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SETTLEMENT AGREEMENT AND GENERAL
RELEASE
This Settlement Agreement and General Release
("Agreement") is entered into as of November 6, 2006, by and
between MAJ Industries LLC, formerly known as Miavita LLC
("Seller") and Matria Healthcare, Inc. ("Matria") (collectively
referred to as "the Parties").
WHEREAS, on March 9, 2005,
Seller and Matria entered into an Asset Purchase Agreement
regarding the purchase and sale of Seller’s Assets to Matria
(the "Purchase Agreement");
WHEREAS, the Purchase Agreement
requires Matria to make annual "Mile Stone Payments" to Seller
through the period ending June 30, 2012, to be calculated in
accordance with the terms and conditions set out in Sections 2.4
and 2.5 of the Purchase Agreement;
WHEREAS, on July 6, 2006,
counsel for Seller sent a Mile Stone Objection Notice to the
General Counsel of Matria objecting to the Mile Stone Statement for
Period 1;
WHEREAS, the Parties, on the
terms and conditions contained herein, desire to compromise and
settle all of the claims and disputes between them, including,
without limitation, those outlined in the Mile Stone Objection
Notice;
NOW, THEREFORE, in consideration
of the mutual covenants and promises contained herein, the Parties,
intending to be legally bound, agree as follows:
I. CONSIDERATION
A. Future Mile Stone Payments:
In lieu of any further Mile Stone Payments under
Section 2.4(b)(ii) of the Purchase Agreement, Seller shall be
entitled to Mile Stone Payments equal to 3.575 times the Net
Revenue derived from New Customers during Period 2. A "New
Customer" shall mean any of the companies included upon the list
attached as Exhibit A to this Agreement or any other company to
which the Parties mutually agree upon in writing in the
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future. Payments made pursuant to this Section
I.A. shall be included in the calculation of the Mile Stone Payment
Cap. The information required to be delivered to the Seller on May
15, 2007 pursuant to Section 2.5(a)(i) of the Purchase Agreement
shall include only a calculation of Net Revenue from New Customers,
Ancillary Revenue and the applicable Mile Stone Payment, if any,
together with a certificate of a duly authorized officer of Matria
certifying the foregoing.
B. Payment: For and in consideration of the agreements and covenants of the
Parties as set forth herein, and conditioned upon Matria receiving
actual payments of not less than FIVE HUNDRED THOUSAND 0/100
DOLLARS ($500,000.00) from New Customers on or before May 1, 2007,
Matria will pay the sum of TWENTY MILLION 0/100 DOLLARS
($20,000,000.00) (the "Payment") to Seller on or before May 1,
2007. Subject to the terms and conditions set forth herein, such
Payment shall be made consistent with the wiring instructions that
Seller communicates in writing to Matria on or before the date on
which this Agreement is executed. At the election of Matria, up to
one-half (1/2) of the Payment may be made in Matria Common Stock
valued at the Closing Stock Price on May 1, 2007. Any shares of
Matria Common Stock issued pursuant to the preceding sentence (the
"Payment Shares") will be issued pursuant to an exemption from
registration available under the Securities Act and will therefore
be deemed "restricted securities" as such term is defined in the
rules promulgated under the Securities Act. In connection with the
potential issuance of Payment Shares, Seller hereby reaffirms the
representations contained in Section 4.35 of the Purchase
Agreement.
Within thirty (30) days of the issuance of any Payment Shares,
Matria shall file a shelf registration statement with the SEC
covering the resale of the Payment Shares and Matria shall use its
best efforts to cause such shelf registration statement to become
effective as soon as
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practicable following the filing thereof, and to
use its best efforts to keep the shelf registration statement
effective until the earlier of (i) all Payment Shares registered
pursuant to such registration statement having been sold pursuant
thereto, or (ii) the expiration of the holding period with respect
to such Payment Shares under Rule 144(k) under the Securities Act,
or any successor provision. Matria shall have the right to suspend
the use of such registration statement by Seller in the event
Matria determines such suspension is necessary as a result of
pending corporate developments, filings with the SEC or similar
events; provided , that any such suspension period shall not
(i) exceed thirty days (30) in any three-month period; or (ii) an
aggregate of ninety (90) days for any twelve (12) month-period. In
connection with the registration of the Payment Shares, Matria
shall (i) pay all expenses of the shelf registration statement,
(ii) as reasonably required by Seller, provide Seller with copies
of the prospectus relating to such registration statement, (iii)
notify Seller when the registration statement has become effective
and of any suspension thereof, and (iv) take all other reasonable
actions as are necessary to permit unrestricted resales of the
Payment Shares by Seller.
Seller hereby agrees that its rights to receive
the Payment shall be in all respects subordinate and subject in
right of payment to the payment of any and all indebtedness of
Matria, whether outstanding on the date hereof or hereafter
incurred, created or assumed, which is owed to any creditor under
the Credit Agreement (currently, that certain Credit Agreement
dated January 19, 2006, by and among Matria, certain domestic
subsidiaries as guarantors, and Bank of America, N.A.). Seller
agrees to take any and all further actions, and to execute any and
all further agreements, instruments and other documents, as are
reasonably requested by Matria or
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Matria’s applicable lenders in order to
further evidence, clarify or give effect to the foregoing
subordination provisions.
In the event Matria is prohibited under the
Credit Agreement as a result of the subordination contemplated by
this Section I.B from making the Payment to Seller when due
hereunder, such Payment shall bear interest from the due date at a
rate per annum (on the basis of a 365-day year) equal to the Prime
Rate on the due date plus one percent (1%); provided ,
however , that, to the extent the Payment remains unpaid,
the rate of interest payable on the Payment shall be increased by
one half of one percent (.5%) on each anniversary of the applicable
due date (i.e. on the first anniversary of the due date, the rate
of interest would increase to the Prime Rate plus one and one-half
percent (1.5%).
Matria’s obligations under this Section
I.B. are in lieu of all Mile Stone Payments under Section 2.4(b) of
the Purchase Agreement that have not been paid to date other than
as expressly provided in Section I.A. above. Payments made pursuant
to this Section I.B. shall be included in the calculation of the
Mile Stone Payment Cap.
C. Termination of Matria’s
Obligation to Keep Business
Intact as a Separate Business: As
of the effective date of this Settlement Agreement, Matria’s
obligation to keep the Business intact as a separate business unit,
pursuant to Section 2.4(h) of the Purchase Agreement, is null and
void. Matria will have sole discretion in determining whether the
Business will be maintained as a separate business or integrated
with Matria’s other businesses. Seller acknowledges and
agrees that Matria has no obligation of any kind to facilitate or
maximize any further Mile Stone Payments under the Purchase
Agreement. Without limiting the generality of the foregoing, Matria
shall have no liability to Seller of any kind for failure
to
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pursue, accept, timely implement or fulfill its
obligations to any New Customer or proposed New Customer or for
failure to pursue, accept, timely i
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