AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

Execution Version

CONFIDENTIAL

 

AGREEMENT AND PLAN OF MERGER

among

Natus Medical Incorporated,

Squaw Acquisition Corporation,

and

Alpine Biomed Holdings Corp.

Dated as of September 14, 2009

 

TABLE OF CONTENTS

 

 

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(continued)

 

 

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This AGREEMENT AND PLAN OF MERGER is made and entered into as of September 14, 2009 (this “ Agreement ”), among Natus Medical Incorporated, a Delaware corporation (“ Parent ”), Squaw Acquisition Corporation, a Delaware corporation and a wholly-owned Subsidiary of Parent (“ Merger Sub ”), and Alpine Biomed Holdings Corp., a Delaware corporation (the “ Company ”).

A. The Company has historically conducted two lines of business, a neurodiagnostic business and a gastrodiagnostic business. The parties intend that Parent will acquire the Company’s neurodiagnostic business through the acquisition of the Company as provided herein.

B. The parties intend that, subject to the terms and conditions hereinafter set forth, Merger Sub shall merge with and into the Company (the “ Merger ”), with the Company to be the surviving corporation of the Merger (the “ Surviving Corporation ”), on the terms and subject to the conditions of this Agreement and pursuant to the General Corporation Law of the State of Delaware (the “ DGCL ”).

C. The Board of Directors of each of Parent and Merger Sub has determined that the Merger is in the best interests of their respective companies. The Board of Directors of the Company (the “ Board ”) has determined that the Merger is in the best interests of the Company, and, subject to the terms and conditions of this Agreement, to recommend to the Company Stockholder the approval of this Agreement and the Merger.

D. Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

DEFINITIONS

1.01 Definitions .

(a) For purposes of this Agreement:

“ affiliate ” of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person.

“ Aggregate Merger Consideration ” means (A) Forty Three Million One Hundred Sixty Five Thousand Dollars ($43,165,000), minus (B) the sum of (i) Transaction Expenses and (ii) the Indebtedness Payoff Amount.

“ Alpine Biomed Corp. ” means Alpine Biomed Corp., a California corporation.

 

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“ AlpineVietnam ” means Alpine Vietnam Co. Ltd., a company organized under the laws of Vietnam.

“ business day ” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or, in the case of determining a date when any payment is due, any day (other than a Saturday or Sunday) on which banks are not required or authorized to close in the City of San Francisco, California.

“ Common Merger Consideration ” means an amount equal to (A) the Post Preference Merger Consideration divided by (B) the sum of the issued and outstanding shares of Company Common Stock and Company Series A Stock.

“ Company ” has the meaning ascribed to such term in the introductory paragraph of this Agreement.

“ Company Capital Stock ” means the Company Common Stock, the Company Preferred Stock, the Company Options, and any other rights to acquire capital stock of the Company from the Company.

“ Company Common Stock ” means the common stock, par value $0.01 per share, of the Company.

“ Company Financial Statements ” means the audited consolidated financial statements of the Company and its Subsidiaries for the fiscal year ended December 31, 2008 and the unaudited consolidated financial statements of the Company and its Subsidiaries for the fiscal period commencing January 1, 2009 and ended June 30, 2009.

“ Company IT Systems ” means all IT Systems used in or held for use in connection with the business of the Company and its Subsidiaries.

“ Company Optionholder ” means a holder of Company Options.

“ Company Options ” means all options and warrants to purchase or otherwise acquire shares of capital stock (or options, warrants or other rights to purchase or otherwise acquire shares of capital stock) of the Company from the Company.

“ Company Preferred Stock ” means the Company Series A Stock.

“ Company Pro Forma Financial Statements ” means the unaudited consolidated financial statements of the Company and its Subsidiaries for the fiscal year ended December 31, 2008 and for the fiscal period commencing January 1, 2009 and ended June 30, 2009, in each case adjusted to give effect to the Gastrodiagnostic Business Distribution as though it had occurred on the last day of the fiscal year preceding the fiscal year that ended on December 31, 2008.

“ Company Reorganization ” means the Company’s merger with and into Alpine Biomed Merger Sub Corp., a Delaware corporation that is a wholly-owned subsidiary of the Company Stockholder, pursuant to which the Company is the surviving corporation and a wholly-owned subsidiary of the Company Stockholder pursuant to the agreements and documents set forth in Schedule V to this Agreement.

 

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“ Company Securityholders ” means the Company Stockholder and the Company Optionholders collectively.

“ Company Series A Stock ” means the Series A Convertible Participating Preferred Stock, par value $0.01 per share, of the Company.

“ Company Stockholder ” means a holder of Company Common Stock or Company Preferred Stock.

“ Contamination ” or “ Contaminated ” means the presence (actual or reasonably suspected) of Hazardous Substances in, on or under the soil, groundwater, surface water or other environmental media or any structure or improvement, if any investigatory, remedial, removal reporting or other response action is required or legally could be required by a governmental authority under any Environmental Law with respect to such presence or suspected presence of Hazardous Substances, or if such response action otherwise is reasonable or appropriate under the circumstances.

“ control ” (including the terms “ controlled by ” and “under “ common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities or by contract or otherwise.

“ Dissenting Shares Excess Payments ” means any payment in respect of Dissenting Shares in excess of the amount of cash that would have been issuable pursuant to Section 2.01(b) in respect of such shares or interests had they never been Dissenting Shares. Dissenting Shares Excess Payments shall constitute “Damages” for purposes of Article VIII without regard to the Basket.

“ Effective Time ” means the time of the filing of the Certificate of Merger (or such later time as may be mutually agreed in writing by the Company and Parent and specified in the Certificate of Merger).

“ Environmental Laws ” means any United States federal, state, local or non United States laws, statutes, ordinances, regulations, rules, codes, orders, other requirements of law and common law relating to (i) releases or threatened releases of Hazardous Substances or materials containing Hazardous Substances; (ii) exposure or alleged exposure to Hazardous Substances; (iii) the manufacture, handling, transport, recycling, reclamation, use, treatment, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (iv) pollution, natural resource damages or protection of the environment, health or safety.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with the Company and which, together with the Company, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

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“ Escrow Agent ” means Wells Fargo Bank, N.A. or such other financial institution as is reasonably acceptable to Parent and the Company.

“ Escrow Cash ” means an amount of cash equal to $3,000,000.

“ Exchange Act ” means the Securities and Exchange Act of 1934, as amended.

“ Gastro Company ” means that certain Delaware limited liability company named as the “Company,” together with its successors and authorized assigns, in the Contribution Agreement dated as of September 4, 2009 between such company and Alpine Biomed Corp. and included as part of the Gastrodiagnostic Business Distribution Documents.

“ Gastrodiagnostic Business ” means the business of the Company and its Subsidiaries of designing, manufacturing, marketing, selling, distributing, licensing and supporting the Gastrodiagnostic Products.

“ Gastrodiagnostic Business Distribution ” means Alpine Biomed Corp.’s assignment, transfer and conveyance to Gastro Company of the Gastrodiagnostic Products, the Gastrodiagnostic Business and related assets of Alpine Biomed Corp. used to operate the Gastrodiagnostic Business, and Alpine Biomed Corp.’s assignment to Gastro Company, and Gastro Company’s assumption of the Retained Liabilities associated with the Gastrodiagnostic Products, the Gastrodiagnostic Business and such assets and issuance of equity interests of Gastro Company in consideration therefor, and Alpine Biomed Corp.’s subsequent distribution of such equity interests to the Company and/or by the Company to the Company Stockholder.

“ Gastrodiagnostic Business Distribution Documents ” means the agreements set forth in Schedule III to this Agreement, together with any related documents, assignments, consents and/or novations, certificates or instruments executed in connection therewith, used to effectuate the Gastrodiagnostic Business Distribution as in effect on the Spin-Off Date.

“ Gastrodiagnostic Products ” means the diagnostic equipment, products, accessories and related services of the Company and its Subsidiaries designed, manufactured, marketed, sold, distributed, licensed and supported in the operation of the gastrodiagnostic or gastroenterology business of the Company and such Subsidiaries, as set forth in Part A of Schedule I of this Agreement.

“ Hazardous Substances ” means (i) those substances defined in or regulated under the following United States federal statutes and their state and local counterparts, as each may be amended from time to time, and all regulations thereunder: the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof; and (iv) polychlorinated biphenyls, asbestos, mold and radon.

 

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“ Healthcare Law ” means the following laws or regulations relating to the regulation of the healthcare industry (as such laws are currently enforced or as interpreted at the Effective Time by existing, publicly available judicial and administrative decisions and regulations): (i) Sections 1877, 1128, 1128A or 1128B of the Social Security Act (the “ SSA ”); (ii) the licensure, certification or registration requirements of healthcare facilities, services or equipment; (iii) any state certificate of need or similar law governing the establishment of healthcare facilities or services or the making of healthcare capital expenditures; (iv) any state law relating to fee-splitting or the corporate practice of medicine; (v) any state physician self-referral prohibition or state anti-kickback law; (vi) any criminal offense relating to the delivery of, or claim for payment for, a healthcare item or service under any federal or state healthcare program; and (vii) any federal or state law relating to the interference with or obstruction of any investigation into any criminal offense.

“ Intellectual Property ” means, collectively, all of the following worldwide legal rights, whether or not filed, perfected, registered or recorded, that may exist under the laws of any jurisdiction to and under all: (i) patents, patent applications, statutory invention registrations, patent rights, including all continuations, continuations-in-part, divisions, reissues, reexaminations or extensions thereof, whether now existing or hereafter filed, issues or acquired, and all inventions, whether or not patentable, (ii) trademarks, service marks, domain names, (including, but not limited to Internet domain names, Internet and World Wide Web URLs, and domain name registrations and pending applications therefor) trade dress, logos, trade names, corporate names, and other identifiers of source or goodwill, including registrations and applications for registration thereof, (iii) rights associated with works of authorship (including audiovisual works) including mask works and copyrights, including copyrights in Software, and registrations and applications for registration thereof, and (iv) rights relating to the protection of trade secrets, know-how, invention rights, and other confidential or proprietary technical, business and other information, including manufacturing and production processes and techniques, research and development information, technology, drawings, specifications, designs, plans, proposals, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans, customer and supplier lists and information, and all rights in any jurisdiction to limit the use or disclosure thereof.

“ IT Systems ” means computer systems, programs, networks, hardware, Software, databases, operating systems, Internet websites, website content and links and equipment used to process, store, maintain and operate data, information and functions.

“ knowledge of the Company” or the “Company’s knowledge ” means the actual knowledge of John Arnott, Richard Drinkward, William Brown, Zaida De Leon, Willy Weinmann, Erik Jensen and Alex Sigal. Each of John Arnott, Richard Drinkward, William Brown, Zaida De Leon, Willy Weinmann, Erik Jensen and Alex Sigal will be deemed to have actual knowledge of a matter if such knowledge would reasonably be expected to be known by an individual who has the duties and responsibilities of such person in the customary performance of such duties and responsibilities.

“ Liability ” or “ Liabilities ” means any debt, liability and obligation, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, including those arising under any law, action or government order and those arising under any contract.

 

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“ Licensed Intellectual Property ” means Intellectual Property licensed to the Company or any of its Subsidiaries pursuant to the Licenses.

“ Licenses ” means all licenses, sublicenses and other contracts pursuant to which the Company or any of its Subsidiaries acquired or is authorized to use or exercise any third party Intellectual Property.

“ Material Adverse Effect ” means, when used in connection with the Company, any event, circumstance, change or effect that, individually or in the aggregate with any other events, circumstances, changes and effects occurring after the date hereof, is or would reasonably be expected to be materially adverse to (i) the business, condition (financial or otherwise), assets, liabilities or results of operations of the Company and its Subsidiaries taken as a whole or (ii) the ability of the Company to consummate the Merger, except to the extent that such effect is caused by, or results from changes in general economic conditions or changes affecting the industry in which the Company operates generally (provided that such changes do not affect the Company and its Subsidiaries in a substantially disproportionate manner).

“ Merger Sub Common Stock ” means the Common Stock, par value $0.01 per share, of Merger Sub.

“ Neurodiagnostic Business ” means the business of the Company and its Subsidiaries of designing, manufacturing, marketing, selling, distributing, licensing and supporting the Neurodiagnostic Products.

“ Neurodiagnostic Products ” means the diagnostic equipment, products, accessories and related services of the Company and its Subsidiaries designed, manufactured, marketed, sold, distributed, licensed and supported in the operation of the neurodiagnostic or neurology business of the Company and such Subsidiaries.

“ New Co. ” means Alpine Gastro Corp., a Delaware corporation.

“ New Co. Employee Severance Liabilities ” means any and all Liabilities, including, without limitation, any severance, bonus, termination or similar obligation arising out of, resulting from, related to or in connection with the termination by the Company or any of its Subsidiaries of those employees identified on Schedule VI .

“ Owned Intellectual Property ” means any Intellectual Property that is owned or purportedly owned by or exclusively licensed to the Company or any of its Subsidiaries.

“ person ” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, trust, association or entity or government, political subdivision, agency or instrumentality of a government.

“ Post Preference Merger Consideration ” means the positive difference of (i) the Aggregate Merger Consideration over (ii) the aggregate amount of Merger Consideration to be paid to the holders of Company Preferred Stock pursuant to Section 2.01(b)(ii).

 

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“ Registered Intellectual Property ” means any Owned Intellectual Property subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any governmental bodies in the United States or applicable foreign jurisdictions, including, but not limited to, any United States, international and foreign: (A) patents and patent applications (including provisional applications); (B) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks; (C) registered Internet domain names; and (D) registered copyrights and applications for copyright registration.

“ SEC ” means the Securities and Exchange Commission.

“ Second Spin and Distribution ” means (i) the assignment, transfer and conveyance by the Company or Alpine Biomed Corp. of the capital stock of Alpine Vietnam, certain IT Systems owned by the Company or its Subsidiaries and certain other assets and rights, in each case as set forth in Part B of Schedule I (the “ Second Spin Business ”), to New Co., and New Co.’s assumption of the Retained Liabilities associated with the Second Spin Business and issuance of equity interests in New Co. to the Company in consideration therefor, and the subsequent distribution by the Company of such equity interests to the Company Stockholder as of immediately prior to the Second Spin-Off Date, and (ii) the Company’s or its applicable Subsidiary’s, as applicable, termination of those employees identified on Schedule VI .

“ Second Spin and Distribution Documents ” means the agreements set forth in Schedule IV to this Agreement, together with any related documents, assignments, consents and/or novations, certificates or instruments executed in connection therewith, used to effectuate the Second Spin and Distribution as in effect on the Second Spin-Off Date.

“ Second Spin-Off Date ” means the Closing Date but shall be deemed to refer to such time of day on the Closing Date that is immediately prior to the Effective Time.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Shrink Wrap Software ” means licenses of generally commercially available off-the-shelf Software licensed pursuant to shrink-wrap, click-wrap licenses or other similar licenses.

“ Software ” means computer software, programs and databases in any form, including Internet web sites, web content and links, all versions, updates, corrections, enhancements, and modifications thereof, and all related documentation.

“ Subsidiary ” or “ Subsidiaries ” of the Company, the Surviving Corporation, Parent, as applicable, or any other person means an affiliate controlled by such person, directly or indirectly through one or more intermediaries.

“ Taxes ” shall mean (i) any and all taxes, fees, levies, duties, tariffs, imposts and other similar charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority or taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or

 

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net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges, and (ii) any Liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any Taxable period, and (iii) any Liability for the payment of any amounts of the type described in clause (i) or (ii) above as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to assume such Taxes or to indemnify any other Person.

“ Tax Return ” means any return, report, schedule, declaration, estimate or election (including attachments to any of the foregoing) filed or required to be filed with any Governmental Authority or taxing authority with respect to Taxes.

“ Transaction Expenses ” means all third party fees and expenses incurred by the Company in connection with the Merger and this Agreement and the transactions contemplated hereby whether or not billed or accrued (including any fees and expenses of legal counsel and accountants, the maximum amount of fees and expenses payable to financial advisors, investment bankers and brokers of the Company and the Subsidiaries notwithstanding any contingencies for earnouts, escrows, etc., and any such fees incurred by Company Securityholders paid for or to be paid for by the Company).

(b) The following terms have the meaning set forth in the Sections set forth below:

 

 

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ARTICLE II

THE MERGER

2.01 Conversion of the Shares; Earnout Consideration

(a) Conversion of Merger Sub Common Stock . At the Effective Time, each share of Merger Sub Common Stock that is issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation, and the shares of the Surviving Corporation into which the shares of Merger Sub Common Stock are so converted shall be the only shares of Company Capital Stock that are issued and outstanding immediately after the Effective Time.

(b) Conversion of Company Capital Stock .

(i) Company Common Stock . Subject to the terms and conditions of this Agreement, at the Effective Time, each share of Company Common Stock and Company Series A Stock that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without the need for any further action on the part of the holder thereof (except as expressly provided herein), be converted into and represent the right to receive an amount of cash, without interest, equal to the Common Merger Consideration. The preceding provisions of this Section 2.01(b)(i) are subject to the provisions of Section 2.01(c) (regarding rights of holders of Dissenting Shares) and Section 2.03 (regarding the withholding of Escrow Cash).

(ii) Company Series A Stock . Subject to the terms and conditions of this Agreement, at the Effective Time, each share of Company Series A Stock that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without the need for any further action on the part of the holder thereof (except

 

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as expressly provided herein), be converted into and represent the right to receive an amount of cash, without interest, equal to $0.615164381723721, plus all accrued and unpaid dividends thereon, in an aggregate amount equal to $27,087,683. The preceding provisions of this Section 2.01(b)(ii) are subject to the provisions of Section 2.01(c) (regarding rights of holders of Dissenting Shares) and Section 2.03 (regarding the withholding of Escrow Cash).

The dollar amounts specified in subparagraphs (i) and (ii) of this Section 2.01(b) with respect to the Company Common Stock and the Company Series A Stock are hereinafter sometimes referred to herein as the “ Merger Consideration ,” provided that the aggregate amount of Merger Consideration payable to the Company Stockholder under Section 2.01(b) of this Agreement and as a result of the Merger shall not in any case exceed the Aggregate Merger Consideration.

(c) Dissenting Shares . As more fully set forth in Section 7.03, holders of shares of Company Capital Stock who have complied with all requirements for perfecting dissenters’ rights, as set forth in the DGCL, shall be entitled to their rights under the DGCL with respect to such shares.

(d) Cancellation of Certain Shares and Company Options . Notwithstanding Section 2.01(b), (i) each share of Company Capital Stock held by the Company immediately prior to the Effective Time, and (ii) each Company Option that is issued and outstanding immediately prior to the Effective Time, shall in each case, by virtue of the Merger and without the need for any further action on the part of the holder hereof (except as expressly provided herein), be cancelled and extinguished without any conversion thereof or payment therefor.

(e) Earnout Consideration . The Company Stockholder shall be entitled to the additional earnout amount set forth below as determined by future Company Gross Revenue (as defined below) for the Earnout Period described below on the following terms:

(i) The earnout period shall begin on January 1, 2009 and shall end on December 31, 2009 (the “ Earnout Period ”).

(ii) The threshold amount for the Earnout Period shall be $35,000,000 (the “ Earnout Threshold ”).

(iii) The earnout amount payable for the Earnout Period shall be the product of (A) the excess, if any, of Company Gross Revenue during the Earnout Period over the Earnout Threshold, multiplied by (B) 1.25 (the “ Earnout Consideration ”); provided that the maximum amount of Earnout Consideration shall not exceed $3,750,000.

(iv) Payments; Review of Books and Records . For any payments due to the Company Stockholder pursuant to clauses (i), (ii) and (iii) of Section 2.01(e), Parent shall pay to the Company Stockholder cash in the applicable earnout amount. Within seventy-five (75) days after the close of the Earnout Period, Parent shall deliver to the Company Stockholder a certificate of the Chief Financial Officer, Treasurer or Controller of Parent certifying on behalf of Parent the amount of Company Gross Revenue for the Earnout Period and the amount of any Earnout Consideration, if any, payable to the

 

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Company Stockholder. Within ten (10) days of the receipt of a certificate from the Chief Financial Officer, Treasurer or Controller of Parent on behalf of Parent indicating that Earnout Consideration is payable to the Company Stockholder, the Company Stockholder shall provide written notice to Parent indicating wire transfer instructions for the account into which Parent is to pay such Earnout Consideration, if applicable. The parties intend that, for tax purposes, the payments (set forth in subsections (i) through (iii) above) to qualify for installment sale treatment under §453 of the Code. Such payments shall be treated as imputed interest to the extent required by the Code. On at least fifteen (15) days prior written notice from the Company Stockholder to Parent given within thirty (30) days after the Company’s Stockholder’s receipt of the foregoing certificate from Parent, the Company Stockholder shall have a right to audit the books and records of the Company to verify Company Gross Revenue for the Earnout Period.

(v) Disagreements over Earnout Consideration . If the Company Stockholder disagrees with Parent’s calculation of the Earnout Consideration payable to the Company Stockholder for the Earnout Period, the Company Stockholder shall deliver to Parent, by the date 45 days after the date on which Parent shall have delivered to the Company Stockholder the certificate indicating the amount of Company Gross Revenue and any applicable Earnout Consideration payable to the Company Stockholder for the Earnout Period (the “ Objection Deadline Date ”), a reasonably detailed statement describing its objections (if any) to Parent’s calculations and its assertion of the appropriate calculation of Earnout Consideration. If the Company Stockholder timely objects to such calculations from Parent and offers its own calculation, such objections shall be resolved as follows:

(A) Parent and the Company Stockholder shall first use reasonable efforts to resolve such objections.

(B) If Parent and the Company Stockholder do not reach a resolution of all objections set forth on the Company Stockholder’s statement of objections within 30 days after delivery of such statement of objections, Parent and the Company Stockholder shall, within 30 days following the expiration of such 30-day period, engage an Arbitrating Accountant (as defined below), pursuant to an engagement agreement executed by Parent, the Company Stockholder and the Arbitrating Accountant, to resolve any remaining objections set forth on the Company Stockholder’s statement of objections and its calculation (the “ Unresolved Objections ”). “ Arbitrating Accountant ” shall mean an accountant selected by Parent and reasonably acceptable to the Company Stockholder, which has not performed services for Parent or the Company Stockholder.

(C) Parent and the Company Stockholder shall jointly submit to the Arbitrating Accountant, within 10 days after the date of the engagement of the Arbitrating Accountant (as evidenced by the date of the engagement agreement), a copy of such calculations of the Earnout Consideration, a copy of the statement of objections delivered by the Company Stockholder to Parent, and a statement setting forth the resolution of any objections agreed to by Parent and the Company Stockholder. Each of Parent and the Company Stockholder shall

 

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submit to the Arbitrating Accountant (with a copy delivered to the other party on the same day), within 45 days after the date of the engagement of the Arbitrating Accountant, a memorandum (which may include supporting exhibits) setting forth their respective positions on the Unresolved Objections. Each of Parent and the Company Stockholder may (but shall not be required to) submit to the Arbitrating Accountant (with a copy delivered to the other party on the same day), within 60 days after the date of the engagement of the Arbitrating Accountant, a memorandum responding to the initial memorandum submitted to the Arbitrating Accountant by the other party. Unless expressly requested in writing by the Arbitrating Accountant in a request made known to both Parent and the Company Stockholder, neither party may present any additional information or arguments to the Arbitrating Accountant, either orally or in writing.

(D) Within 90 days after the date of its engagement hereunder, the Arbitrating Accountant shall determine whether the objections raised by the Company Stockholder are valid in light of the definition of Company Gross Revenue contained herein and the calculation of Earnout Consideration under Section 2.01(e)(iii) and shall issue a ruling which shall include a calculation of the Earnout Consideration for the Earnout Period in accordance with Section 2.01(e), as adjusted pursuant to any resolutions to objections agreed upon by Parent and the Company Stockholder and pursuant to the Arbitrating Accountant’s resolution of the Unresolved Objections. Such calculation of the Earnout Consideration for the Earnout Period shall be deemed to be final.

(E) The resolution by the Arbitrating Accountant of the Unresolved Objections shall be conclusive and binding upon Parent and the Company Stockholder. Parent and the Company Stockholder agree that the procedure set forth in this Section 2.01(e)(v) for resolving disputes with respect to the payout of the Earnout Consideration for the Earnout Period shall be the sole and exclusive method for resolving any such disputes; provided that this provision shall not prohibit either party from instituting litigation to enforce the ruling of the Arbitrating Accountant.

(F) The fees and expenses of the Arbitrating Accountant shall be borne by Parent or the Company Securityholders depending on which party’s calculation of the Earnout Consideration is furthest away from the final Earnout Consideration determined by the Arbitrating Accountant (and to the extent that the Company Stockholder’s calculation of the Earnout Consideration is furthest away from that determined by the Arbitrating Accountant, Parent and the Company Stockholder shall cause the Escrow Agent to deduct such fees and expenses of the Arbitrating Accountant and to pay such amount to Parent).

(vi) Company Gross Revenue . For purposes of this Agreement, “ Company Gross Revenue ” for the Earnout Period shall be the aggregate amount of gross revenue, as determined in accordance with GAAP (as in effect on the Closing Date) and as consistently applied by the Company in the Company Financial Statements, of the Company from sales of the Earnout Products and Services in the Earnout Period. Any

 

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subsequent change in GAAP that would adversely affect Company Gross Revenue shall not be taken into account for purposes of calculating Company Gross Revenue for purposes of this Agreement (regardless of how Company Gross Revenue is accounted for other purposes such as Parent’s reporting or internal accounting). For purposes of determining Company Gross Revenue for the Earnout Period, Parent shall not impose on the Company any adjustment or charge in the nature of a general and administrative, management or similar adjustment or charge.

(vii) Earnout Products and Services . For purposes of this Agreement, “ Earnout Products and Services ” shall mean each of the products and services currently produced, manufactured, marketed, licensed, sold or distributed by the Company and its Subsidiaries, other than the Gastrodiagnostic Products.

(viii) Operation of the Company during the Earnout Period . Parent, the Company and the Company Stockholder acknowledge and agree that from and after the Closing Date each of Erik Jensen, Alex Sigal and Phillip Moses (the “ Management Team ”) will oversee the management of the business and affairs of the Company as it relates to the marketing and sales of the Earnout Products and Services during the Earnout Period, and that the following shall govern the relationship of Parent and the Management Team with respect to the foregoing during the Earnout Period:

(A) The Company and its Subsidiaries shall be maintained and accounted for as free-standing subsidiaries of Parent and shall not be combined with any other current business operations of Parent. The foregoing shall not prohibit Parent from consolidating back office activities into other operating groups so as to achieve improved efficiency, lower costs and improved operating margins.

(B) The business and affairs of the Company relating to the marketing and sales of the Earnout Products and Services shall be managed by or under the direction of the Management Team in substantially the same manner and with the same rights and authority each such member of the Management Team possessed as of the date of this Agreement in accordance with past management and operating policies.

(C) The Management Team shall have the authority and discretion to make strategic and operating decisions in accordance with past management and operating policies regarding the marketing and sales of the Earnout Products during the Earnout Period, including, but not limited to, the right to (i) enter into contracts with new or continuing customers of the Company and (ii) continue (during the Earnout Period) arrangements relating to supply and sourcing requirements for contracts of the Company; provided, however, that such full authority and discretion on the part of the Management Team shall not be deemed to include the ability to require expenditures from Parent, the Surviving Corporation or any of their respective Subsidiaries relating to the marketing and sales of such Earnout Products and Services that are beyond the historic levels of such expenditures; provided, further, that in connection with the marketing and sales of the Earnout Products and Services the Management Team, or each of the

 

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Surviving Corporation, its Subsidiaries and the Management Team, as the case may be, shall effect sales of the Earnout Products and Services at approximately the same pricing and gross profit level that have historically been made by the Company and its Subsidiaries as reflected in the Company Financial Statements and the Company Pro Forma Financial Statements.

(D) Parent shall allow the Company to retain sufficient cash from the conduct of its business to enable the Company to continue to conduct its operations consistent with past practice. Parent shall allow the Management Team to communicate and consult with John Arnott, and shall allow John Arnott to communicate and consult with the Management Team, regarding any and all matters identified in subparagraphs (B) and (C) immediately above.

(E) Parent shall not during the Earnout Period (i) take any action with respect to the operation of the Company that is in bad faith for the purpose of decreasing Company Gross Revenue for, or negatively impacting sales of Earnout Products and Services in, the Earnout Period, or otherwise designed to avoid the payment of the Earnout Consideration; (ii) take any action that would result in the sale, lease, exchange, distribution or mortgage of any assets of the Neurodiagnostic Business comprised of Earnout Products and Services (other than as may be required by Parent’s primary bank credit facility with respect to the targets of Parent’s acquisitions delivering subsidiary guaranties and pledging certain of their assets as security therefor); or (iii) cause any reorganization, merger, consolidation, dissolution or liquidation of the Company or make any sale, transfer, assignment or other disposition of the shares of capital stock of the Company without the prior written consent of the Company Stockholder.

(F) The Company and its Subsidiaries shall continue to sell and market Earnout Products and Services until the expiration of the Earnout Period, and Parent shall not take any action to discontinue such sales and marketing activities during the Earnout Period.

(G) Parent, during the Earnout Period, (1) shall not terminate the employment of any member of the sales team who is an employee of the Company and its Subsidiaries responsible for sales and marketing of Earnout Products and Services (each, a “ Sales Rep ”) and shall continue during the Earnout Period to provide base compensation or wages for each Sales Rep at no less than the rate of compensation or wages paid by the Company to such Sales Rep as of the Agreement Date; (2) shall maintain and honor during the Earnout Period all incentive and commission plans in effect as of the Agreement Date with respect to the Sales Reps; and (3) shall not announce or otherwise communicate during the Earnout Period any intention or plan to reduce (1) the size of the sales team comprised of the Sales Reps of the Company and its Subsidiaries or (2) the compensation or wages or the incentive or commission plans of the Sales Reps; provided, however, that Parent may terminate any Sales Reps with the prior written consent of the Company Stockholder (which consent will not be unreasonably withheld or delayed).

 

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(H) The parties shall be entitled to equitable relief to enjoin any actual or threatened breach or violation of the terms of this Section 2.01(e)(viii) . Notwithstanding the foregoing, all legal and equitable remedies shall be available on a cumulative basis and no remedy will be deemed exclusive.

(ix) Acceleration of Earnout Payment . Notwithstanding any other provision of this Agreement, in the event that at any point prior to the end of the Earnout Period either:

(A) Parent or an entity controlling, controlled by or under common control with Parent ceases to be (either directly, or indirectly through one or more wholly owned subsidiaries) the owner of the controlling interest in the outstanding capital stock of or other equity interests in the Company; or

(B) any person or group of persons shall have acquired beneficial ownership of more than 50% of the outstanding voting securities of Parent (within the meaning of Sections 13(d) or 14(d) of the Exchange Act (a “ Change of Control ”);

then immediately upon the occurrence of any such Change of Control, Parent shall irrevocably become liable to pay to the Company Stockholder aggregate Earnout Consideration in an amount equal to $3,750,000.

2.02 Company Options.

Parent is not assuming, and shall not assume, any obligations or Liabilities under (a) any option or similar plan of the Company, (b) any outstanding Company Options, or (c) any other direct or indirect rights to acquire shares of Company Capital Stock (other than to make the payments contemplated under Section 2.01(b)). On the Closing Date, any option or similar plan of the Company, the Company Options, and any other direct or indirect rights to acquire shares (or Company Options) of Company Capital Stock from the Company shall be terminated without further obligation or Liability of the Company, Parent or the Surviving Corporation. Parent shall not substitute any equivalent option or right for any such terminated Company Option or right.

2.03 Escrow.

At the Effective Time, Parent shall withhold the Escrow Cash from the cash payable pursuant to Sections 2.01(b)(i) and 2.01(b)(ii) to the holders of Company Common Stock and Company Series A Stock (as the case may be) as of immediately prior to the Effective Time (other than Company Stockholder who only hold shares of Company Capital Stock which constitute and remain Dissenting Shares), on a pro rata basis (based upon the amount of cash each such holder is entitled to receive pursuant to Sections 2.01(b)(i) and 2.01(b)(ii) and with respect to their shares of Company Common Stock and Company Series A Stock (as the case may be) (other than Dissenting Shares)). Simultaneously with the execution and delivery of this Agreement, Parent, the Company Stockholder and the Escrow Agent shall enter into an escrow agreement (the “ Escrow Agreement ”) which will provide the terms and conditions for the release of the Escrow Cash to the Company Stockholder after the first anniversary of the Closing Date subject to the terms of this Agreement and the Escrow Agreement. On the Closing Date, Parent

 

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shall cause the Escrow Cash to be deposited with the Escrow Agent. The Escrow Agent shall hold the Escrow Cash as security for the indemnification rights under Article VIII. A portion of the Escrow Cash will be treated as imputed interest to the extent required under the Code.

2.04 Intentionally Omitted.

2.05 Effects of the Merger. At and upon the Effective Time:

(a) the separate existence of Merger Sub shall cease and Merger Sub shall be merged with and into the Company, and the Company shall be the surviving corporation of the Merger pursuant to the terms of this Agreement and a certificate, or articles, of merger (as required by the DGCL) (the “ Certificate of Merger ”) which shall have been filed with the Secretary of State of the State of Delaware;

(b) the certificate of incorporation of the Surviving Corporation shall be amended in its entirety to read as set forth in the Certificate of Merger;

(c) the bylaws of the Surviving Corporation shall be amended in its entirety to read as the bylaws of Merger Sub;

(d) the officers of Merger Sub immediately prior to the Effective Time shall be appointed as the officers of the Surviving Corporation immediately after the Effective Time until their respective successors are duly appointed;

(e) the members of the Board of Directors of Merger Sub immediately prior to the Effective Time shall be elected as the members of the Board of Directors of the Surviving Corporation immediately after the Effective Time until their respective successors are duly elected or appointed and qualified; and

(f) the Merger shall, from and after the Effective Time, have all of the effects provided by the DGCL.

2.06 Tax Consequences and Withholding.

(a) The parties intend that the Merger shall be treated as a taxable purchase of securities of the Company pursuant to the Code and each party shall report the transactions contemplated hereby consistently with such intent. However, no party hereto makes any representation or warranty regarding the Tax consequences of any transaction contemplated by this Agreement.

(b) Parent or Parent’s agent shall be entitled to deduct and withhold from the Merger Consideration payable to the Company Stockholder the amounts required to be deducted and withheld under the Code, or any applicable provision of state, local or foreign tax law, with respect to the making of such payment. To the extent that amounts are so withheld and properly remitted to the appropriate Governmental Authority, such withheld amounts shall be (i) treated for all purposes of this Agreement as having been paid to the Company Stockholder and (ii) deposited on the Company Stockholder’s behalf with the appropriate taxing authorities.

 

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(c) Notwithstanding anything in this agreement to the contrary, each party (and its representatives, agents and employees) may consult any tax advisor regarding the U.S. federal tax treatment and U.S. federal tax structure of the transactions contemplated hereby and may disclose to any person, without limitation of any kind, the U.S. federal tax treatment and U.S. federal tax structure of the transactions contemplated hereby and all materials (including opinions or other tax analyses) that are provided relating to such treatment or structure.

2.07 Further Assurances.

If at any time before or after the Effective Time Parent reasonably believes or is advised that any further instruments, deeds, assignments or assurances are reasonably necessary or desirable to consummate the Merger or to carry out the purposes and intent of this Agreement at or after the Effective Time, then the Company, Parent, the Surviving Corporation and their respective officers or directors shall execute and deliver all such proper deeds, assignments, instruments and assurances and do all other things reasonably necessary or desirable to consummate the Merger and to carry out the purposes and intent of this Agreement.

2.08 Dissenting Shares.

(a) Notwithstanding any provision of this Agreement to the contrary, shares of Company Capital Stock that are outstanding immediately prior to the Effective Time and that are held by Company Stockholder who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into, or represent the right to receive, the Merger Consideration. Such Company Stockholder shall be entitled to receive payment of the appraised value of such Company Capital Stock held by them in accordance with the provisions of such Section 262, except that all Dissenting Shares held by Company Stockholder who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares under such Section 262 shall thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration, without any interest thereon, upon surrender of the certificate or certificates, if any, that formerly evidenced such shares.

(b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL.

2.09 Retained Assets; Retained Liabilities.

The parties acknowledge and agree that (i) the Company caused certain assets historically owned by the Company and its Subsidiaries in respect of the Gastrodiagnostic Business, as set forth in Part A of Schedule I to this Agreement, to be spun off and contributed to Gastro Company by virtue of the Gastrodiagnostic Business Distribution on September 4, 2009 (the “ Spin-Off Date ”), (ii) after the Spin-Off Date and immediately prior to the Closing Date, the

 

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Company caused certain assets in respect of the Second Spin Business and assets of the Company or its Subsidiaries used to operate the Second Spin Business, as set forth in Part B of Schedule I to this Agreement (such retained assets and businesses collectively referred to herein as the “ Retained Assets ”), to be spun off and contributed to New Co. by virtue of the Second Spin and Distribution on the Second Spin-Off Date, and (iii) notwithstanding any provision to the contrary contained in this Agreement, the Gastrodiagnostic Business Distribution Documents, the Second Spin and Distribution Documents, or any other document governing or effectuating the Gastrodiagnostic Business Distribution, Second Spin and Distribution or the Company Reorganization, as the case may be, Parent shall not assume by operation of law, as a consequence of the Merger or otherwise, and the Company Stockholder as of immediately prior to the Spin-Off Date shall retain and be responsible for, any and all Liabilities of the Company or any of its Subsidiaries arising out of, related to or in connection with the Retained Assets, the Gastrodiagnostic Business, the Gastrodiagnostic Business Distribution, the Second Spin Business, the Second Spin and Distribution and the Company Reorganization and such other Liabilities set forth in Schedule II of this Agreement (collectively, the “ Retained Liabilities ”).

2.10 Transaction Fees.

Each of Parent, on the one hand, and the Company Stockholder, on the other hand, shall bear and pay all fees, costs and expenses (including all legal fees and expenses) that have been incurred or that are in the future incurred respectively by or on behalf of it or them, as the case may be, in connection with the transactions contemplated hereby, whether or not the Merger is consummated. Parent and the Company agree that the Company Stockholder shall pay Winston & Strawn LLP the amount of legal fees due to Winston & Strawn LLP at the Closing for services rendered to the Company or the Company Stockholder in connection with the transactions contemplated by this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to Parent and Merger Sub to enter into this Agreement, and except as disclosed in the disclosure schedule prepared by the Company and delivered by the Company to Parent and Merger Sub simultaneously with the execution and delivery of this Agreement (the “ Disclosure Schedule ”), the Company hereby represents and warrants to Parent and Merger Sub that:

3.01 Organization and Qualification.

(a) The Company is a corporation duly incorporated and validly existing and in good standing under the laws of Delaware and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so incorporated or validly existing or to have such power, authority and governmental approvals would not prevent or materially delay consummation of the Merger and would not reasonably be expected to have a Material Adverse Effect. The Company is duly qualified or licensed as a foreign legal entity to do business, and is in good standing, in each jurisdiction where the character of the properties

 

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owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not prevent or materially delay consummation of the Merger and would not reasonably be expected to have a Material Adverse Effect.

(b) Section 3.01(b) of the Disclosure Schedule sets forth a true, correct and complete list of each Subsidiary of the Company. Each Subsidiary of the Company is a corporation or other business entity duly organized and validly existing under the laws of its jurisdiction of organization and has the requisite corporate or other organizational power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized or existing or to have such power, authority and governmental approvals would not prevent or materially delay consummation of the Merger and would not reasonably be expected to have a Material Adverse Effect. Each Subsidiary of the Company is duly qualified or licensed as a foreign legal entity to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so qualified or licensed and in good standing that would not prevent or materially delay consummation of the Merger and would not reasonably be expected to have a Material Adverse Effect. Except as otherwise set forth on Section 3.01(b) of the Disclosure Schedule, the Company is the direct or indirect owner of all of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary, free and clear of all Encumbrances, and all such shares are duly authorized, validly issued, fully paid and nonassessable and are not subject to any preemptive right or right of first refusal created by statute, the certificate or articles of incorporation and bylaws or other equivalent organizational or governing documents, as applicable, of such Subsidiary or any contract to which such Subsidiary is a party or by which it is bound. For those Subsidiaries where the Company does not directly or indirectly own all of the issued and outstanding shares of capital stock or other equity ownership interests of such Subsidiary, Section 3.01(b) of the Disclosure Schedule sets forth an accurate list of all outstanding shares of capital stock or other units of equity ownership and the number of shares or other units owned by the Company and each Subsidiary of the Company and by each other person owning capital stock or other units of such entity. Except as set forth on Section 3.01(b) of the Disclosure Schedule, there are no outstanding subscriptions, options, warrants, “put” or “call” rights, exchangeable or convertible securities or other contracts of any character relating to the issued or unissued capital stock or other securities of any Subsidiary of the Company or otherwise obligating the Company or any Subsidiary of the Company to issue, transfer, sell, purchase, redeem or otherwise acquire or sell any such securities. Except with respect to the Subsidiaries of the Company set forth in Section 3.01(b), the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

3.02 Certificate of Incorporation and Bylaws.

The Company has heretofore made available to Parent a true, correct and complete copy of the Certificate of Incorporation (the “ Certificate of Incorporation ”) and the bylaws (the “ Bylaws ”) of the Company, and the equivalent organizational and governing instrument or

 

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documents of each Subsidiary of the Company, in each case as amended to date. Such Certificate of Incorporation and Bylaws and such other equivalent organizational and governing instruments or documents of each Subsidiary are in full force and effect. Neither the Company nor any Subsidiary is in violation of any of the provisions of the Certificate of Incorporation and Bylaws, or equivalent organizational and governing instrument or documents, as the case may be.

3.03 Capitalization.

(a) The authorized Company Capital Stock is comprised of 60,000,000 shares of Company Common Stock and 40,000,000 shares of Company Preferred Stock. There are (i) (A) 6,518,939 shares of Company Common Stock issued and outstanding, and (B) 35,965,995.5 shares of Company Series A Stock issued and outstanding, (ii) no shares of Company Common Stock held in the treasury of the Company, (iii) (A) 6,422,499 shares of Company Common Stock reserved for issuance under the Company’s 2007 Stock Incentive Plan (the “ 2007 Incentive Plan ”), (B) 3,442,962 shares of Company Common Stock reserved for future issuance pursuant to outstanding Company Options issued under the 2007 Incentive Plan, (C) 571,500 shares of Company Common Stock reserved for issuance under the Company’s 2005 Equity Incentive Plan (the “ 2005 Incentive Plan, ” and, together with the 2007 Incentive Plan, collectively referred to as the “ Company Option Plan ”), and (D) 500,000 shares of Company Common Stock reserved for future issuance pursuant to outstanding Company Options issued under the 2005 Incentive Plan, and (iv) 325,000 shares of Company Common Stock reserved for future issuance pursuant to outstanding warrants (the “ Company Warrants ”). All outstanding Company Options (other than the Company Warrants) have been granted pursuant to the Company Option Plan. Except for the Company Options, there are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued Company Capital Stock, or obligating the Company to issue or sell any shares of such capital stock, or other equity interests in, the Company. Section 3.03 of the Disclosure Schedule sets forth the following information with respect to each Company Option outstanding on the date of this Agreement: (i) the name of the Company Option recipient; (ii) the number of shares of Company Common Stock subject to such Company Option; (iii) the exercise or purchase price of such Company Option; (vi) the date on which such Company Option expires; (vii) the tax status; and (viii) whether the exercisability of, or right to repurchase, such Company Option will be accelerated in any way by the transactions contemplated by this Agreement. The Company has made available to Parent accurate and complete copies of the Company Option Plan and the form of all stock option agreements evidencing such Company Options. All shares of Company Capital Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of Company Capital Stock or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other person. Except as set forth on Section 3.03(a) of the Disclosure Schedule, there are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Stock Option as a result of the Merger. All outstanding shares of Company Capital Stock and all outstanding Company Options have been issued and granted in compliance in all material respects with all requirements set forth in any contract, agreement or instrument to which the Company is party. The Company Stockholder is the sole owner or holder of all outstanding shares of Company Common Stock and Company Preferred Stock.

 

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(b) The Company Options that are cancelled and terminated by virtue of the Merger as contemplated by Section 2.01(d) may be cancelled and terminated without the consent of the holders of such Company Options and without the payment of any consideration to the holders of such Company Options.

3.04 Authority Relative to this Agreement.

The Company or its applicable Subsidiary has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate each of the Gastrodiagnostic Business Distribution, the Second Spin and Distribution and the Company Reorganization and the Merger. The execution and delivery of this Agreement by the Company and the consummation by the Company or its applicable Subsidiary of the Gastronomic Business Distribution, the Second Spin and Distribution, the Company Reorganization and the Merger have been duly and validly authorized by all necessary corporate action on the part of the Company or such Subsidiary, and no other corporate proceedings on the part of the Company or such Subsidiary are necessary to authorize this Agreement or to consummate the Merger (other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the outstanding shares of Company Capital Stock (“ Company Securityholder Approval ”) and the filing and recordation of appropriate merger documents as required by DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to the public policy, bankruptcy, insolvency and relief of debtors and rules of law governing specific performance, injunctive relief and other equitable remedies. The Board of the Company has approved this Agreement and the Merger.

3.05 No Conflict; Required Filings and Consents.

(a) Except as set forth on Section 3.05(a) of the Disclosure Schedule, the Gastrodiagnostic Business Distribution, the Second Spin and Distribution, and the Company Reorganization did not, and the execution and delivery of this Agreement, and the performance of this Agreement, by the Company, and the consummation of the Merger, shall not, (i) conflict with or violate the Certificate of Incorporation, Bylaws or any resolution, currently in effect, adopted by the Board of the Company (or any committee thereof) or the Company Stockholder, (ii) assuming that all consents, approvals and other authorizations described in Section 3.05(b) have been obtained and that all filings and other actions described in Section 3.05(b) have been made or taken, violate any United States or non-United States national, state, provincial, municipal or local statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order (“ Law ”) applicable to the Company or by which any property or asset of the Company is bound or affected, or (iii) 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 right of termination, amendment, acceleration or cancellation of, or result in the

 

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creation of a lien or other encumbrance on any material property or asset of the Company pursuant to, any material note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any material property or asset of the Company is bound or affected.

(b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States or non-United States national, state, provincial, municipal or local government, governmental, regulatory or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body (a “ Governmental Authority ”) that shall not have been obtained or filed as of the Closing, except for the filing and recordation of appropriate merger documents and as required by the DGCL.

3.06 Permits; Compliance.

(a) Section 3.06 of the Disclosure Schedule contains a complete and accurate list of all material franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for the Company to own, lease and operate its properties or to carry on its business as it is now being conducted (the “ Permits ”) and identifies which, if any, of such Permits pertains solely to the Gastrodiagnostic Business. No suspension or cancellation of any of the Permits is pending or, to the knowledge of the Company, threatened. The Company is not, in any material respect, in default, breach or violation of, (i) any Law applicable to the Company or by which any property or asset of the Company is bound or affected, including, without limitation, with respect to design, labeling, testing and inspection of the Company’s products, and any Law of the United States Food and Drug Administration, or (ii) any material note, bond, mortgage, indenture, contract, agreement, lease, license, Permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any property or asset of the Company is bound.

(b) Except as set forth in Section 3.06 of the Disclosure Schedule, the Company has not received, at any time since August 1, 2007, any formal written notice or other formal written communication from any Governmental Authority or any other person regarding (i) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Permit, or (ii) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Permit. All applications required to have been filed for the renewal of any Permit have been duly filed on a timely basis with the appropriate Governmental Authority, and all other filings required to have been made with respect to any such Permit have been duly made on a timely basis with the appropriate Governmental Authority.

3.07 Financial Statements.

(a) Section 3.07 of the Disclosure Schedule includes the Company Financial Statements and the Company Pro Forma Financial Statements. The Company Financial Statements (i) are derived from and in accordance with the books and records of the Company

 

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and its Subsidiaries, (ii) complied as to form in all material respects with applicable accounting requirements with respect thereto as of their respective dates, (iii) have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated and consistent with each other (except that the financial statements as of and for the period ended June 30, 2009 do not include all notes required in year-end financial statements), and (iv) fairly present in all material respects the financial position of the Company and its Subsidiaries at the dates therein indicated and the results of operations and cash flows of the Company and its Subsidiaries for the periods therein specified. The Company Pro Forma Financial Statements (i) are derived from and in accordance with the books and records of the Company and its Subsidiaries, (ii) complied as to form in all material respects with applicable accounting requirements with respect thereto as of their respective dates, and (iii) fairly present in all material respects the financial position of the Company and its Subsidiaries at the dates therein indicated and the results of operations and cash flows of the Company and its Subsidiaries for the periods therein specified, in each case giving effect to the Gastrodiagnostic Business Distribution, the Second Spin and Distribution and the Company Reorganization as though it had occurred on the last day of the fiscal year preceding the fiscal year that ended on December 31, 2008.

(b) Except as and to the extent set forth on the unaudited balance sheet of the Company at June 30, 2009, including the notes thereto included in the Company Financial Statements (the “ 2009 Balance Sheet ”), the Company does not have any Liability, other than those incurred after June 30, 2009 in the ordinary course of the Company’s business consistent with past practice and that do not result from any breach of contract, tort or violation of law and that were not required to be set forth in the 2009 Balance Sheet in accordance with GAAP .

(c) The Company maintains a standard system of accounting established and administered in accordance with GAAP. The Company maintains a system of internal accounting controls for the Company and its Subsidiaries sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Section 3.07(c) of the Disclosure Schedule lists, and the Company has made available to Parent complete and correct copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls.

(d) All accounts receivable of the Company and its Subsidiaries reflected on the June 30, 2009 balance sheet included in the Company Pro Forma Financial Statements or arising thereafter have arisen from bona fide transactions in the ordinary course of business consistent with past practices.

(e) Section 3.07(e)(i) of the Disclosure Schedule sets forth the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Company and its Subsidiaries maintain accounts of any nature and the names of all persons authorized to draw thereon or make withdrawals therefrom. Section 3.07(e)(ii) of the Disclosure Schedule further lists those deposits or other amounts of cash of the Company and its Subsidiaries as of the Closing Date that are restricted cash.

 

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(f) The Company has sufficient surplus, as defined by the DGCL, to complete the Gastrodiagnostic Business Distribution in accordance with the DGCL.

(g) Notwithstanding the foregoing representations and warranties of the Company set forth in