any Employee Plan or agreements or
awards made thereunder; or (f) take any action to fund or in any other way
secure the payment of compensation or benefits under any Employee Plan,
agreement, contract or arrangement or Employee Plan;
6.1.8 Except for borrowing under the Enpath Credit Agreement in the
ordinary course of business, consistent with past practice, (a) repurchase,
prepay, incur or assume any material indebtedness, (b) modify any material
indebtedness or other liability in a manner that adversely affects Enpath, (c)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person, or
(d) make any loans, advances or capital contributions to, or investments in, any
other Person (other than customary travel advances to employees in compliance
with applicable Legal Requirements and in accordance with past practice in an
amount not to exceed $25,000 in the aggregate);
6.1.9 Incur any aggregate capital expenditures, or any obligations or
liabilities in connection therewith in an amount in excess of $100,000;
6.1.10 Change any accounting policies, methods, periods or procedures
(including procedures with respect to reserves, revenue recognition, payments of
accounts payable and collection of accounts receivable) used by it unless
required by applicable Legal Requirements or GAAP;
6.1.11 Make any material Tax election or material change in any Tax
election, consent to an extension of the statute of limitations for any open Tax
period, amend any Tax Returns or enter into any settlement or compromise of any
Tax liability of Enpath in an amount in excess of $25,000;
6.1.12 (a) Pay, discharge, satisfy, settle or compromise (including by
judgment or consent decree) any claim, litigation or any legal proceeding
(including claims, litigation and legal proceedings of shareholders and any
shareholder litigation relating to this Agreement, the Merger or any other of
the Contemplated Transactions or otherwise), except for any settlement or
compromise involving less than $25,000, but subject to an aggregate maximum of
$50,000, including all fees, costs and expenses associated therewith but
excluding from such amounts any contribution from any insurance company or other
parties to the litigation; (b) waive, release, grant or transfer any right of
material value other than in the ordinary course of business consistent with
past practice; or (c) commence any material legal proceeding;
45
6.1.13 Enter into any material agreement or arrangement with any of its
officers, directors, employees or any affiliate other than any stay agreements
deemed reasonable and approved in advance by both Purchaser and Enpath's
Compensation Committee;
6.1.14 Except as required by applicable Legal Requirements, adopt or
enter into any collective bargaining agreement or other labor union contract
applicable to the employees of Enpath;
6.1.15 Knowingly take any action (or omit to take any action) if such
action (or omission) would, or would be reasonably likely to result in (a) any
representation and warranty of Enpath set forth in this Agreement that is
qualified by materiality becoming untrue (as so qualified) or (b) any such
representation and warranty that is not so qualified becoming untrue in any
material respect at, or as of any time before the Effective Time;
6.1.16 Enter into any agreement, arrangement or contract to allocate,
share or otherwise indemnify for Taxes; or
6.1.17 Authorize any of, or commit, resolve or agree to take any of,
the foregoing actions.
6.2 NO SOLICITATION
6.2.1 Enpath will not, nor will Enpath authorize or permit any of its
Representatives to, and Enpath shall instruct, and cause each applicable
Affiliate, if any, to instruct, each such Representative not to, directly or
indirectly, solicit, initiate or knowingly take any action to facilitate or
encourage the submission of any Acquisition Proposal or any inquiries or the
making of any proposal that would reasonably be expected to lead to any
Acquisition Proposal, or, subject to Section 6.2.2 (a) conduct or engage in any
discussions or negotiations with, disclose any non-public information relating
to Enpath to, afford access to the business, properties, assets, books or
records of Enpath to, or otherwise cooperate in any way with, or knowingly
assist, participate in, facilitate or encourage any effort by, any Third Party
that is seeking to make, or has made, any Acquisition Proposal, (b) (i) amend or
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of Enpath, (ii) approve any
transaction under, or any Third Party becoming an "interested shareholder"
under, Section 302A.011, Subd. 49 of the MBCA, or (iii) enter into any agreement
in principle, letter of intent, term sheet, acquisition agreement, merger
agreement, option agreement, joint venture agreement, partnership agreement or
other Contract relating to any Acquisition Proposal. Subject to Section 6.2.2,
neither Enpath's Board of Directors nor any committee thereof shall fail to
make, withdraw or modify in a manner adverse to Purchaser or Merger Sub the
Enpath Board Recommendation, or recommend an Acquisition Proposal, fail to
recommend against acceptance of any tender offer or exchange offer for the
shares of Enpath Common Stock within 10 Business Days after the commencement of
such offer, or take any action or make any public statement inconsistent with
the Enpath Board Recommendation, or resolve or agree to take any of the
foregoing actions (any of the foregoing, an "Adverse Recommendation Change").
Enpath shall, and shall cause its Representatives to, cease immediately and
cause to be terminated any and all existing activities, discussions or
negotiations, if any, with any Third Party conducted prior to the date hereof
with respect to any Acquisition Proposal.
46
6.2.2 Notwithstanding the foregoing, prior to the acceptance for
payment of shares of Enpath Common Stock under the Offer (in the case of clauses
(a) through (c) below), Enpath's Board of Directors, directly or indirectly
through any Representative, may (a) engage in negotiations or discussions with
any Third Party that, subject to Enpath's compliance with this Section 6.2, has
made (and not withdrawn) a bona fide Acquisition Proposal in writing that
Enpath's Board of Directors believes in good faith, after considering the advice
of its outside legal counsel and a financial advisor, constitutes a Superior
Acquisition Proposal or would reasonably be expected to lead to a Superior
Acquisition Proposal, (b) thereafter furnish to such Third Party non-public
information relating to Enpath pursuant to an executed confidentiality agreement
with terms not materially less favorable to Enpath than those contained in any
Confidentiality Agreement entered into by Enpath and Purchaser (the
"Confidentiality Agreement") and containing additional provisions that expressly
permit Enpath to comply with the terms of this Section 6.2 (a copy of which
Confidentiality Agreement shall be promptly (in all events within 24 hours)
provided for informational purposes only to Purchaser), (c) following receipt of
and on account of such Superior Acquisition Proposal, make an Adverse
Recommendation Change and/or (d) take any non-appealable, final action that any
court of competent jurisdiction orders Enpath to take, but in each case referred
to in the foregoing clauses (a) through (c), only if Enpath's Board of Directors
determines in good faith by a majority vote, after considering the advice of
outside legal counsel to Enpath, that it is necessary or appropriate to take
such action to comply with its fiduciary duties under applicable Legal
Requirements. Nothing contained herein shall prevent Enpath's Board of Directors
from complying with Rule 14d-9 and Rule 14e-2(a) or Item 1012(a) of Regulation
M-A under the Exchange Act with regard to an Acquisition Proposal; provided that
nothing in this sentence shall be deemed to excuse any failure to otherwise
comply with the requirements of this Section 6.2.2.
6.2.3 Enpath's Board of Directors shall not take any of the actions
referred to in clauses (a) through (d) of the preceding subsection unless Enpath
shall have delivered to Purchaser prior written notice advising Purchaser that
it intends to take such action. Enpath shall notify Purchaser promptly (but in
no event later than 24 hours) after receipt by Enpath (or any of its
Representatives) of any Acquisition Proposal or any inquiry that would
reasonably be expected to lead to an Acquisition Proposal, any request for
non-public information relating to Enpath or for access to the business,
properties, assets, books or records of Enpath by any Third Party that, to the
knowledge of Enpath, is seeking to make, or has made after the date hereof, an
Acquisition Proposal. Enpath shall provide such notice orally and in writing and
shall identify the Third Party making, and the material terms and conditions of,
any such Acquisition Proposal, indication or request. Enpath shall keep
Purchaser informed, as promptly as practicable, of the status and details of any
such Acquisition Proposal and provide to Purchaser, as soon as practicable after
receipt or delivery thereof, copies of all material correspondence and other
written materials sent or provided to Enpath from any Third Party in connection
with any Acquisition Proposal, or sent or provided by Enpath to any third party
in connection with any Acquisition Proposal. Enpath shall provide Purchaser with
at least 48 hours prior notice of any meeting of the Enpath's Board of Directors
(or such lesser notice as is provided to the members of Enpath's Board of
Directors) at which the Enpath's Board of Directors is reasonably expected to
consider any Acquisition Proposal. Enpath shall promptly provide Purchaser with
any non-public information concerning the Enpath's business, present or future
performance, financial condition or results of operations, provided to any Third
Party that was not previously provided to Purchaser.
47
6.2.4 Notwithstanding anything to the contrary contained in this
Section 6.2, the fact that Enpath or any of its Representatives has had
discussions or negotiations with Third Parties prior to the date of this
Agreement regarding a possible Acquisition Proposal shall not prevent Enpath
from taking any of the actions specified in the proviso in Section 6.2.1, the
second sentence of Section 6.2.2 or Section 9.1.6 with respect to a new
Acquisition Proposal that was submitted by such Third Party after the date of
this Agreement and that was not solicited in violation of Sections 6.2.1 and
6.2.3.
ARTICLE 7
OTHER AGREEMENTS
7.1 SHAREHOLDER MEETING; PROXY MATERIAL; SHORT FORM MERGER
7.1.1 If Enpath Shareholder Approval is required under the MBCA in
order to consummate the Merger other than pursuant to Section 302A.621 of the
MBCA, then, in accordance with all applicable Legal Requirements, Enpath's
Articles of Incorporation and Bylaws, Enpath shall establish a record date
(which will be as promptly as reasonably practicable following the consummation
of the Offer) for, duly call, give notice of, convene and hold the meeting of
Enpath's shareholders (the "Enpath Shareholders' Meeting") as promptly as
practicable after the consummation of the Offer, for the purpose of voting on
the matters requiring Enpath Shareholder Approval; provided that (a) if Enpath
is unable to obtain a quorum of its shareholders at such time, Enpath may extend
the date of the Enpath Shareholder Meeting by no more than five Business Days
and Enpath shall use its reasonable best efforts during such five-Business Day
period to obtain such a quorum as soon as practicable, and (b) Enpath may delay
the Enpath Shareholder Meeting to the extent (and only to the extent) Enpath
reasonably determines that such delay is required by applicable Legal
Requirements, Enpath's Articles of Incorporation or Bylaws. Subject to Section
6.2.2, the Enpath's Board of Directors shall recommend unanimously that its
shareholders grant the Enpath Shareholder Approval and use its reasonable best
efforts to obtain the Enpath Shareholder Approval, and Enpath shall otherwise
comply with all applicable Legal Requirements applicable to the Enpath
Shareholder Meeting.
7.1.2 If the Enpath Shareholder Approval is required under the MBCA in
order to consummate the Merger other than pursuant to Section 302A.621 of the
MBCA, then, in accordance with all applicable Legal Requirements, Enpath's
Articles of Incorporation and Bylaws, as promptly as practicable after the
consummation of the Offer, Enpath and Purchaser shall prepare jointly and Enpath
shall file with the SEC the Proxy Statement and as soon as practicable
thereafter use its reasonable best efforts to mail to its shareholders the Proxy
Statement and all other proxy materials for such meeting, and if necessary in
order to comply with applicable securities laws, after the Proxy Statement shall
have been so mailed, as promptly as practicable circulate amended, supplemental
or supplemented proxy material, and, if required in connection therewith,
re-solicit proxies. Subject to Section 6.2.2, the Proxy Statement shall contain
the unanimous recommendation of Enpath's Board of Directors to the shareholders
of Enpath to grant the Enpath Shareholder Approval. Enpath and Purchaser, as the
case may be, shall furnish all information concerning Enpath or Purchaser as the
other party hereto may reasonably request in connection with the preparation and
filing with the SEC of the Proxy Statement. Purchaser and its counsel shall be
given a reasonable opportunity to review and comment on the Proxy Statement
before such document (or any amendment or supplement thereto) is filed with the
SEC, and Enpath shall give reasonable and good faith consideration to any
comments reasonably proposed by Purchaser and its counsel. Enpath shall (a) as
promptly as practicable after the receipt thereof, provide Purchaser and its
counsel with copies of any written comments, and advise Purchaser and its
counsel of any oral comments, with respect to the Proxy Statement (or any
amendment or supplement thereto) received from the SEC or its staff, (b) provide
Purchaser and its counsel a reasonable opportunity to review Enpath's proposed
response to such comments, (c) give reasonable and good faith consideration to
any comments reasonably proposed by Purchaser and its counsel, and (iv) provide
Purchaser and its counsel a reasonable opportunity to participate in any
discussions or meetings with the SEC.
48
7.1.3 Notwithstanding any provision of this Agreement to the contrary,
if Purchaser, Merger Sub or any other Subsidiary of Purchaser shall acquire at
least 90% of the outstanding shares of Enpath Common Stock pursuant to the
Offer, through exercise of the 90% Top-Up Option or otherwise, the parties
hereto shall take all necessary and appropriate action to cause the Merger to be
effective as soon as practicable after such acquisition without a meeting of
shareholders of Enpath, in accordance with Section 302A.621 of the MBCA.
7.2 ADDITIONAL AGREEMENTS
Enpath, Purchaser and Merger Sub will each comply in all material
respects with all applicable Legal Requirements and with all applicable rules
and regulations of any Governmental Entity in connection with its execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
7.3 NOTIFICATION OF CERTAIN MATTERS
7.3.1 Enpath shall give prompt notice to Purchaser of (a) the
occurrence or non-occurrence of any fact, event or circumstance whose occurrence
or nonoccurrence has had or may have a Material Adverse Effect, (b) any material
breach by Enpath or any officer, director, employee or agent of Enpath, of any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 7.3.1 shall not limit or otherwise affect the remedies available
hereunder to Purchaser.
7.3.2 Purchaser shall give prompt notice to Enpath of (a) the
occurrence or non-occurrence of any fact, event or circumstance whose occurrence
or nonoccurrence would be likely to cause any representation or warranty of
Purchaser or Merger Sub contained in this Agreement to be untrue or inaccurate
in any material respect at any time from the date hereof to the Effective Time,
(b) any material breach by Purchaser or Merger Sub, or any officer, director,
employee or agent thereof, of any covenant, condition or agreement to be
complied with or satisfied by it hereunder and (c) the occurrence or
non-occurrence of any fact, event or circumstance which constitutes a Material
Adverse Effect; provided, however, that the delivery of any notice pursuant to
this Section 7.3.2 shall not limit or otherwise affect the remedies available
hereunder to Enpath.
49
7.4 CONFIDENTIALITY; ACCESS TO INFORMATION
7.4.1 Each of Purchaser and Enpath agree that it shall, and shall cause
its respective affiliates and each of their respective officers, directors,
employees, financial advisors, consultants and agents to, hold in strict
confidence all Confidential Information obtained by them from the other party.
The term "Confidential Information" includes all data and information a
disclosing party provides to a receiving party, but does not include information
which: (a) was or becomes generally available to the public other than as a
result of a disclosure by the receiving party or its Representatives; (b) was or
becomes available to the receiving party on a non-confidential basis from a
source other than the disclosing party or its advisors, provided, that, to the
receiving party's knowledge, such source is not bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation of secrecy
to, the disclosing party with respect to such information; or (c) was within the
receiving party's possession prior to its being furnished to the receiving party
by or on behalf of the disclosing party, provided, that to the knowledge of the
receiving party, the source of such information was not bound by a
confidentiality agreement with, or other contractual, legal or fiduciary
obligation of secrecy to, the disclosing party in respect thereof.
7.4.2 The receiving party hereby agrees that the Confidential
Information will be kept confidential by the receiving party; provided, however,
that any such Confidential Information may be disclosed by the receiving party
to its Representatives who reasonably need to know such information (it being
agreed that the receiving party's Representatives shall be informed by the
receiving party of the confidential nature of such information and that by
receiving such information they are agreeing to be bound by this agreement). The
receiving party agrees to be responsible for any breach of this agreement by any
of its Representatives.
7.4.3 If a receiving party is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any Confidential
Information, the receiving party will provide the disclosing party with prompt
notice of such request and the documents and/or information requested thereby so
that the disclosing party may seek an appropriate protective order and/or waive
the receiving party's compliance with the provisions of this Section 7.4. The
receiving party further agrees that if in the absence of a protective order or
the receipt of a waiver hereunder the receiving party is nonetheless, upon the
advice of its counsel, compelled or otherwise required by any Legal Requirement
to disclose Confidential Information, the receiving party may disclose without
liability hereunder that portion of the Confidential Information which its
counsel advises in writing that the receiving party is compelled to disclose;
provided, however, that the receiving party shall give the disclosing party
written notice of the information to be so disclosed as far in advance of its
disclosure as is practicable.
50
7.4.4 From the date hereof to the Effective Time, Enpath shall, and
shall cause its directors, officers, directors, employees, auditors and agents
to, afford the directors, officers, employees, environmental and other
consultants, attorneys, accountants, financial advisors, financing sources,
representatives and agents of Purchaser reasonable access at all reasonable
times to its directors, officers, employees, representatives, agents,
properties, offices and other facilities and to all information systems,
contracts, books and records (including Tax Returns, audit work papers and
insurance policies), and shall furnish Purchaser with all financial, operating
and other data and information Purchaser through their directors, officers,
employees, consultants or agents, may reasonably request. No information
received pursuant to this Section 7.5 shall affect or be deemed to modify or
update any of the representations and warranties of Enpath contained in this
Agreement.
7.5 PUBLIC ANNOUNCEMENTS
Purchaser and Enpath shall consult with each other before issuing, and
provide each other with the opportunity to review and comment upon, any press
release or other public statements or announcements with respect to this
Agreement or the Contemplated Transactions and shall not issue any such press
release or make any such public statement without the other parties' consent,
which consent shall not be unreasonably withheld or delayed; except that a party
may, without prior written consent, issue such press release as may be required
by any applicable Legal Requirement if it has used commercially reasonable
efforts to consult with the other party but has been unable to do so prior to
the time such press release or public statement is so required or issued or
made. The party desiring to make a public statement or disclosure shall consult
with the other parties and give them the opportunity to review and comment on
the proposed disclosure. Nothing in this Section 7.5 shall prohibit subsequent
disclosures that are consistent in all material respects with disclosures
previously consented to pursuant to the first sentence of this Section 7.5.
7.6 APPROVAL AND CONSENTS; COOPERATION
7.6.1 Subject to Section 7.6.2, each of Enpath, Purchaser and Merger
Sub shall cooperate with each other and use their respective commercially
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all things, necessary or proper on their part under this Agreement and
applicable Legal Requirements to consummate and make effective the Offer, the
Merger and the Contemplated Transactions as soon as practicable. Without
limiting the foregoing, but subject to Section 7.6.2 below, the parties shall
(a) prepare and file as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings and other documents and to
obtain as promptly as practicable all consents, waivers, licenses, orders,
registrations, approvals, Permits and authorizations necessary or advisable to
be obtained from any third party and/or any Governmental Entity in order to
consummate the Offer, the Merger or the Contemplated Transactions (including,
but not limited to, those approvals, consents, orders, registrations,
declarations and filings set forth in Section 4.5.1 of the Disclosure Schedule
(collectively, the "Required Approvals")) and (b) take all reasonable steps as
may be necessary to obtain all such Required Approvals. Each of Enpath,
Purchaser and Merger Sub shall use its commercially reasonable efforts to
resolve any objections to such Required Approvals, if any, as any Governmental
Entity may threaten or assert with respect to this Agreement and the
Contemplated Transactions in connection with the Required Approvals. Enpath,
Purchaser and Merger Sub each shall, upon request by the other, furnish the
other with all information concerning itself, its affiliates, directors,
officers and shareholders and such other matters as may reasonably be necessary
in connection with the Offer Documents, the Enpath Disclosure Documents or any
other statement, filing, notice or application made by or on behalf of Enpath,
Purchaser or Merger Sub to any third party and/or Governmental Entity in
connection with the Offer, the Merger and the Contemplated Transactions.
51
7.6.2 Notwithstanding anything to the contrary in this Agreement,
Enpath, Purchaser and Merger Sub will use their commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable Legal Requirements to
consummate the Offer, the Merger and the Contemplated Transactions in as
expeditious manner as possible. In furtherance and not in limitation of the
foregoing, each of Enpath and Purchaser agrees (a) to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
Contemplated Transactions as promptly as practicable, and, in any event, within
ten Business Days after the date hereof, and to supply as promptly as
practicable any additional information and documentary material that may be
required or requested pursuant to the HSR Act, (b) to make an appropriate filing
of Enpath Disclosure Documents and the Offer Documents as promptly as
practicable after the date hereof and to supply as promptly as practicable any
additional information and documentary material that may be required or
requested by the SEC or its staff or any state securities authority in
connection with such filings, and (c) to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable, including, in the case of Purchaser, entering
into any required settlement, undertaking, consent decree or stipulation with
any Governmental Entity or implementing any required divestiture, hold separate
or similar transaction with respect to any assets; provided, however, that,
Purchaser shall not be required to implement any required divestiture, hold
separate or similar transaction with respect to any assets or agree to waive any
substantial rights or to accept any substantial limitation on its operations or
to dispose of any significant assets in connection with obtaining any such
consent or authorization.
7.6.3 Subject to applicable Legal Requirements relating to the sharing
of information, Enpath and Purchaser shall have the right to review in advance,
and to the extent practicable each will consult the other on, all the
information relating to Enpath and Purchaser, as the case may be, that appear in
any filing made with, or written materials submitted to, any third party and/or
any Governmental Entity in connection with any legal proceeding arising under
the HSR Act related to the Merger and the Contemplated Transactions. In
exercising the foregoing right, both of Enpath and Purchaser shall act
reasonably and as promptly as practicable. Neither Enpath or Purchaser shall
agree to participate in any substantive meeting or discussion with any such
Governmental Entity in respect of any filing, investigation or inquiry related
to any legal proceeding arising under the HSR Act related to this Agreement or
the Merger unless it consults with the other parties reasonably in advance and,
to the extent permitted by such Governmental Entity, gives the other parties the
opportunity to attend and participate.
52
7.7 DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
7.7.1 All rights to indemnification under Enpath's Articles of
Incorporation, By-Laws or indemnification contracts or undertakings existing in
favor of those Persons who are, or were, directors and officers of the Enpath at
or prior to the date of this Agreement (the "Indemnified Parties") shall survive
the Merger and shall be observed by the Surviving Corporation to the fullest
extent permitted by Minnesota law or other applicable law for a period of six
years from the Effective Time. Purchaser shall guarantee such performance by the
Surviving Corporation. The Articles of Incorporation and the Bylaws of the
Surviving Corporation will contain provisions with respect to exculpation,
indemnification and advancement of expenses that are at least as favorable to
the indemnified parties as those contained in Enpath's Articles of Incorporation
and Enpath's Bylaws as in effect on the date hereof, which provisions will not
be amended, repealed or otherwise modified for a period of not less than six
years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who, immediately prior to the Effective Time,
were directors, officers, employees or agent of Enpath's, unless such a
modification is required by Law.
7.7.2 For a period of not less than six years after the Effective Time,
the Surviving Corporation shall maintain in effect the existing policy of
officers' and directors' liability insurance maintained by Enpath as of the date
of this Agreement in the form disclosed by Enpath to Purchaser prior to the date
of this Agreement (the "Existing Policy"), or purchase an extended reporting
period policy (tail) to the Existing Policy; provided, however, that (a) the
Surviving Corporation may substitute therefor policies issued by an insurance
carrier with the same or better credit rating as the Company's current insurance
carrier with at least the same coverage and amounts and containing terms and
conditions that are no less advantageous to the covered persons than the
Existing Policy, and (b) the Surviving Corporation shall not be required to pay
annual premiums for the Existing Policy (or for any substitute policies) in
excess of an amount which equal 250% of the last annual premium of the Existing
Policy on the date hereof (the "Maximum Amount"). In the event any future annual
premiums for the Existing Policy (or any substitute policies) exceeds the
Maximum Amount, the Surviving Corporation shall be entitled to reduce the amount
of coverage of the Existing Policy (or any substitute policies) to the amount of
coverage that can be obtained for a premium equal to the Maximum Amount. This
Section 7.7 shall survive the consummation of the Merger. Notwithstanding
Section 10.3, this Section 7.7 is intended to be for the benefit of and to grant
third-party rights to Indemnified Parties whether or not parties to this
Agreement, and each of the Indemnified Parties shall be entitled to enforce the
covenants contained herein.
7.7.3 If the Surviving Corporation or any of its successors or assigns
(a) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (b) transfers all or substantially all of its properties and assets to any
Person, then and in each such case, proper provision shall be made so that the
Indemnified Parties' rights thereunder are adequately preserved or provided for.
7.8 CONTINUATION OF EMPLOYEE BENEFITS
7.8.1 For a period beginning at the Effective Time and ending no
earlier than the first anniversary thereof, Purchaser and/or the Surviving
Corporation shall provide to employees of Enpath who continue employment with
the Surviving Corporation ("Continuing Employees") benefits that are not
materially less favorable, in the aggregate, to the benefits provided to the
Continuing Employees immediately prior to the Closing Date. Subject to the
preceding sentence, nothing contained herein shall preclude Purchaser or the
Surviving Corporation from terminating the employment of any individual or from
amending or terminating any Employee Plan.
53
7.8.2 From and after the Effective Time, Purchaser shall cause the
Surviving Corporation to honor and perform in accordance with their terms all
existing employment, severance, consulting and salary continuation agreements,
plans, policies or arrangements (including any benefits to be provided under any
Employee Plan) between Enpath and any current or former officer, director,
Employee or consultant of Enpath or group of such officers, directors, Employees
or consultants described on Section 7.8.2 of the Disclosure Schedule.
7.8.3 To the extent permitted under any applicable Legal Requirement,
for purposes of determining severance and vacation benefits maintained by the
Surviving Corporation, each employee of Enpath shall be given credit for all
service with Enpath (or service credited by Enpath).
7.8.4 To the extent of any changes in any Employee Plans covering
Continuing Employees after the Effective Time, and to the extent permissible
under such plans, Purchaser and/or the Surviving Corporation shall cause such
plan to (a) waive any preexisting condition limitations to the extent such
conditions were covered under the applicable medical, health or dental plans of
Enpath; (b) waive any waiting period limitation or evidence of insurability
requirement which would otherwise be applicable to such employee on or after the
Effective Time to the extent such employee had satisfied any similar limitation
or requirement under an analogous Enpath plan prior to the Effective Time; and
(c) recognize service of the Continuing Employees credited by Enpath or any
ERISA Affiliate for purposes of eligibility and vesting (but not for purposes of
any accrual under any defined benefit pension plan or retiree medical plan).
7.8.5 In the event Section 409A(a)(1)(B) of the Code requires a
deferral of any payment to an employee who is a "key employee" as that term is
defined in Code 409A, such payment shall be accumulated and paid in the single
lump sum on the earliest date permitted by Code 409A.
7.8.6 Purchaser agrees that after the Effective Time, the Surviving
Corporation will pay or provide, for the year ending December 31, 2007, to the
persons employed by Enpath immediately prior to the Effective Time, any cash
incentive payment to which they shall be or become entitled under the 2007
Salaried Employee Bonus Plan, (the "2007 Bonus Plan"), as a percentage of base
compensation through December 31, 2007, which plans Purchaser agrees will be
maintained in effect through December 31, 2007. In addition, if any such
employees are involuntarily terminated after the Effective Time and prior to
January 1, 2008, they shall receive a bonus payment under the 2007 Bonus Plan,
waiving any other conditions precedent, (i) at target performance as a
percentage of annualized base compensation of the employee, provided that the
similarly situated active employees are entitled to a bonus at or above target
under the 2007 Bonus Plan; (ii) equal to a fraction, the numerator of which is
the number of days worked by the employee during the calendar year divided by
365 days; (iii) less any bonus previously paid for 2007 under the 2007 Bonus
Plan; and (iv) paid at the same time and manner as bonuses are paid to similarly
situated active employees of the Surviving Corporation.
54
7.9 DELISTING
Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist Enpath Common Stock from
The NASDAQ Stock Market, LLC and to terminate registration of Enpath under the
Exchange Act; provided that such delisting and termination shall not be
effective until after the Effective Time of the Merger.
7.10 RESIGNATION OF DIRECTORS AND OFFICERS
Enpath shall obtain and deliver to Purchaser prior to the Closing Date
(to be effective as of the Effective Time) the resignation of each officer and
director of Enpath, in their capacities as officers and directors, and not as
employees, as Purchaser shall specify not less than two Business Days prior to
the Closing Date.
7.11 RELEASES AND ACKNOWLEDGEMENTS OF PAYMENT FROM STOCK PLAN
PARTICIPANTS
Enpath shall obtain and deliver to Purchaser on or prior to the Closing
Date (to be effective as of the Effective Time) releases and acknowledgements of
option cancellation from each Person listed in Section 4.2 of the Disclosure
Schedule as a holder of an Option.
7.12 COMPANY COMPENSATION ARRANGEMENTS
Prior to the scheduled expiration of the Offer (as it may be extended
hereunder), Enpath (acting through its Compensation Committee) will take all
such steps as may be required to cause each Enpath Compensation Arrangement
entered into by Enpath on or after the date hereof with any of its officers,
directors or employees or any member of the Compensation Committee pursuant to
which consideration is paid to such officer, director, employee or member to be
approved as an Employment Compensation Arrangement and to satisfy the
requirements of the non-exclusive safe harbor set forth in Rule 14d-10(d) of the
Exchange Act. Prior to the scheduled expiration of the Offer (as it may be
extended hereunder), neither Enpath's Board of Directors nor the Compensation
Committee shall withdraw, nor permit the withdrawal of, Enpath Compensation
Approvals.
7.13 SHAREHOLDER LITIGATION
Enpath shall promptly advise Purchaser, orally and in writing, of any
shareholder litigation against Enpath or its directors relating to this
Agreement, the Merger or the transactions contemplated by this Agreement and
shall keep Purchaser fully informed regarding any such shareholder litigation.
Enpath shall give Purchaser the opportunity to consult with Enpath regarding the
defense or settlement of any such shareholder litigation, shall give reasonable
consideration to Purchaser's advice with respect to such shareholder litigation
and, prior to the termination of this Agreement, will not settle any such
litigation without Purchaser's prior written consent, which consent will not be
unreasonably withheld or delayed.
55
ARTICLE 8
CONDITIONS PRECEDENT
8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER, MERGER SUB AND
ENPATH
The respective obligations of the parties to effect the Merger shall be
subject to satisfaction or waiver of the following conditions at or prior to the
Closing Date:
8.1.1 The adoption of the Merger and the approval of this Agreement by
the shareholders of Enpath contemplated by Section 7.1, shall have been duly and
validly obtained in accordance with all applicable Legal Requirements;
8.1.2 The parties hereto shall have received all approvals from
Governmental Entities required or mutually deemed necessary in connection with
the transactions contemplated by this Agreement and the Merger, all notice
periods and waiting periods required in connection with, or after the granting
of, any such approvals shall have passed and all conditions contained in any
such approval required to have been satisfied prior to consummation of such
transactions shall have been satisfied; provided, however, that no such approval
shall have imposed any condition or requirement that, in the reasonable opinion
of the Board of Directors of Purchaser so materially and adversely affects the
anticipated economic and business benefits to Purchaser of the Merger and the
other transactions contemplated by this Agreement as to render consummation of
the Merger inadvisable;
8.1.3 Merger Sub (or Purchaser on Merger Sub's behalf) will have
accepted for payment and paid for all of the shares of Enpath Common Stock
validly tendered pursuant to the Offer and not withdrawn, provided, however,
that this Section 8.1.3 will not be a condition to the obligation of Purchaser
or Merger Sub to consummate the Merger if the failure to satisfy such conditions
shall arise from Purchaser's or Merger Sub's breach of any provision of this
Agreement.
8.1.4 None of the parties hereto shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger and the other transactions contemplated
by this Agreement.
ARTICLE 9
TERMINATION, WAIVER AND AMENDMENT
9.1 TERMINATION
This Agreement may be terminated and the Offer and the Merger (and the
other transaction contemplated by the Transaction Documents) may be abandoned
(notwithstanding if approval by the Shareholders of Enpath has been obtained),
by giving written notice of such termination to each other party hereto:
56
9.1.1 At any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto, which consent shall have been approved
by action of the respective Board of Directors;
9.1.2 At any time on or prior to the Consummation of the Offer, by
Purchaser if Enpath has, or by Enpath in writing if Purchaser or Merger Sub has,
in any material respect, breached (a) any covenant or agreement contained in
this Agreement that would, individually or in the aggregate, result in a failure
of a condition in Section 1.1.3 or 1.1.4 of Annex I hereto if continuing on the
expiration date of the Offer and such breach has not been cured or is not
capable of being cured before the End Date (if being understood that Purchaser
may not terminate this Agreement pursuant to this Section 9.1.2 if such breach
by Enpath is cured or if Purchaser has materially breached this Agreement);
9.1.3 At any time, by any party hereto in writing, if any Governmental
Entity of competent jurisdiction shall have issued a final, nonappealable order
that (a) makes acceptance for payment of, and payment for, the shares of Enpath
Common Stock pursuant to the Offer or consummation of the Merger illegal or
otherwise prohibited, or (b) enjoins Merger Sub from accepting for payment of,
and paying for, the shares of Enpath Common Stock pursuant to the Offer or
Enpath or Purchaser from consummating the Merger;
9.1.4 At any time, by any party hereto in writing, if (a) the Offer has
not been consummated prior to August 1, 2007 (the "End Date") or (b) the
shareholders of Enpath do not approve the transactions contemplated herein by
November 1, 2007 (the "Outside Termination Date"), provided that the right to
terminate this Agreement pursuant to this Section 9.1.4 shall not be available
to any party whose breach of any provision of this Agreement results in the
failure of such conditions under (a) to be satisfied on or before the End Date
or the conditions of (b) to be satisfied on or before the Outside Termination
Date;
9.1.5 By Purchaser, if prior to the acceptance for payment of shares of
Enpath Common Stock under the Offer (a) an Adverse Recommendation Change shall
have occurred, (b) Enpath shall have entered into, or publicly announced its
intention to enter into, a binding definitive agreement (other than a
confidentiality agreement contemplated by Section 6.2.2) relating to any
Acquisition Proposal; (c) a Triggering Event shall have occurred, or (d) Enpath
or any of its Representatives shall have willfully and materially breached any
of its obligations under Section 6.2;
9.1.6 By Enpath, if prior to the acceptance for payment of shares of
Enpath Common Stock under the Offer, Enpath's Board of Directors shall have
authorized Enpath, subject to complying with the terms of this Agreement, to
enter into a definitive agreement providing for a Superior Acquisition Proposal;
provided that Enpath shall have paid any amounts due pursuant to Section 9.2 in
accordance with its terms; and provided further that in the case of any
termination by Enpath, (a) Enpath notifies Purchaser, in writing at least three
Business Days prior to such termination, promptly of its intention to terminate
this Agreement and to enter into a binding definitive agreement in respect of a
Superior Acquisition Proposal, attaching the final version of such proposed
definitive agreement, and (b) Purchaser does not make, within two Business Days
of receipt of such written notification, an offer, attaching the final version
of proposed definitive agreement, that is determined by Enpath's Board of
Directors in good faith after considering the advice of its outside counsel and
its financial advisors, to be at least as favorable to the shareholders of
Enpath as such Superior Acquisition Proposal, it being understood that Enpath
shall not enter into any such binding agreement during such two Business Day
period; or
57
9.1.7 By Enpath, if Merger Sub has (i) failed to commence the Offer
within seven Business Days of the date of this Agreement or (ii) failed to
accept for payment and pay for shares of Enpath Common Stock as and when
required pursuant to the Offer, unless such inaction shall have been caused by
or resulted from the failure of Enpath to perform, in any material respect, any
of its covenants or agreements contained in this Agreement or the material
breach by Enpath of any of its representations or warranties contained in this
Agreement.
9.2 EFFECT OF TERMINATION / TERMINATION FEE
9.2.1 In the event this Agreement is terminated pursuant to Section
9.1, this Agreement and the plan of merger provided for in Article 3 shall
become void and have no effect, except that (a) the provisions relating to
confidentiality and expenses set forth in Section 7.4 and 10.2, respectively,
shall survive any such termination, (b) a termination pursuant to Section
9.1.2(a) or 9.1.2(b) shall not relieve the breaching party from liability for an
uncured willful breach of such covenant or agreement or representation or
warranty giving rise to such termination; and (c) if applicable, the provisions
of Section 9.2.2 shall govern.
9.2.2 If (i) Enpath's Board of Directors either terminates this
Agreement pursuant to Section 6.2.2 and Section 9.1.6, or (ii) Purchaser
terminates this Agreement pursuant to Section 9.1.5, then Enpath shall pay
Purchaser a termination fee, in immediately available funds, in an amount equal
to Three Million Dollars ($3,000,000) payable within 15 calendar days of such
termination.
9.2.3 Enpath acknowledges that the agreements contained in this Section
9.2 are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Purchaser and Merger Sub would not enter into
this Agreement. Accordingly, if Enpath fails to pay any amount due to Purchaser
pursuant to Section 9.2 when due, Enpath shall pay the costs and expenses
(including reasonable legal fees and expenses) in connection with any action
taken to collect payment (including the prosecution of any lawsuit or other
legal action), together with interest on the unpaid amount at the publicly
announced prime rate of M&T Bank in Buffalo, New York from the date such amount
was first payable to the date it is paid.
9.3 WAIVER
Except where not permitted by applicable Legal Requirements, Purchaser
and Enpath, respectively, by written instrument signed by an executive officer
of such party, may at any time (whether before or after approval of this
Agreement by the shareholders of Merger Sub and the shareholders of Enpath)
extend the time for the performance of any of the obligations or other acts of
Enpath, on the one hand, or Purchaser or Merger Sub, on the other hand, and may
waive (a) any inaccuracies of such parties in the representations or warranties
contained in this Agreement or any document delivered pursuant hereto or
thereto, (b) compliance with any of the covenants, undertakings or agreements of
such parties, or satisfaction of any of the conditions precedent to its
obligations, contained herein or (c) the performance by such parties of any of
its obligations set out herein or therein; provided, however, that no such
waiver, or amendment or supplement contemplated by Section 9.4, executed after
approval of this Agreement and the Merger by the shareholders of Enpath shall,
without the further approval thereof, change the amount or kind of Merger
Consideration.
58
9.4 AMENDMENT OR SUPPLEMENT
This Agreement and the plan of merger provided for in Article 3 may be
amended or supplemented at any time only by mutual agreement of the parties
hereto or thereto. Any such amendment or supplement must be in writing and
approved by their respective Boards of Directors and/or officers authorized
thereby and shall be subject to the proviso in Section 9.3.
ARTICLE 10
GENERAL PROVISIONS
10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time, except that the agreements set forth in Article
3 shall survive the Effective Time indefinitely and those set forth in Sections
7.4, 9.1, 9.2 and Article 10 shall survive termination indefinitely.
10.2 EXPENSES
Each party hereto shall bear and pay all costs, fees and expenses
incurred by it in connection with this Agreement and the transactions
contemplated in this Agreement, including but not limited to the costs, fees and
expenses of its own financial consultants, accountants and counsel; provided
that Purchaser shall pay all filing fees payable pursuant to the HSR Act.
10.3 ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement, except as inconsistent
herewith. The terms and conditions of this Agreement and the plan of merger
provided for herein shall inure to the benefit of and be binding upon the
parties hereto and thereto and their respective successors. Except as
specifically set forth herein, nothing in this Agreement is intended to confer
upon any party, other than the parties hereto, and their respective successors,
any rights, remedies, obligations or liabilities.
10.4 NO ASSIGNMENT
No party hereto may assign any of its rights or obligations under this
Agreement to any other Person.
59
10.5 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent and
received by facsimile transmission or overnight express or by registered or
certified mail, postage prepaid, addressed as follows:
If to Enpath prior to the Closing, to:
Enpath Medical, Inc.
2300 Berkshire Lane North
Minneapolis, Minnesota, 55441
Attn: President
Telephone: (763) 951-8181
Facsimile: (763) 559-0148
With a required copy to:
Lindquist & Vennum, P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Attn: Thomas G. Lovett IV
Barbara Lano Rummel
Telephone: (612) 371-3211
Facsimile: (612) 371-3207
If to Purchaser or Merger Sub:
Greatbatch, Ltd.
9645 Wehrle Drive
Clarence, New York 14031
Attn: President
Telephone: 716-759-5600
Facsimile: 716-759-5654
With a required copy to:
Hodgson Russ LLP
One M&T Plaza, Suite 2000
Buffalo, New York 14203
Attn: Robert B. Fleming
Kristy L. Berner
Telephone: 716-856-4000
Facsimile: 716-849-0349
or to such other address or facsimile number as such party may hereafter specify
for the purpose by notice to each other party hereto. All such notices, requests
and other communications shall be deemed received on the date of receipt by the
recipient thereof if received prior to 5:00 p.m. on a Business Day in the place
of receipt. Otherwise, any such notice, request or communication shall be deemed
to have been received on the next succeeding Business Day in the place of
receipt.
60
10.6 CAPTIONS
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
10.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
10.8 GOVERNING LAW; JURISDICTION
10.8.1 This Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota applicable to agreements made and
entirely to be performed within such jurisdiction, except to the extent that
federal law may apply or that the MBCA is mandatorily applicable to the internal
corporate affairs of the parties to the Merger.
10.8.2 Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any court of the United States in the State of
Minnesota in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than any court of the United States located in the
State of Minnesota, and (iv) consents to service being made through the notice
procedures set forth in Section 10.5. Each of Enpath, Purchaser and Merger Sub
hereby agrees that service of any process, summons, notice or document by U.S.
registered mail to the respective addresses set forth in Section 10.5 shall be
effective service of process for any claim, action, suit or proceeding in
connection with this Agreement or the transactions contemplated hereby.
10.9 WAIVER OF JURY TRIAL
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.10 INVALID PROVISIONS
It any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law or order, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, and (iii) the
remaining provision of this Agreement will remain in full force and effect and
will not be affected by illegal, invalid or unenforceable provision or by its
severance herefrom.
61
10.11 ENFORCEMENT OF AGREEMENT
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement was not performed in
accordance with its specified terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction, this being in addition
to any other remedy to which they are entitled at law or in equity.
[SIGNATURE PAGE FOLLOWS]
62
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers and attested by their officers thereunto duly authorized,
all as of the day and year first above written.
PURCHASER: GREATBATCH, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
MERGER SUB: CHESTNUT ACQUISITION CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
ENPATH: ENPATH MEDICAL, INC.
By:_______________________________
Name: James D. Hartman
Title: Chairman of the Board
63
ANNEX I
-------
1.1 Notwithstanding any other provision of the Offer, but subject to
compliance with Section 2.1.1 of the Agreement, Merger Sub (a) shall not be
required to accept for payment or pay for any tendered shares of Enpath Common
Stock, (b) may delay the acceptance for payment of, or the payment for, any
tendered Enpath Common Stock, and (c) may terminate or amend the Offer as to
Enpath Common Stock not then paid for, in the event that at or prior to the
scheduled expiration of the Offer (as it may be extended pursuant to Section
2.1.1 of the Agreement): (i) the Minimum Condition shall not have been
satisfied; (ii) the applicable waiting period (and any extension thereof)
applicable to the transactions contemplated by the Agreement (including the
Offer and the Merger) under the HSR Act shall not have expired or been
terminated; or (iii) any of the following conditions exists:
1.1.1 A temporary restraining order, preliminary or permanent
injunction or other writ, injunction, consent, or order, issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Offer or the Merger, other than the application of the
waiting period provisions of the HSR Act is, in effect; or
1.1.2 There shall have been any action taken, or any applicable Legal
Requirement shall have been enacted, enforced, promulgated, issued or deemed
applicable to the Offer or the Merger, by any Governmental Entity, other than
the application of the waiting period provisions of the HSR Act, which makes the
consummation of the Offer or the Merger illegal; or
1.1.3 any of the representations and warranties of Enpath contained in
this Agreement, disregarding any materiality or Material Adverse Effect
qualifications contained in any such representation or warranty, shall not be
true and correct in all respects when made or at any time prior to the
consummation of the Offer as if made at and as of such time (other than any such
representation or warranty that is made only as of a specified date, which need
only to be true in all respects as of such specified date), except where the
failure of such representations and warranties to be true and correct would not
reasonably be expected to have a Material Adverse Effect and Purchaser shall
have received a certificate signed by an executive officer of Enpath on its
behalf to the foregoing effect; or
1.1.4 Enpath shall have breached or failed to perform in any material
respect any of its agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the consummation of the Offer,
or such breach or failure to perform shall not have been cured to the good faith
satisfaction of Purchaser; or
1.1.5 or any change or development shall have occurred and be
continuing as of the expiration of the Offer that has had, individually or in
the aggregate, a Material Adverse Effect; or
1.1.6 (a) an Adverse Recommendation Change shall have occurred and not
been withdrawn, or (b) the Company shall have entered into, or publicly
announced its intention to enter into, a letter of intent, memorandum of
understanding or contract (other than a confidentiality agreement contemplated
by Section 6.2.2 of the Agreement) relating to any Acquisition Proposal and such
announcement shall not have been withdrawn and such letter, memorandum of
understanding or contract shall remain in effect; or
64
1.1.7 the Agreement shall have been terminated in accordance with its
terms.
1.2 The capitalized terms that are used in this Annex I shall have the
respective meanings ascribed thereto in the Agreement and Plan of Merger, dated
as of April 28, 2007, by and among Greatbatch Ltd., a New York corporation,
Chestnut Acquisition Corporation, a Minnesota corporation, and Enpath Medical,
Inc., a Minnesota corporation.
65
SCHEDULES AND EXHIBITS
----------------------
66
EXHIBIT A
---------
SHAREHOLDERS
John C. Hertig
James D. Hartman
Thomas L. Auth
Michael D. Dale
Albert Emola
Richard F. Sauter
Richard T. Schwarz
67