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Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VALLEY FORGE SCIENTIFIC CORP.
("Valley Forge"),
SYNERGETICS ACQUISITION CORPORATION
("MergerSub"),
AND
SYNERGETICS, INC.
("Synergetics")
dated May 2, 2005
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TABLE OF CONTENTS
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1. Definitions 2
2. Basic Transaction 6
(a) The Merger 6
(b) The Closing 7
(c) Actions at the Closing 7
(d) Effect of Merger 7
3. Disposition of Synergetics Shares 9
(a) Conversion of Synergetics Shares 9
(b) Exchange of Certificates 9
(c) Lost, Mislaid, Stolen or Destroyed Certificates 10
(d) Dissenting Shares 10
(e) Fractional Shares 10
(f) Options 10
(g) Restrictions on Sale of Valley Forge Shares 11
(h) Conversion of MergerSub Shares 12
4. Representations, Warranties, Covenants and Agreements of
Synergetics 12
(a) Organization, Qualification and Corporate Power 12
(b) Capitalization 12
(c) Authorization of Transaction 13
(d) Non-contravention 13
(e) Brokers' Fees 13
(f) Tangible Assets 14
(g) Financial Statements 14
(h) Synergetics Disclosure Binder 14
(i) Absence of Material Changes 14
(j) Undisclosed Liabilities 16
(k) Permits, Licenses and Legal Compliance 16
(l) Tax Matters 17
(m) Real Property 18
(n) Intellectual Property 19
(o) Bank Accounts 20
(p) Inventory 20
(q) Contracts 20
(r) Notes and Accounts Receivable 21
(s) Powers of Attorney 21
(t) Insurance 21
(u) Litigation 22
(v) Product Warranty 22
(w) Product Liability 23
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(x) Employees 23
(y) Employee Benefits 23
(z) Guaranties 23
(aa) Environment, Health, and Safety 24
(ab) Certain Business Relationships with Affiliates 24
(ac) Subsidiaries 25
(ad) Disclosure 25
(ae) Internal Controls; Information Provided 26
5. Representations, Warranties, Covenants and Agreements of
the
MergerSub and Valley Forge 26
(a) Organization, Qualification and Corporate Power 27
(b) Capitalization 27
(c) The MergerSub's Status 27
(d) Authorization of Transaction 27
(e) Non-contravention 28
(f) Brokers' Fees 28
(g) Tangible Assets 28
(h) Financial Statements 29
(i) Valley Forge Disclosure Binder 29
(j) Absence of Material Changes 29
(k) Undisclosed Liabilities 31
(l) Permits, Licenses and Legal Compliance 31
(m) Tax Matters 32
(n) Real Property 33
(o) Intellectual Property 34
(p) Bank Accounts 34
(q) Inventory 35
(r) Contracts 35
(s) Notes and Accounts Receivable 36
(t) Powers of Attorney 36
(u) Insurance 36
(v) Litigation 37
(w) Product Warranty 37
(x) Product Liability 37
(y) Employees 38
(z) Employee Benefits 38
(aa) Guaranties 38
(ab) Environment, Health and Safety 38
(ac) Certain Business Relationships With Affiliates 39
(ad) Subsidiaries 39
(ae) Disclosure 40
(af) SEC Reports; Internal Controls; Information Provided 40
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6. Covenants Relating to Conduct of Business 42
(a) Covenants of Valley Forge 42
(b) Covenants of Synergetics 45
(c) Control of the other Party's Business 48
7. Additional Agreements 48
(a) Preparation of Proxy Statement; S-4 Registration
Statement; Valley Forge Shareholders Meeting
and Registration Expenses 48
(b) Reasonable Best Efforts 49
(c) Fees and Expenses 49
(d) Directors' and Officers' Indemnification and Insurance
50
(e) Public Announcements 50
(f) Assignment of Mails Trademark 51
(g) Supermajority Director Voting Requirements 51
(h) Section 16 Matters 51
(i) Nasdaq Listing 52
(j) Affiliate Letters 52
(k) Access to Information 52
8. Conditions Precedent 52
(a) Conditions Precedent to Each Party's Obligation to
Effect
the Merger 52
(b) Additional Conditions to the Obligations of Valley Forge
and the MergerSub 53
(c) Additional Conditions to the Obligation of Synergetics
54
9. Items to be Delivered at Closing 55
(a) Items to be Delivered by Synergetics 55
(b) Items to be Delivered by Valley Forge and/or the
MergerSub 56
10. Break-up Fee 57
11. Termination 58
12. Miscellaneous 59
(a) No Third Party Beneficiaries 59
(b) Entire Agreement 59
(c) Succession and Assignment 59
(d) Counterparts 59
(e) Headings 59
(f) Notices 59
(g) Governing Law 61
(h) Amendments and Waivers 61
(i) Severability 61
(j) Construction 61
(k) Incorporation of Exhibits and Schedules 62
(l) Arbitration 62
(m) Future Assurances 62
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Exhibit "A" Certificate of Merger
Exhibit "B" Shareholders' Agreement
Exhibit "C" Synergetics Voting Agreement
Exhibit "D" Valley Forge Voting Agreement
Exhibit "E" Valley Forge & Leonard Malis Option
Agreement
Exhibit "F" Form of Affiliate Letter
Exhibit "G" Form of Employment Agreement
Exhibit "H" Form of Synergetics Opinion
Exhibit "I" Form of Valley Forge Opinion
Exhibit "J" New Synergetics Stock Option Plan
Synergetics Disclosure Binder--Exceptions to Representations and
Warranties
Valley Forge Disclosure Binder--Exceptions to Representations
and Warranties
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into this 2nd day
of May,
2005, by and among SYNERGETICS ACQUISITION CORPORATION, a
Delaware corporation
(the "MergerSub"), VALLEY FORGE SCIENTIFIC CORP., a Pennsylvania
corporation and
corporate parent of the MergerSub ("Valley Forge"), and
SYNERGETICS, INC., a
Missouri corporation ("Synergetics"). MergerSub, Valley Forge,
and Synergetics
are sometimes hereinafter referred to individually as a "Party"
or collectively
as "Parties."
WHEREAS, the Board of Directors of the MergerSub, Valley Forge
and
Synergetics have each approved the merger of MergerSub with and
into the
Synergetics in a transaction intended to qualify as a tax-free
reorganization
within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of
the Internal
Revenue Code of 1986, as amended (the "Code"), under the terms
and conditions
set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the representations, warranties, and mutual
covenants herein
contained, the Parties agree as follows.
1. Definitions.
-----------
"Additional Valley Forge Shares" shall mean 612,000 Valley
Forge Shares to be delivered by Valley Forge to the Synergetics
shareholders as
part of the Synergetics Merger Consideration.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event,
incident, action, failure to act, or transaction that forms or
could form the
basis for any specified consequence.
"Certificate of Merger" has the meaning set forth in Section
2(c) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning
the businesses and affairs of Synergetics, its Subsidiaries and
its Affiliates
and/or Valley Forge, its Subsidiaries and its Affiliates, if
any, that is not
already generally available to the public.
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"Delaware General Corporation Law" means the General
Corporation Law of the State of Delaware, as amended.
"Effective Date" has the meaning set forth in Section
2(d)(i)
below.
"Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an
Employee Pension
Benefit Plan; (b) qualified defined contribution retirement plan
or arrangement
which is an Employee Pension Benefit Plan; (c) qualified defined
benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan
(including any Multi-employer Plan), or (d) Employee Welfare
Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"Environmental, Health and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the
Occupational Safety
and Health Act of 1970, each as amended, together with all other
laws (including
rules, regulations, codes, plans, injunctions, judgments,
orders, decrees,
rulings and charges thereunder) of federal, state, local and
foreign governments
(and all agencies thereof) concerning pollution or protection of
the
environment, public health and safety, or employee health and
safety, including
laws relating to emissions, discharges, releases, or threatened
releases, of
pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials
or wastes into ambient air, surface water, ground water, or
lands or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical,
industrial, hazardous, or toxic materials or waste.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Extremely Hazardous Substance" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know
Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21)
"GAAP" means United States generally accepted accounting
principles as in effect from time to time, consistently
applied.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to
practice), all
improvements thereto, and all patents, patent applications and
patent
disclosures, together with all reissuance, continuations,
continuations-in-part,
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revisions, extensions, and reexaminations thereof; (b) all
trademarks, service
marks, logos, and trade names, together with all translations,
adaptations,
derivations and combinations thereof and including all goodwill
associated
therewith; (c) all copyrightable works, all copyrights and all
applications,
registrations, and renewals in connection therewith; (d) all
trade secrets and
confidential business information (including ideas, research and
development,
know-how, formulas, compositions, manufacturing and production
processes and
techniques, technical data, designs, drawings, specifications,
bills of
materials, customer and supplier lists, pricing and cost
information and
business and marketing plans and proposals; (e) all computer
software (including
data and related documentation); (f) all other proprietary
rights; and (g) all
copies and tangible embodiments thereof, in whatsoever form or
medium.
"IRS" means the Internal Revenue Service.
"Knowledge" means (i) with respect to Synergetics, the
actual
knowledge of the individuals listed in Section 1 of the
Synergetics Disclosure
Binder and (ii) with respect to Valley Forge and Merger Sub, the
actual
knowledge of the individuals listed in Section 1 of the Valley
Forge Disclosure
Binder, in each case after reasonable investigation.
"Liability" means any liability of Synergetics, Valley Forge
or the MergerSub arising from the conduct of their respective
business on or
prior to the Closing Date (whether known or unknown, whether
asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued,
whether liquidated or unliquidated, and whether due or to become
due), including
any liability for Taxes and reasonable costs incurred in
securing attorney,
accounting or other professional services.
"Material Adverse Effect" means any event which would
reasonably be expected to, individually or in the aggregate,
result in a
material adverse effect on the business, assets, financial
condition or results
of operations of either the MergerSub, Valley Forge or
Synergetics.
"Merger" has the meaning set forth in Section 2(a) below.
"MergerSub Share" means any share of Common Stock, $0.01 par
value per share, of the MergerSub.
"Most Recent Synergetics Fiscal Year End" has the meaning
set
forth in Section 4(g).
"Most Recent Synergetics Fiscal Month End" has the meaning
set
forth in Section 4(g).
"New Synergetics" has the meaning set forth in Section 2(c)
below.
"New Synergetics Share" means any share of the Common Stock,
no par value per share, of Valley Forge following the Effective
Date.
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"Option" shall mean each option to purchase or acquire
Synergetics' Shares, whether issued by Synergetics pursuant to
the Option Plan
or otherwise.
"Option Plan" shall mean the Synergetics, Inc. Incentive
Stock
Option Plan.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including
with respect to
quantity and frequency).
"Person" means an individual, a partnership, a corporation,
an
association, a joint stock company, a trust, a joint venture, an
unincorporated
organization, or a governmental entity (or any department,
agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"Proxy Statement/Prospectus" has the meaning set forth in
Section 7(a)(i) below.
"Reportable Event" has the meaning set forth in ERISA Sec.
4043.
"Requisite MergerSub Stockholder Approval" means the
affirmative vote of Valley Forge as the sole holder of MergerSub
Shares in favor
of this Agreement and the Merger.
"Requisite Synergetics Stockholder Approval" means the
affirmative vote of the holders of at least two-thirds of the
issued and
outstanding Synergetics Shares in favor of this Agreement and
the Merger and the
exercise of dissenters rights by the holders of not more than
4.9% of the issued
and outstanding Synergetics Shares.
"Requisite Valley Forge Stockholder Approval" means the
affirmative vote of the holders of at least a majority of the
issued and
outstanding Valley Forge Shares in favor of this Agreement and
the Merger and
the exercise of dissenters rights by the holders of not more
than 4.9% of the
issued and outstanding Valley Forge Shares.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's,
materialmen's, and similar liens, (b) liens for Tax not yet due
and payable or
for Tax that the taxpayer is contesting in good faith through
appropriate
proceedings, (c) purchase money liens and liens securing rental
payments under
capital lease arrangements, and (d) other liens arising in the
Ordinary Course
of Business and not incurred in connection with the borrowing of
money.
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"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of
the common stock
or has the power to vote or direct the voting of sufficient
securities to elect
a majority of the directors.
"Surviving Corporation" has the meaning set forth in Section
2(a) below.
"Synergetics Disclosure Binder" means that certain
disclosure
binder provided by Synergetics to Valley Forge and the MergerSub
and certified
by Synergetics to be true, accurate and complete in all material
respects.
"Synergetics Share" means any share of the Common Stock,
$0.01
2/3 par value per share, of Synergetics.
"Synergetics Voting Agreement" has meaning set forth in
Section 4(c) below.
"Tax" or "Taxes" means any federal, state, local, or foreign
income, gross receipts, mercantile license, payroll, employment,
excise,
severance, stamp, occupation, premium, windfall profits,
environmental
(including Tax under Code Sec. 59A), customs duties, capital
stock, franchise,
profits, withholding, social security (or similar),
unemployment, disability,
real property, personal property, sales, use, transfer,
registration, value
added, alternative or add-on minimum, estimated, or any other
tax of any kind
whatsoever, including any interest, penalty, or addition
thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim
for
refund, or information return or statement relating to Tax,
including any
amendment thereof and any schedule or attachment thereto.
"Transfer Agent" means American Stock Transfer & Trust
Company.
"Valley Forge Disclosure Binder" means that certain
disclosure
binder provided by Valley Forge to Synergetics and certified by
Valley Forge to
be true, accurate and complete in all material respects.
"Valley Forge Share" means any share of the Common Stock, no
par value per share, of Valley Forge.
"Valley Forge Voting Agreement" has the meaning set forth in
Section 5(d) below.
2. Basic Transaction.
-----------------
(a) The Merger. On and subject to the terms and conditions of
this
Agreement, MergerSub (the "Merger") will merge with and into
Synergetics at the
Effective Date. Synergetics shall be the only corporation
surviving the Merger
(the "Surviving Corporation").
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(b) The Closing. The closing of the transactions contemplated
by
this Agreement (the "Closing") shall take place at the offices
of Valley Forge,
136 Green Tree Road, Suite 100, Oaks, Pennsylvania 19456-1179,
or at such other
place as may be mutually agreeable to the Parties, commencing at
10:00 a.m.
local time (or such other time as may be mutually agreeable to
the Parties) on
the date one (1) business day after the satisfaction or waiver
of all of the
conditions to the obligations of the parties to consummate the
transactions
contemplated hereby other than the conditions that by their
terms are to be
satisfied on the Closing Date, or such other date as may be
mutually agreeable
to the Parties (the "Closing Date").
(c) Actions at the Closing. At the Closing the following
shall
occur: (i) Valley Forge will undertake a F Reorganization in
accordance with
Section 368(a)(1)(F) of the Code resulting in its
reincorporation in the State
of Delaware (the "Reincorporation") and change its corporate
name to
"Synergetics, Inc." (following the Closing Valley Forge will be
sometimes
hereinafter referred to as "New Synergetics"); (ii) Synergetics
will deliver to
the MergerSub and Valley Forge the various certificates,
instruments, and
documents referred to in Section 9(a) below; (iii) the MergerSub
and Valley
Forge will deliver to Synergetics the various certificates,
instruments, and
documents referred to in Section 9(b) below; (iv) the MergerSub
and Synergetics
will file with the Secretaries of State of the State of Delaware
and the State
of Missouri a Certificate of Merger in the form attached hereto
as
(the "Certificate of Merger"); and (v) the Parties shall take
any and all other
actions consistent with this Agreement so as to effectuate the
Closing,
including, but not limited to, changing the ticker symbol of New
Synergetics.
(d) Effect of Merger.
----------------
(i) General. The Merger shall become effective at the
time (the "Effective Date") MergerSub and Synergetics file the
Certificate of
Merger with the Secretary of State of the State of Missouri. The
Merger shall
have the effect set forth in the General and Business
Corporations Law of
Missouri. Upon the consummation of the Merger, the franchises
and all the
property, real, personal and mixed, causes of action and every
other asset of
MergerSub shall vest in the Surviving Corporation without
further act or deed.
The Surviving Corporation may, at any time after the Effective
Date, take any
action (including executing and delivering any document) in the
name and on
behalf of MergerSub in order to carry out and effectuate the
transactions
contemplated by this Agreement.
(ii) Certificate of Incorporation. The Certificate of
Incorporation of Synergetics in effect at and as of the
Effective Date, a copy
of which is contained in Section 2(d)(ii) of the Synergetics
Disclosure Binder,
will remain the Certificate of Incorporation of the Surviving
Corporation
without any modification or amendment in the Merger except as
provided for by
the Certificate of Merger.
(iii) Bylaws. Except as set forth below, the Bylaws of
Synergetics in effect at and as of the date this Agreement is
executed, a copy
of which is contained in Section 2(d)(iii) of the Synergetics
Disclosure Binder,
will remain the Bylaws of the Surviving Corporation without any
modification or
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amendment in the Merger. Upon the Closing Date, the Parties
shall take all
corporate action necessary to amend the New Synergetics ByLaws
(or in the event
the Reincorporation does not occur for any reason, the Valley
Forge ByLaws) to
include the supermajority Board of Director voting provisions
detailed in
Section 7(g) herein below.
(iv) Directors and Officers. From and after the date this
Agreement is executed until the Closing Date, (i) the directors
of the MergerSub
shall be the directors of Valley Forge and (ii) the officers of
the MergerSub
shall be the officers of Valley Forge. Valley Forge hereby
agrees to take all
actions necessary for the Board of Directors of New Synergetics
to be comprised
of the individuals specified below this Section 2(d)(iv) (each a
"Director" and
collectively the "Directors") effective immediately upon
consummation of the
Merger. The Board of Directors of Valley Forge shall take all
actions necessary
to appoint Jerry L. Malis as Executive Vice President and Chief
Scientific
Officer, Kurt W. Gampp, Jr. as the Chief Operating Officer and
Gregg D. Scheller
as the Chief Executive Officer and President of New Synergetics
to be effective
upon and as of the Effective Date. Upon execution of this
Agreement, Valley
Forge and certain of its shareholders shall become parties to
the Valley Forge
Voting Agreement (as defined below) pursuant to which such
shareholders shall
take all corporate action necessary, including, but not limited
to, the
affirmative vote of all their respective Valley Forge Shares, to
cause the New
Synergetics Board of Directors (effective upon consummation of
the Merger) to
consist of seven (7) members divided by the Board of Directors
into three (3)
classes with three year staggered terms with the term of office
of the Class "A"
directors expiring at the annual meeting of the New Synergetics
shareholders in
2006, (the "2006 Meeting") the term of office of the Class "B"
directors
expiring at the annual meeting of the New Synergetics
shareholders in 2007 and
the term of office of the Class "C" directors expiring at the
annual meeting of
the New Synergetics shareholders in 2008. On the Closing Date,
the members of
the New Synergetics Board of Directors shall be as follows: (i)
Class "A"
directors shall be Larry Cardinale and Robert Dick; (ii) Class
"B" directors
shall be Juanita Hinshaw and an independent individual who shall
be designated
and approved as set forth below before the filing of the
Proxy
Statement/Prospectus and is willing and able to serve,
possessing relevant
experience in the medical product industry to be nominated by
Valley Forge's
Nominating Committee and approved by the Valley Forge Board of
Directors, and
subject to the consent of the Board of Directors of Synergetics,
which consent
shall not be unreasonably withheld or delayed; and (iii) Class
"C" directors
shall be Jerry L. Malis, Gregg D. Scheller and Kurt W. Gampp,
Jr. The Parties
agree that effective immediately upon consummation of the
Merger, the
composition of the Board of Directors of the Surviving
Corporation shall be
identical to the composition of the Board of Directors of New
Synergetics.
Subject to compliance with applicable law, the Parties shall use
their best
efforts to cause the New Synergetics Board of Directors to elect
independent
members of the New Synergetics Board of Directors to each of the
Audit
Committee, the Compensation Committee and the Nominating
Committee of New
Synergetics so that such committees are constitute as described
in Section
8(c)(viii). The Parties' further agree that the Nominating
Committee of New
Synergetics shall, subject to the approval a majority of the
members of the
Board of Directors of New Synergetics, designate two nominees to
be elected at
the 2006 Meeting.
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(v) Final Tax Returns. New Synergetics shall prepare
final tax returns for Synergetics (including amended returns and
any claims for
refunds) and information reports in accordance with GAAP and pay
any Tax due as
reflected on such tax returns.
3. Disposition of Synergetics Shares.
---------------------------------
(a) Conversion of Synergetics Shares. At and as of the
Effective
Date, by virtue of the Merger and without any action on the part
of the holders
thereof:
(i) The holders of issued and outstanding Synergetics
Shares shall be entitled to receive, in the aggregate, such
number of Valley
Forge Shares as is equal to the result obtained by (A) dividing
(x) the issued
and outstanding Valley Forge Shares as of the date hereof
(7,913,712 shares) by
(y) 0.34 minus (B) the issued and outstanding Valley Forge
Shares as of the date
hereof (7,913,712 shares) plus (C) the Additional Valley Forge
Shares
(collectively, the "Synergetics Merger Consideration"). Each
outstanding
Synergetics Share shall be converted into the right to receive
such number of
Valley Forge Shares as is equal to the quotient determined by
dividing the
Synergetics Merger Consideration by the then issued and
outstanding Synergetics
Shares.
(ii) All Synergetics Shares held by Synergetics as
treasury shares, if any, shall be cancelled.
(iii) After the Effective Date, there shall be no transfers
on the stock transfer books of Synergetics of shares that were
outstanding
immediately prior to the Effective Date. If, after the Effective
Date, any
Certificates (as defined below) are presented to Synergetics for
transfer, they
shall be canceled and exchanged for the Synergetics Merger
Consideration as
described in Section 3(a) hereof.
(b) Exchange of Certificates. Promptly on or after the
Effective
Date, New Synergetics shall cause the Transfer Agent to mail to
each holder of
record of Synergetics Shares as of the Effective Date the
Transmittal Form (as
defined below) which shall specify that each Synergetics
shareholder may
surrender to the Transfer Agent all outstanding certificates,
which immediately
prior to the Effective Date represented Synergetics Shares (the
"Certificate" or
"Certificates") in exchange for the Synergetics Merger
Consideration. Delivery
shall be effected, and risk of loss and title to the
Certificates shall pass,
only upon delivery of the Certificates to the Transfer Agent.
Upon surrender to
the Transfer Agent of a Certificate and a duly executed and
properly completed
Transmittal Form, the Certificate so surrendered shall forthwith
be canceled.
Promptly thereafter, Valley Forge agrees to deliver, or cause to
be delivered,
the Synergetics Merger Consideration to each Synergetics
shareholder along with
such other transmittal materials that Valley Forge and the
Transfer Agent
reasonably determines is necessary or appropriate (the
"Transmittal Form"). From
the Effective Date until surrender in accordance with the
provisions of this
Section 3(c), each Certificate shall represent, for all
purposes, only the right
to receive a share of the Synergetics Merger Consideration
provided in Section
3(a) and any dividends or other distributions payable
thereon.
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(c) Lost, Mislaid, Stolen or Destroyed Certificates. In the
event
any Certificates shall have been lost, stolen or destroyed,
Valley Forge shall
issue in exchange for such lost, stolen or destroyed
Certificates, upon the
making of an affidavit of that fact by the holder thereof, such
shareholder's
share of the Synergetics Merger Consideration as may be required
pursuant to
Section 3(a); provided, however, that Valley Forge may, in its
sole and
unfettered discretion and as a condition precedent to such
issuance, require the
owner of such lost, stolen or destroyed Certificate(s) to
deliver an indemnity,
reasonably acceptable to Valley Forge, against any claim that
may be made
against Valley Forge or the MergerSub with respect to the
Certificate(s) alleged
to have been lost, stolen or destroyed.
(d) Dissenting Shares. To the extent that the availability
of
appraisal rights are mandated under the General and Business
Corporations Law of
Missouri, Synergetic Shares that have not been voted for
adoption of the Merger
and with respect to which appraisal rights have been properly
demanded in
accordance with the General and Business Corporations Law of
Missouri (the
"Dissenting Shares") shall not be converted pursuant to this
Article 3 at or
after the Effective Date unless and until the holder of such
Dissenting Shares
becomes ineligible for such appraisal rights. If a holder of
Dissenting Shares
becomes ineligible for appraisal, then, as of the Effective Date
or the date
such Dissenting Shares become ineligible for appraisal rights,
whichever occurs
later, such holder's Dissenting Shares shall cease to be
Dissenting Shares and
shall be converted pursuant to this Article 3 (subject to all of
the rights and
obligations of the Synergetics shareholders hereunder).
Synergetics shall
immediately give Valley Forge and the MergerSub notice of any
demand for
appraisal rights in connection with the Merger and Valley Forge
and the
MergerSub shall have the right to participate in all
negotiations and
proceedings with respect to any such demands at its sole cost
and expense.
Synergetics shall not, except with the prior written consent of
Valley Forge and
the MergerSub, voluntarily make any payment with respect to, or
settle or offer
to settle, any such demand.
(e) Fractional Shares. No certificates or scrip representing
fractional Valley Forge Shares shall be issued to former
Synergetics
shareholders upon the surrender for exchange of Certificates,
and such former
Synergetics shareholders shall not be entitled to any voting
rights, rights to
receive any dividends or distributions or other rights as a
stockholder of
Valley Forge with respect to any fractional Valley Forge Shares
that would have
otherwise been issued to such former Synergetics shareholders.
In lieu of any
fractional Valley Forge Shares that would have otherwise been
issued, each
former Synergetics shareholder that would have been entitled to
receive a
fractional Valley Forge Share shall, upon proper surrender of
such person's
Certificates, receive a cash payment equal to the last sale
price per share of
the Valley Forge Shares on the Nasdaq SmallCap Market, on the
business day
immediately preceding the Closing Date, multiplied by the
fraction of a share
that such Synergetics shareholder would otherwise be entitled to
receive.
(f) Options.
-------
(i) As of the Effective Date, all Options, whether vested
or unvested, and the Option Plan, insofar as it relates to
Options outstanding
under such Plan as of the Closing, shall be assumed by Valley
Forge. Immediately
after the Effective Date, each Option outstanding immediately
prior to the
10
<PAGE>
Effective Date shall be deemed to constitute an option to
acquire, on the same
terms and conditions as were applicable under such Option at the
Effective Date,
such number of shares as is equal to the number of Synergetics
Shares subject to
the unexercised portion of such Option multiplied by a
conversion ratio equal to
the ratio set forth in Section 3(a)(i) above (with any fraction
resulting from
such multiplication to be rounded to the nearest whole number).
The exercise
price per share of each such assumed Option shall be equal to
the exercise price
of such Option immediately prior to the Effective Date, divided
by the
conversion ratio equal to the ratio set forth in Section 3(a)(i)
above (rounded
up to the nearest whole cent). The term, exercisability, vesting
schedule,
status as an "incentive stock option" under Section 422 of the
Code, if
applicable, and all of the other terms of the Options shall
otherwise remain
unchanged.
(ii) As soon as practicable after the Effective Date, New
Synergetics or the Surviving Corporation shall deliver to the
holders of Options
appropriate notices setting forth such holders' rights pursuant
to such Options,
as amended by this Section 3(f), and the agreements evidencing
such Options
shall continue in effect on the same terms and conditions
(subject to the
amendments provided for in this Section 3(f) and such
notice).
(iii) New Synergetics shall take all corporate action
necessary to reserve for issuance a sufficient number of Valley
Forge Shares for
delivery upon exercise of the Options assumed in Section 3(f).
Promptly after
the Effective Date, but in no event later than thirty (30) days
thereafter,
Valley Forge shall file a Registration Statement on Form S-8 (or
any successor
form) under the Securities Act with respect to all New
Synergetics Shares
subject to such Options that may be registered on a Form S-8,
and shall use its
reasonable best efforts to maintain the effectiveness of such
Registration
Statement for so long as such Options remain outstanding.
(iv) Synergetics shall obtain, prior to the Closing, the
consent from each holder of an Option to the amendment of such
Option pursuant
to this Section 3(f) (unless such consent is not required under
the terms of the
applicable agreement, instrument or plan).
(v) As soon as practicable after the Effective Date, if
required, New Synergetics shall deliver a notice to the holders
of options to
acquire Valley Forge Shares that the agreements evidencing such
options shall
continue in effect on the same terms and conditions as in effect
prior to the
Effective Date. Such notice shall also state that such options
shall not be
subject to any anti-dilution protections that may be set forth
in the agreements
evidencing such options.
(g) Restrictions on Sale of New Synergetics Shares. The
Parties
shall use their best efforts to cause certain of the
Shareholders of New
Synergetics to become parties to a Shareholders' Agreement,
substantially in the
form attached hereto as Exhibit "B" (the "Shareholders'
Agreement")(1), pursuant
to which the parties thereto shall agree to certain restrictions
on the transfer
-------------------------------
(1) The following parties and their respective affiliates will
be parties to
the Shareholders' Agreement: Gregg D. Scheller, Kurt W. Gampp,
Jr., Jerry
L. Malis and Leonard I. Malis.
11
<PAGE>
of their respective Synergetics Merger Consideration and/or
Valley Forge Shares
for a period of twelve (12) months after the Closing,
notwithstanding the
registration of such Synergetics Merger Consideration. Such
persons shall not,
except as otherwise permitted in accordance with the
Shareholders' Agreement,
sell, or enter into any agreement, arrangement or negotiations
relating to the
sale of, any of their respective Valley Forge Shares or the
Synergetics Merger
Consideration.
(h) Conversion of MergerSub Shares. Each MergerSub Share
issued
and outstanding immediately prior to the Effective Date shall be
converted into
and thereafter evidence one share of Common Stock, $0.01 par
value per share, of
the Surviving Corporation.
4. Representations, Warranties, Covenants and Agreements of
Synergetics. Synergetics represents and warrants to the
MergerSub and Valley
Forge that the statements contained in this Section 4 are true
and correct as of
the date of this Agreement. To the extent applicable,
Synergetics makes the
representations and warranties contained in this Section 4 to
the MergerSub and
Valley Forge on behalf of each Subsidiary of Synergetics. The
Synergetics
Disclosure Binder shall be arranged in sections and subsections
corresponding to
the numbered and lettered sections and subsections contained in
this Section 4.
The disclosures in any section or subsection of the Synergetics
Disclosure
Binder shall qualify other sections and subsections in this
Section 4 only to
the extent it is clear from a reading of the disclosure that
such disclosure is
applicable to other sections and subsections.
(a) Organization, Qualification and Corporate Power.
Synergetics
is a corporation duly organized, validly existing, and
subsisting under the laws
of the State of Missouri. Synergetics is duly authorized to
conduct business and
subsisting under the laws of each jurisdiction where such
qualification is
required, except for the jurisdiction in which the failure to be
so qualified
has not had and would not reasonably be expected to have a
Material Adverse
Effect on Synergetics. Synergetics has full corporate power and
authority to
carry on the business in which it is engaged and to own and use
the properties
owned and used by it. Synergetics' Certificate of Incorporation
and all
amendments thereto to date, By-laws as amended to date and
minutes and stock
books, have been delivered to the MergerSub for review prior to
execution of
this Agreement, and are full, complete and correct to the date
of this
Agreement. Synergetics is not in violation of any of the
provisions of its
Certificate of Incorporation, as amended, or By-laws, as
amended. The said
minutes accurately and fully reflect all meetings, actions,
proceedings and
other matters properly includable therein. Except as reflected
in said minutes,
there are no minutes of meetings or consents in lieu of meetings
of the Board of
Directors or shareholders of Synergetics.
(b) Capitalization. The authorized capital stock of
Synergetics
and the issued and outstanding shares of capital stock of
Synergetics are set
forth in Section 4(b) of the Synergetics Disclosure Binder.
Section 4(b) of the
Synergetics Disclosure Binder also sets forth a true and
complete list of all of
the Synergetics shareholders, the number of shares of capital
stock owned by
each of them, and as set forth in the Synergetics' books and
records, the date
such shares were transferred or issued to said shareholders and
each
shareholder's address. Except as detailed in Section 4(b) of the
Synergetics
Disclosure Binder, there are no outstanding or authorized
Options, warrants,
12
<PAGE>
purchase rights, subscription rights, conversion rights,
exchange rights, or
other contracts or commitments that could require Synergetics to
issue, sell, or
otherwise cause to become outstanding any capital stock. The
maturity date and
exercise price for each Option is listed in Section 4(b) of the
Synergetics
Disclosure Binder. All of Synergetics' issued and outstanding
shares of capital
stock have been duly authorized and validly issued, are fully
paid and
non-assessable, are not subject to preemptive rights, and have
been issued in
compliance with all applicable federal and state securities
laws. Furthermore,
the Synergetics Share repurchase program has been conducted in
compliance with
all applicable federal and state securities laws. There are no
outstanding or
authorized stock appreciation, phantom stock, profit
participation, or similar
rights with respect to Synergetics.
(c) Authorization of Transaction. Synergetics has full power
and
authority (including full corporate power and authority) to
execute and deliver
this Agreement. Prior to or contemporaneous with the execution
of this
Agreement, certain of the Synergetics shareholders will deliver
a voting
agreement (the "Synergetics Voting Agreement")(2) pursuant to
the terms of which
they shall covenant and agree not to transfer or otherwise
dispose of any of
their Synergetics Shares prior to the Effective Date and to vote
all their
Synergetics Shares and any other shares of capital stock of
Synergetics obtained
following the date of this Agreement in favor of the Merger. A
copy of the
Synergetics Voting Agreement is attached hereto as Exhibit "C".
The Board of
Directors of Synergetics has duly authorized the execution,
delivery, and
performance of this Agreement by Synergetics, and Synergetics
has received any
and all approvals required by any government authority to enter
into this
Agreement and effect the transactions contemplated hereby. This
Agreement
constitutes the valid and legally binding obligation of
Synergetics, enforceable
in accordance with its terms and conditions.
(d) Non-contravention. Neither the execution and the delivery
of
this Agreement, nor the consummation of the transactions
contemplated hereby,
will (i) violate any statute, regulation, rule, injunction,
judgment, order,
decree, ruling, or other restriction of any government,
governmental agency, or
court to which Synergetics is subject or any provision of the
charter or Bylaws
of Synergetics or (ii) conflict with, result in a breach of,
constitute a
default under, result in the acceleration of, create in any
party the right to
accelerate, terminate, modify, or cancel, or require any notice
under any
agreement, contract, lease, license, instrument, or other
arrangement to which
Synergetics is a party or by which it is bound or to which any
of its assets is
subject (or result in the imposition of any Security Interest
upon any of its
assets). Other than in connection with the provisions of the
Missouri general
corporation law, Synergetics does not need to give any notice
to, make any
filing with, or obtain any authorization, consent, or approval
of any government
or governmental agency in order for the Parties to consummate
the transactions
contemplated by this Agreement.
(e) Brokers' Fees. Synergetics has no Liability or obligation
to
pay any fees or commissions to any broker, finder, or agent with
respect to the
transactions contemplated by this Agreement for which MergerSub
or Valley Forge
could become liable or obligated.
-------------------------------
(2) The following Synergetics shareholders and their respective
affiliates will
be parties to the Synergetics Voting Agreement: Gregg D.
Scheller, Kurt W.
Gampp, Jr. and Earl F. Neely.
13
<PAGE>
(f) Tangible Assets. Synergetics has good and marketable title
to,
or a valid leasehold interest in, the buildings, machinery,
equipment and other
tangible assets used by it, located on or off its premises, or
shown on the
Synergetics' Financial Statements (as defined below) or acquired
after the date
thereof, free and clear of all Security Interests, except for
properties and
assets disposed of in the Ordinary Course of Business since the
date of the Most
Recent Synergetics Fiscal Month End (as defined below). Without
limiting the
generality of the foregoing, Synergetics has good and marketable
title to all of
the tangible assets necessary for the conduct of its businesses
as presently
conducted. Each such tangible asset is free from defects of
which any director
or officer of Synergetics has Knowledge, has been maintained in
accordance with
normal industry practice, is in good operating condition and
repair (subject to
normal wear and tear) and is suitable for the purposes for which
it presently is
used and presently is proposed to be used.
(g) Financial Statements. Synergetics has delivered to the
MergerSub prior to the execution of this Agreement true and
complete copies of:
(i) audited financial statements for Synergetics last five (5)
fiscal years
ended July 31, 2004 (hereinafter referred to as the "Most Recent
Synergetics
Fiscal Year End"); and (ii) unaudited financial statements for
the six (6)
months ended January 31, 2005 (the "Most Recent Synergetics
Fiscal Month End")
(collectively, the "Synergetics Financial Statements"). Except
as set forth in
Section 4(g) of the Synergetics Disclosure Binder, the
Synergetics Financial
Statements have been prepared in accordance with GAAP applied on
a consistent
basis throughout the periods covered thereby, present fairly the
financial
condition of Synergetics, as of the respective dates thereof,
and the results of
operations of Synergetics for such periods, are correct and
complete, and are
consistent with the books and records of Synergetics (which
books and records
are correct and complete).
(h) Synergetics Disclosure Binder. Synergetics has delivered
to
the MergerSub prior to the execution of this Agreement the
Synergetics
Disclosure Binder which contain certain information and material
regarding
Synergetics. The Synergetics Disclosure Binder is, in all
material respects, a
true, accurate and complete description of Synergetics and
Synergetics'
business. The Synergetics Disclosure Binder does not contain any
untrue
statement of a material fact or omit to state a material fact
necessary in order
to make the statements so made or information so delivered not
misleading.
Synergetics hereby covenants and agrees to provide Valley Forge
and the
MergerSub with updates to the Synergetics Disclosure Binder from
the date of
this Agreement through the Closing Date. Synergetics further
covenants and
agrees to immediately notify Valley Forge and the MergerSub upon
any event
(whether or not insured against), which is reasonably likely to
have a Material
Adverse Effect.
(i) Absence of Material Changes. Except as otherwise described
in
Section 4(i) of the Synergetics Disclosure Binder, since the
Most Recent
Synergetics Fiscal Year End, there has not been any material
adverse change in
the business, financial condition, operations or results of
operations of
Synergetics. Without limiting the generality of the foregoing,
since that date:
14
<PAGE>
(i) Synergetics has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than
for a fair
consideration in the Ordinary Course of Business;
(ii) Synergetics has not entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases,
and licenses) outside the Ordinary Course of Business;
(iii) except as disclosed in the Synergetics Disclosure
Binder, no party (including Synergetics) has accelerated,
terminated, modified,
or cancelled any material agreement, contract, lease, or license
(or series of
related material agreements, contracts, leases, and licenses) to
which
Synergetics is a party or by which it is bound;
(iv) Synergetics has not granted any Security Interest
upon any of its assets, tangible or intangible;
(v) Synergetics has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary
Course of Business;
(vi) Synergetics has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of,
any other Person
(or series of related capital investments, loans, and
acquisitions) outside the
Ordinary Course of Business;
(vii) Synergetics has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for
borrowed money or capitalized lease obligation outside the
Ordinary Course of
Business;
(viii) Synergetics has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary
Course of
Business;
(ix) Synergetics has not cancelled, compromised, waived,
or released any right or claim (or series of related rights and
claims) outside
the Ordinary Course of Business;
(x) Synergetics has not granted any license or sublicense
of any rights under or with respect to any Intellectual
Property;
(xi) Synergetics has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital
stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired
any of its
capital stock;
(xii) Synergetics has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to
its property;
15
<PAGE>
(xiii) Synergetics has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and
employees
outside the Ordinary Course of Business;
(xiv) Synergetics has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the
terms of any existing such contract or agreement;
(xv) Synergetics has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the
Ordinary Course of Business;
(xvi) except as disclosed in the Synergetics Disclosure
Binder, Synergetics has not adopted, amended, modified or
terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract,
or commitment for
the benefit of any of its directors, officers, and employees (or
taken any such
action with respect to any other Employee Benefit Plan);
(xvii) Synergetics has not made any other change in
employment terms for any of its directors, officers, and
employees outside the
Ordinary Course of Business;
(xviii) Synergetics has not made or pledged to make any
charitable or other capital contribution outside the Ordinary
Course of
Business;
(xix) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside
the Ordinary
Course of Business involving Synergetics and Synergetics has not
altered the
terms and conditions of firm purchase orders, commitments, or
contracts for its
services and products (the "Backlog"), and the dollar amount of
orders in the
Backlog is not materially less than it was as of such date,
except as increased
or decreased in the Ordinary Course of Business, and the Backlog
which is
outstanding and as of the date hereof contains terms and
conditions that are
consistent with Synergetics' practices over the past year and as
described in
the Synergetics Disclosure Binder; and
(xx) Synergetics has not committed to any of the foregoing.
(j) Undisclosed Liabilities. Except as set forth in Section
4(j)
of the Synergetics Disclosure Binder, Synergetics has no
Liability (and there is
no Basis for any present or future action, suit, proceeding,
hearing,
investigation, charge, complaint, claim, or demand against
either of them giving
rise to any Liability), except for (i) Liabilities set forth in
the Synergetics
Financial Statements and (ii) Liabilities which have arisen
after the Most
Recent Synergetics Fiscal Month End in the Ordinary Course of
Business (none of
which is material, or results from, arises out of, relates to,
is in the nature
of, or was caused by any breach of contract, breach of warranty,
tort,
infringement, or violation of law).
(k) Permits, Licenses and Legal Compliance. Section 4(k) of
the
Synergetics Disclosure Binder sets forth all material permits,
licenses,
franchises and approvals from all Federal, state, local and
foreign governmental
16
<PAGE>
and regulatory bodies held by Synergetics. Synergetics has all
permits,
licenses, franchises and approvals of all Federal, state, local
and foreign
governmental or regulatory bodies required to carry on its
businesses as
presently conducted, except for those the absence of which,
individually or in
the aggregate, have not had and would not reasonably be expected
to have, a
Material Adverse Effect; all such permits, licenses, franchises
and approvals
are in full force and effect, and Synergetics has no Knowledge
of any threatened
suspension or cancellation of any of them. Synergetics and its
Affiliates, if
any, have complied with all applicable laws (including rules,
regulations,
codes, injunctions, judgments, orders, decrees and rulings,
thereunder) of
federal, state, local, and foreign governments (and all agencies
thereof), and
no action, suit, proceeding, hearing, investigation, charge,
complaint, claim,
demand, or notice has been filed or commenced against any of
them alleging any
failure so to comply.
(l) Tax Matters.
-----------
(i) Synergetics has filed all Tax Returns that it was
required to file on or prior to the date hereof except the final
tax returns
referred to in Section 2(d)(v) above. All such Tax Returns were
correct and
complete in all material respects. All Tax owed by Synergetics
(whether or not
shown on any Tax Return) have been paid. Synergetics currently
is not the
beneficiary of any extension of time within which to file any
Tax Return. No
claim has ever been made by an authority in a jurisdiction where
Synergetics
does not file Tax Returns that it is or may be subject to
taxation by that
jurisdiction. There are no Security Interests on any of the
assets of
Synergetics that arose in connection with any failure (or
alleged failure) to
pay any Tax.
(ii) Synergetics has withheld and paid all Tax required to
have been withheld and paid in connection with amounts paid or
owing to any
employee, independent contractor, creditor, stockholder, or
other third party.
(iii) Synergetics does not expect any authority to assess
any additional Tax for any period for which Tax Returns have
been filed. There
is no dispute or claim concerning any Tax Liability of
Synergetics either (A)
claimed or raised by any authority in writing or (B) as to which
Synergetics has
Knowledge based upon personal contact with any agent of such
authority. Section
4(l)(iii) of the Synergetics Disclosure Binder lists all
federal, state, local,
and foreign income Tax Returns filed with respect Synergetics
for taxable
periods ended on or before July 31, 2004. No Tax Returns have
been audited or
are currently the subject of audit. Synergetics has delivered to
MergerSub
correct and complete copies of all federal and state income Tax
Returns.
(iv) Synergetics has not waived any statute of limitations
in respect of Tax or agreed to any extension of time with
respect to a Tax
assessment or deficiency.
(v) The Synergetics Financial Statements for the Most
Recent Synergetics Fiscal Month End reflect an adequate reserve
for all Taxes
payable by Synergetics for all taxable periods and portions
thereof through the
date of such financial statements. No deficiency with respect to
any Taxes has
17
<PAGE>
been proposed, asserted or assessed against Synergetics, and no
requests for
waivers of the time to assess any such Taxes are pending.
(vi) Synergetics has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial
understatement of federal income Tax within the meaning of Code
Section 6662.
Synergetics is not a party to any Tax allocation or sharing
agreement.
Synergetics (A) has not been a member of an Affiliated Group
filing a
consolidated federal income Tax Return, and (B) has no Liability
for the Tax of
any Person (other than Synergetics) under Treas. Reg. Section
1.1502-6 (or any
similar provision of state, local, or foreign law), as a
transferee or
successor, by contract, or otherwise.
(vii) It is the intent of the Parties hereto that the
transactions hereunder qualify as a tax-free reorganization
within the meaning
of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code ("Tax-Free
Status").
Synergetics will take all such action as is required in order to
give effect to
the intent of the Parties for Federal, state and local Tax
purposes to the
greatest extent permitted by law.
(m) Real Property.
-------------
(i) Except for the Synergetics Subsidiary property
located at 3845 Corporate Centre Drive, St. Charles, Missouri
63304-8678 (the
"Missouri Property") as detailed in Section 4(m) of the
Synergetics Disclosure
Binder, Synergetics owns no real property. Section 4(m) of the
Synergetics
Disclosure Binder lists and describes all real property leased
by Synergetics.
There are no subleases with respect to such real property.
Synergetics has
delivered to the MergerSub correct and complete copies of any
and all title
binders and/or the leases (the "Leases") relative to the real
property listed in
Section 4(m) of the Synergetics Disclosure Binder. With respect
to the Leases:
(A) the Leases are legal, valid, binding and
enforceable in accordance with their terms, and are in full
force and effect,
against Synergetics, and to its Knowledge, the landlord
thereunder;
(B) subject to the consent of the landlord
thereunder, the Leases will continue to be legal, valid, binding
and enforceable
in accordance with their respective terms, and in full force and
effect, against
Synergetics, and to its Knowledge, the landlord thereunder,
following the
consummation of the transactions contemplated hereby;
(C) Synergetics is not in breach or default,
under the Leases, and no event has occurred which, with notice
or lapse of time,
would constitute a breach or default thereunder by Synergetics
or permit
termination, modification, or acceleration thereunder by the
landlord
thereunder, and to the Knowledge of Synergetics, the landlord
thereunder is not
in breach or default under any of the Leases, and no event has
occurred which,
with notice or lapse of time, would constitute a breach or
default by the
landlord or permit termination, modification, or acceleration
thereunder by
Synergetics;
18
<PAGE>
(D) neither Synergetics nor, to its Knowledge,
the landlord thereunder, has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the Leases;
(F) Synergetics has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest
in the
leasehold or other real property;
(G) except as set forth in Section 4(m) of the
Synergetics Disclosure Binder, Synergetics has received all
approvals of
governmental authorities (including licenses and permits)
required in connection
with the current operation of each building on the real property
leased or owned
by Synergetics and each such building has been operated and
maintained by
Synergetics in accordance with the Leases and all applicable
laws, rules, and
regulations; and
(H) all buildings have access to water, sewer,
electric, gas and telephone utilities necessary for the current
operation of
Synergetics within such buildings.
(n) Intellectual Property.
---------------------
(i) Synergetics owns all Intellectual Property used or
currently contemplated to be used in the future in the operation
of the business
of Synergetics as presently conducted, including, but not
limited to, all
Intellectual Property identified in Section 4(n) of the
Synergetics Disclosure
Binder. Each such item of Intellectual Property owned or used by
Synergetics or
any Affiliate immediately prior to the Closing hereunder will be
owned or
available for use by the MergerSub or Valley Forge on identical
terms and
conditions immediately subsequent to the Closing hereunder.
Synergetics has
taken all necessary and desirable action to maintain and protect
each such item
of Intellectual Property that it owns.
(ii) To the Knowledge of Synergetics, Synergetics has not
interfered with, infringed upon, misappropriated, or otherwise
come into
conflict with any Intellectual Property rights of third parties,
and Synergetics
has not received any charge, complaint, claim, demand, or notice
alleging any
such interference, infringement, misappropriation, or violation
(including any
claim that Synergetics or any Affiliate must license or refrain
from using any
Intellectual Property rights of any third party).
(iii) To the Knowledge of Synergetics, Synergetics will not
interfere with, infringe upon, misappropriate, or otherwise come
into conflict
with, any Intellectual Property rights of third parties as a
result of the
continued operation of its businesses as presently conducted.
Synergetics has no
Knowledge of any new products, inventions, procedures, or
methods of
manufacturing or processing that any competitors or other third
parties
(including any employee, independent contractor, director or
officer of
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Synergetics) have developed which reasonably could be expected
to supersede or
make obsolete any product or process of Synergetics. To the
Knowledge of
Synergetics, no third party (including any employee, independent
contractor,
director or officer of Synergetics) has interfered with,
infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property
rights of Synergetics or any Affiliate.
(o) Bank Accounts. Section 4(o) of the Synergetics
Disclosure
Binder sets forth all the banks in which Synergetics has an
account, credit line
or safety deposit box and a brief description of each such
account, credit line
or safety deposit box, including the names of all persons
currently authorized
to draw thereon or having access thereto.
(p) Inventory. Section 4(p) of the Synergetics Disclosure
Binder
lists all the Synergetics inventory, supplies, manufactured and
purchased parts,
all of which are merchantable and fit for the purpose for which
it was procured
or manufactured, and none of which is obsolete, damaged, or
defective.
(q) Contracts. Section 4(q) of the Synergetics Disclosure
Binder
lists the following contracts and other agreements to which
Synergetics is a
party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products, or other
personal property, or for the furnishing or receipt of
services;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any
indebtedness for
borrowed money, or any capitalized lease obligation, or under
which it has
imposed a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or
non-competition of Synergetics or any of its employees,
independent contractors,
officers or directors;
(vi) any agreement involving any Synergetics shareholders,
Affiliates or Subsidiary;
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other
plan or
arrangement for the benefit of its current or former directors,
officers, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis or providing
severance
benefits;
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(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers, employees or
independent
contractors;
(xi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on
Synergetics; or
(xii) any other agreement with an annual value in excess of
$10,000.
Synergetics has delivered to MergerSub a correct and complete
copy of each
written agreement listed in Section 4(q) of the Synergetics
Disclosure Binder
(as amended to date) and a written summary setting forth the
terms and
conditions of any oral agreement. With respect to each such
agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full
force and effect;
(B) the agreement will continue to be legal, valid, binding,
enforceable, and in
full force and effect on identical terms following the
consummation of the
transactions contemplated hereby; (C) neither Synergetics, nor
to its Knowledge,
any other party thereto is in breach or default, and no event
has occurred which
with notice or lapse of time would constitute a breach or
default, or permit
termination, modification, or acceleration, under the agreement;
and (D) neither
Synergetics, nor to its Knowledge, any other party thereto has
repudiated any
provision of the agreement.
(r) Notes and Accounts Receivable. All notes and accounts
receivable of Synergetics reflected in the Synergetics Financial
Statements for
the Most Recent Synergetics Fiscal Month End are valid
receivables subject to no
set-offs or counterclaims, are current and collectible, net of
the applicable
reserve for bad debts on the balance sheet for the Most Recent
Synergetics
Fiscal Month End.
(s) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of Synergetics.
(t) Insurance. Section 4(t) of the Synergetics Disclosure
Binder
sets forth the following information with respect to each
insurance policy
(including policies providing property, directors and officers
indemnification,
casualty, liability, and workers' compensation coverage and bond
and surety
arrangements) to which Synergetics has been a party, a named
insured, or
otherwise the beneficiary of coverage at any time within the
past three (3)
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
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(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and
amount (including
a description of how deductibles and ceilings are calculated and
operate) of
coverage;
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements; and
(vi) a list of all claims made under said policies.
With respect to each such insurance policy that has not, by its
terms, lapsed:
(A) the policy is legal, valid, binding, enforceable, and in
full force and
effect; (B) the policy will continue to be legal, valid,
binding, enforceable,
and in full force and effect on identical terms following the
consummation of
the transactions contemplated hereby; (C) neither Synergetics,
nor to its
Knowledge, any other party to the policy is in breach or default
(including with
respect to the payment of premiums or the giving of notices),
and no event has
occurred which, with notice or the lapse of time, would
constitute such a breach
or default, or permit termination, modification, or
acceleration, under the
policy; and (D) neither Synergetics, nor to its Knowledge, any
other party to
the policy has repudiated any provision thereof. Synergetics has
been covered
during the past three (3) years by insurance in scope and amount
customary and
reasonable for the businesses in which it has engaged during the
aforementioned
period.
(u) Litigation. Except as set forth in Section 4(u) of the
Synergetics Disclosure Binder, there is not pending against
Synergetics or, to
the Knowledge of Synergetics, threatened against Synergetics,
its Affiliates or
Subsidiaries any claim, action, suit, arbitration proceeding,
governmental
proceeding or other proceeding of any character (each, a
"Proceeding"). All of
the items set forth on Section 4(u) of the Synergetics
Disclosure Binder are
fully covered by insurance except as indicated on such section
of the
Synergetics Disclosure Binder. Except as set forth on Section
4(u) of the
Synergetics Disclosure Binder, (i) all pending Proceedings
relating to or
involving the Synergetics, its Subsidiaries or Affiliates (or
any of their
respective officers or directors as such) are adequately
provided for in the
Synergetics Financial Statements in accordance with GAAP, (ii)
except as
detailed on Section 4(u) of the Synergetics Disclosure Binder,
Synergetics, its
Subsidiaries or Affiliates are not engaged in or otherwise
prosecuting any legal
action to recover monies due it or for damages sustained by it,
and (iii)
Synergetics, its Subsidiaries or Affiliates are not subject to
any judgment,
decree, injunction, rule or order of any court, and Synergetics,
its
Subsidiaries or Affiliates are not subject to any governmental
restriction which
is reasonably likely (a) to have a Material Adverse Effect or
(b) to cause a
material limitation on Synergetics' ability to operate its
business after the
Closing. There are no Proceedings pending, nor to Synergetics'
Knowledge,
threatened, under or pursuant to any warranty, whether expressed
or implied, on
products or services sold by Synergetics, its Subsidiaries or
Affiliates.
(v) Product Warranty. Each product manufactured, sold, leased,
or
delivered by Synergetics has been in conformity with all
applicable contractual
commitments and all express and implied warranties, and
Synergetics has no
Liability (and there is no Basis for any present or future
Proceeding against
any of them giving rise to any Liability) for replacement or
repair thereof or
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other damages in connection therewith. No product manufactured,
sold, leased, or
delivered by Synergetics or any Affiliate is subject to any
guaranty, warranty,
or other indemnity. Section 4(v) of the Synergetics Disclosure
Binder includes
copies of the standard terms and conditions of sale or lease for
each of
Synergetics products.
(w) Product Liability. Neither Synergetics nor any Affiliate
has
any Liability (and there is no Basis for any present or future
Proceeding
against any of them giving rise to any Liability) arising out of
any injury to
individuals or property as a result of the ownership,
possession, or use of any
product manufactured, sold, leased, or delivered by Synergetics
or any
Affiliate.
(x) Employees. Section 4(x) of the Synergetics Disclosure
Binder
lists the names, titles, date of hire, last salary increase and
current salary
rates of, bonus, commission, employee benefit, health insurance,
pension,
retirement, vacation, and sick pay commitments to all employees
and independent
contractors of Synergetics. The accrued liability for the
foregoing commitments
shall be included in the Synergetics Financial Statements. To
the Knowledge of
Synergetics, no executive, employee, or independent contractor
has any plans to
terminate their relationship with Synergetics. Synergetics is
not a party to or
bound by any collective bargaining agreement, nor has it
experienced any
strikes, grievances, claims of unfair labor practices, or other
collective
bargaining disputes. Synergetics has not committed any unfair
labor practice.
Synergetics has no Knowledge of any organizational effort
presently being made
or threatened by or on behalf of any labor union with respect to
employees of
Synergetics. Neither Synergetics, nor any of its officers,
directors or
employees are subject to any claim or potential claim, currently
or as a result
of the transaction described herein, of employment
discrimination, wrongful
termination, sexual harassment or other employment related
claims by any present
or past employee or independent contractor of Synergetics.
(y) Employee Benefits. Except as disclosed in Section 4(y) of
the
Synergetics Disclosure Binder, Synergetics does not currently
and has never in
the past maintained, and has never contributed to, any Employee
Benefit Plan or
Employee Welfare Benefit Plan.
(z) Guaranties. Synergetics is not a guarantor or otherwise
liable
for any Liability or obligation (including indebtedness) of any
other Person.
(aa) Environment, Health, and Safety.
-------------------------------
(i) Synergetics has complied in all material respects
with all Environmental, Health, and Safety Laws, and no
Proceeding or written
notice has been filed or commenced against any of them alleging
any failure so
to comply. Without limiting the generality of the preceding
sentence,
Synergetics has obtained and been in material compliance with
all of the terms
and conditions of all permits, licenses, and other
authorizations which are
required under, and has complied in all material respects with
all other
limitations, restrictions, conditions, standards, prohibitions,
requirements,
obligations, schedules, and timetables which are contained in,
all
Environmental, Health, and Safety Laws.
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<PAGE>
(ii) Synergetics has no Liability (and Synergetics has not
handled or disposed of any substance, arranged for the disposal
of any
substance, exposed any employee or other individual or Person to
any substance
or condition, or owned or operated any property or facility in
any manner that
could form the Basis for any present or future action, suit,
proceeding,
hearing, investigation, charge, complaint, claim, or demand
against Synergetics
giving rise to any Liability) for damage to any site, location,
or body of water
(surface or subsurface), for any illness of or personal injury
to any employee
or other individual or Person, or for any reason under any
Environmental,
Health, and Safety Law, except for any Liability which has not
had and would not
reasonably be expected to have a Material Adverse Effect.
(iii) All properties and equipment used in the business of
Synergetics are free of asbestos, PCB's, methylene chloride,
trichloroethylene,
1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous
Substances, except to the extent reasonable amounts of such
substances are used
in compliance with applicable Environmental, Health and Safety
Laws.
(ab) Certain Business Relationships With Affiliates. Except for
the
business arrangements and relationships between Synergetics and
any Affiliate
which are set forth in Section 4(ab) of the Synergetics
Disclosure Binder, none
of the Synergetics shareholders or their Affiliates has been
involved in any
business arrangement or relationship with Synergetics within the
past 24 months,
and none of the Synergetics shareholders or their Affiliates
owns any asset,
tangible or intangible, which is used in the business of
Synergetics, as
modified by the Synergetics disclosure Binder.
(ac) Subsidiaries.
------------
(i) Each Subsidiary of Synergetics is a corporation duly
organized, validly existing, and in subsisting under the laws of
the
jurisdiction of its incorporation. Each Subsidiary of
Synergetics is duly
authorized to conduct business and subsisting under the laws of
each
jurisdiction where such qualification is required, except for
the jurisdiction
in which the failure to be so qualified has not had and would
not reasonably be
expected to have a Material Adverse Effect on Synergetics or
such Subsidiary.
Each Subsidiary of Synergetics has full corporate power and
authority to carry
on the business in which it is engaged and to own and use the
properties owned
and used by it. The Certificate of Incorporation of each
Subsidiary of
Synergetics and all amendments thereto to date, By-laws as
amended to date and
minutes and stock books, have been delivered to the MergerSub
for review prior
to execution of this Agreement, and are full, complete and
correct to the date
of this Agreement. No Subsidiary of Synergetics is in violation
of any of the
provisions of its Certificate of Incorporation, as amended, or
By-laws, as
amended. The said minutes accurately and fully reflect all
meetings, actions,
proceedings and other matters properly includable therein.
Except as reflected
in said minutes, there are no minutes of meetings or consents in
lieu of
meetings of the Board of Directors or shareholders of any such
Subsidiary of
Synergetics.
(ii) The authorized capital stock of each Subsidiary of
Synergetics and the issued and outstanding shares of capital
stock of each such
Subsidiary are set forth in Section 4(ac) of the Synergetics
Disclosure Binder.
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<PAGE>
Section 4(ac) of the Synergetics Disclosure Binder also sets
forth a true and
complete list of all of the shareholders of each such
Subsidiary, the number of
shares of capital stock owned by each of them, and as set forth
in the
Synergetics' books and records, the date such shares were
transferred or issued
to said shareholders and each shareholder's address. Except as
detailed in
Section 4(ac) of the Synergetics Disclosure Binder, there are no
outstanding or
authorized options, warrants, purchase rights, subscription
rights, conversion
rights, exchange rights, or other contracts or commitments that
could require
any such Subsidiary to issue, sell, or otherwise cause to become
outstanding any
capital stock. All of the issued and outstanding shares of
capital stock of each
Subsidiary of Synergetics have been duly authorized and validly
issued, are
fully paid and non-assessable, are not subject to preemptive
rights, and have
been issued in compliance with all applicable federal and state
securities laws.
There are no outstanding or authorized stock appreciation,
phantom stock, profit
participation, or similar rights with respect to any Subsidiary
of Synergetics.
(iii) Synergetics does not control directly or indirectly
or have any direct or indirect equity participation or similar
interest in any
corporation, partnership, limited liability company, joint
venture, trust or
other business association or entity which is not a
Subsidiary.
(ad) Disclosure. The representations and warranties contained
in
this Section 4, as modified by the Synergetics Disclosure
Binder, do not contain
any untrue statement of a material fact or omit to state a
material fact
necessary in order to make the statements and information
contained in this
Section 4 not misleading.
(ae) Internal Controls; Information Provided.
---------------------------------------
(i) Each of the consolidated financial statements
included in the Synergetics Disclosure Binder, together with the
notes and
schedules related thereto, as of their respective dates, (A)
were prepared in
accordance with GAAP, applied on a consistent basis throughout
the periods
involved (except as may be indicated in the notes to such
financial statements
or, in the case of unaudited interim financial statements) and
(B) fairly
presented in all material respects the consolidated financial
position of
Synergetics and its Subsidiaries as of the respective dates of
the balance
sheets included therein and the results of operations and
changes in financial
position for the respective periods indicated, except that the
unaudited interim
financial statements are subject to lack of footnotes and normal
and recurring
year-end adjustments and any other adjustments described therein
not material in
amount.
(ii) Each of Synergetics and its Subsidiaries maintains
accurate books and records reflecting its assets and liabilities
and maintains
proper and adequate internal accounting controls which provide
reasonable
assurance that (A) transactions are executed with management's
authorization;
(B) transactions are recorded as necessary to permit preparation
of the
consolidated financial statements of Synergetics in accor
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