EXHIBIT 2.1
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AGREEMENT AND PLAN
OF REORGANIZATION AND MERGER
BETWEEN
ANSAN PHARMACEUTICALS, INC. AND
DISCOVERY LABORATORIES, INC.
JULY 16, 1997
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AGREEMENT AND PLAN
OF REORGANIZATION AND MERGER
This Agreement and Plan of Reorganization and Merger ("Agreement") is
made as of July 16, 1997 between ANSAN PHARMACEUTICALS, INC., a Delaware
corporation ("Ansan") and DISCOVERY LABORATORIES, INC., a Delaware corporation
("Discovery").
BACKGROUND
A. The parties hereto desire that Discovery shall be merged with and
into Ansan; that Ansan shall be the surviving corporation; and that each share
of the capital stock of Discovery which is outstanding immediately prior to the
effective time of the merger, other than those shares which become "Appraisal
Shares" within the meaning of Section 262 of the DGCL, be converted as set forth
in this Agreement into shares of the capital stock of Ansan.
B. The parties intend that the merger constitute a "reorganization"
under Section 368(a), of the Code.
In consideration of the premises and agreements set forth herein, THE
PARTIES AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall, for purposes of this
Agreement, have the meanings specified in this Article I unless the context
expressly or by necessary implication otherwise requires:
1.1. Affiliate. "Affiliate" shall have the meaning set forth in the
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1933 Act.
1.2. Affiliates Agreement. "Affiliates Agreement" shall have the
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meaning set forth in Section 6.9 of this Agreement.
1.3. Ansan Common Stock. "Ansan Common Stock" shall mean the Common
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Stock, $.001 par value, of Ansan.
1.4. Ansan Financial Statements. "Ansan Financial Statements" shall
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have the meaning set forth in Section 5.2 of this Agreement.
1.5. Ansan Preferred Stock. "Ansan Preferred Stock" shall mean the
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Series B Convertible Preferred Stock of Ansan having the rights, preferences and
restrictions substantially as set forth in the Certificate of Designation
attached to this Agreement as Exhibit A, but subject to any further adjustments
to reflect the reverse stock split contemplated by this Agreement, which
Certificate of Designation shall be filed with the Secretary of State of the
State of Delaware on or before the Closing Date.
1.6. Ansan Series A Preferred Stock. "Ansan Series A Preferred
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Stock" shall mean the Series A Convertible Preferred Stock of Ansan having the
rights, preferences and restrictions set forth in the Certificate of Designation
filed with the Secretary of State of the State of Delaware on or about the date
hereof.
1.7. Ansan Stock. "Ansan Stock" shall mean the Ansan Common Stock,
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Ansan Preferred Stock and Ansan Series A Preferred Stock.
1.8. ATI. "ATI" shall mean Acute Therapeutics, Inc., a Delaware
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corporation.
1.9. Appraisal Shares. "Appraisal Shares" shall mean all shares, if
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any, of the outstanding capital stock of Discovery or Ansan for which appraisal
rights have been claimed under Section 262 of the DGCL.
1.10. Balance Sheet. "Balance Sheet" shall have the meaning set
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forth in Section 3.6 of this Agreement.
1.11. Balance Sheet Date. "Balance Sheet Date" shall have the
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meaning set forth in Section 3.6 of this Agreement.
1.12. Business Day. "Business Day" shall mean any day the New York
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Stock Exchange is open for trading.
1.13. Certificate. "Certificate" shall have the meaning set forth in
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Section 2.4.3 of this Agreement.
1.14. Certificate of Merger. "Certificate of Merger" shall mean the
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certificate of merger between Ansan and Discovery as required by Section 251 of
the DGCL, in the form attached to this Agreement as Exhibit B.
1.15. Closing. "Closing" shall mean the delivery by Ansan and
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Discovery of the various documents contemplated by this Agreement or otherwise
required in order to consummate the Merger.
1.16. Closing Date. "Closing Date" shall have the meaning set forth
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in Section 2.2 of this Agreement.
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1.17. Code. "Code" shall mean the Internal Revenue Code of 1986, as
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amended.
1.18. DGCL. "DGCL" shall mean the General Corporation Law of the
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State of Delaware, as amended.
1.19. Disclosure Statement. "Disclosure Statement" shall have the
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meaning set forth in the first paragraph of Article III of this Agreement.
1.20. Discovery Common Stock. "Discovery Common Stock" shall mean
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the Common Stock, $.001 par value, of Discovery.
1.21. Discovery Financial Statements. "Discovery Financial
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Statements" shall have the meaning set forth in Section 4.3 of this Agreement.
1.22. Discovery Option. "Discovery Option" shall have the meaning
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set forth in Section 2.3 of this Agreement.
1.23. Discovery Preferred Stock. "Discovery Preferred Stock" shall
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mean the Series A Convertible Preferred Stock of Discovery.
1.24. Discovery Stock. "Discovery Stock" shall mean both the
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Discovery Common Stock and the Discovery Preferred Stock.
1.25. Discovery Warrant. "Discovery Warrant" shall have the meaning
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set forth in Section 2.3 of this Agreement.
1.26. Discovery Working Capital. "Discovery Working Capital" shall
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mean an amount equal to Discovery's current assets, less Discovery's current
liabilities, less any long-term debt owed to ATI, as determined in accordance
with generally accepted accounting principles and without consolidating the
accounts of ATI with Discovery for the purposes of such calculation.
1.27. Effective Time. "Effective Time" shall mean the time when the
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Certificate of Merger is filed with the Secretary of State of the State of
Delaware and the Merger becomes effective.
1.28. Exchange Act. "Exchange Act" shall mean the Securities and
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Exchange Act of 1934, as amended.
1.29. Exchange Agent. "Exchange Agent" shall have the meaning set
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forth in Section 2.4.1 of this Agreement.
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1.30. Fair Market Value of Ansan Common Stock. "Fair Market Value of
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Ansan Common Stock" shall mean the average of the last reported closing bid
prices of the Ansan Common Stock on the Nasdaq SmallCap Market on the 20 trading
days immediately preceding the Closing Date.
1.31. Holders. "Holders" shall mean holders of Discovery Stock
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immediately prior to the Effective Time.
1.32. Lockup Agreement. "Lockup Agreement" shall have the meaning
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set forth in Section 6.10 of this Agreement.
1.33. Merger. "Merger" shall mean the merger of Discovery with and
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into Ansan in accordance with this Agreement, the Certificate of Merger and
applicable law.
1.34. Proxy Statement. "Proxy Statement" shall mean the Proxy
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Statement to be mailed to the stockholders of Ansan in connection with the
Merger.
1.35. S-4. "S-4" shall mean the Registration Statement on Form S-4
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to be filed by Ansan with the SEC in connection with the issuance of Ansan Stock
pursuant to the Merger.
1.36. SEC. "SEC" shall mean the Securities and Exchange Commission.
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1.37. Subsidiary. "Subsidiary" shall mean, with respect to a
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particular party hereto, any corporation or other organization, whether
incorporated or unincorporated, of which at least a majority of the securities
or interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned by such party or by one or more Subsidiaries, or by such party and one or
more Subsidiaries.
1.38. Titan. "Titan" shall mean Titan Pharmaceuticals Inc., a
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Delaware corporation.
1.39. Titan Agreement. "Titan Agreement" shall mean the agreement in
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the form attached hereto as Exhibit C.
1.40. 1933 Act. "1933 Act" shall mean the Securities Act of 1933, as
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amended, and the rules, regulations and forms thereunder.
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ARTICLE II
MERGER, CLOSING AND CONVERSION OF SHARES
2.1. Merger. Subject to and in accordance with the terms and
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conditions of the Agreement and the Certificate of Merger, on the Closing Date,
Ansan and Discovery shall execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware, whereupon Discovery shall be merged
with and into Ansan pursuant to Sections 251 of the DGCL.
2.2. Closing. The Closing shall take place at the offices of Xxxxxx
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Xxxxxx White & XxXxxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, on
November 3, 1997 at 1:00 pm, or if the conditions set forth in Articles VI and
VII have not been satisfied or waived by such date, on the earliest practicable
date, but in no event later than December 31, 1997, after satisfaction or waiver
of such conditions (the "Closing Date").
2.3. Conversion of Shares.
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2.3.1 In accordance with this Agreement and the Certificate of
Merger:
(a) each share of Discovery Common Stock outstanding immediately
prior to the Effective Time (except those shares of Discovery Common Stock which
are Appraisal Shares and whose Holder and Discovery do not thereafter agree in
writing should not be treated as Appraisal Shares) shall, by virtue of the
Merger and without any action on the part of the holder thereof be converted, at
and as of the Effective Time into 1.1641085 shares of Ansan Common Stock.
Holders of Discovery Common Stock shall receive only whole shares of Ansan
Common Stock, with Ansan being authorized to pay in cash, in lieu of any
resulting fractional share, the Fair Market Value of Ansan Common Stock
multiplied by such fraction so as to eliminate the necessity for the issuance of
fractional shares upon such conversion,
(b) each share of Discovery Preferred Stock outstanding immediately
prior to the Effective Time (except those shares of Discovery Preferred Stock
which are Appraisal Shares and whose Holder and Discovery do not thereafter
agree in writing should not be treated as Appraisal Shares) shall, by virtue of
the Merger and without any action on the part of the holder thereof be
converted, at and as of the Effective Time into one (1) share of Ansan Preferred
Stock. Holders of Discovery Preferred Stock shall receive only whole shares of
Ansan Preferred Stock; in lieu of any fractional share of Ansan Preferred Stock,
Holders shall receive in cash the fair market
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value of such fractional share valuing Ansan Preferred Stock on an as-converted
to Ansan Common Stock basis at the Fair Market Value of the Ansan Common Stock,
(c) each of the outstanding underwriter warrants and stock options
to purchase Discovery Stock ("Discovery Warrant" and "Discovery Option",
respectively) shall thereafter entitle the holder thereof to receive, upon
exercise thereof, 1.1641085 shares of Ansan Common Stock for each share of
Discovery Common Stock subject to such Discovery Option or Discovery Warrant, at
an exercise price for each full share of Ansan Common Stock equal to the
exercise price per share of Discovery Common Stock with respect to such
Discovery Option or Discovery Warrant multiplied by 1.1641085, which exercise
price per share shall be rounded up to the nearest two-place decimal, and one
(1) share of Ansan Preferred Stock for each share of Discovery Preferred Stock
subject to such Discovery Option or Discovery Warrant, at an exercise price
equal to the exercise price stated in such Discovery Option or Discovery
Warrant. The number of shares of Ansan Stock that may be purchased by a holder
on the exercise of any Discovery Option or Discovery Warrant shall not include
any fractional share of Ansan Stock but shall be rounded down to the next lower
whole share of Ansan Stock. Ansan shall assume in full such Discovery Options
and Discovery Warrants and all of Discovery's other rights and obligations
thereunder and under all agreements relating thereto (including without
limitation registration rights in favor of the holders of the Discovery
Warrants) and shall give notice to such effect to the Holder thereof promptly
after the Closing. After such assumption, Ansan shall issue, upon any partial or
total exercise of any Discovery Option or Discovery Warrant, in lieu of shares
of Discovery Stock, the number of shares of Ansan Stock to which the holder of
the Discovery Option or Discovery Warrant is entitled pursuant to this
Agreement,
(d) any Ansan Stock held by Discovery immediately prior to the
Effective Time shall be canceled, and
(e) in accordance with the foregoing, Ansan shall issue Ansan
Common Stock and Ansan Preferred Stock and assume the obligations to issue Ansan
Common Stock and Ansan Preferred Stock upon exercise of Discovery Options and
Discovery Warrants which, on as converted and exercised basis, represent
20,208,807 shares of Ansan Common Stock.
2.4. Exchange of Certificates.
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2.4.1 Prior to the Closing Date, Ansan shall appoint Continental
Stock Trust & Transfer, or such other bank or trust company selected by Ansan as
Discovery may approve, to act as exchange agent (the "Exchange Agent") in the
Merger.
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2.4.2 Promptly after the Closing Date, but in no event later than
three Business Days thereafter, the Exchange Agent shall make available for
exchange in accordance with this Section 2.4.2 the shares of Ansan Stock
issuable pursuant to Section 2.3 in exchange for outstanding shares of Discovery
Stock.
2.4.3 As soon as practicable after the Closing Date, the Exchange
Agent shall mail to each holder of record of a stock certificate that,
immediately prior to the Closing Date, represented outstanding shares of
Discovery Stock (a "Certificate") whose shares are being converted into Ansan
Common Stock or Ansan Preferred Stock pursuant to Section 2.3, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Ansan may reasonably specify), and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
evidencing Ansan Common Stock or Ansan Preferred Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Ansan, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor (subject to Section 2.4) the number of shares of Ansan Common
Stock or Ansan Preferred Stock to which the holder of Discovery Stock is
entitled pursuant to Section 2.3 hereof and is represented by the Certificate so
surrendered. The Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Discovery Stock that is not registered
in the transfer records of Discovery, or its transfer agent, Ansan Common Stock
or Ansan Preferred Stock may be delivered to a transferee if the Certificate
representing such Discovery Stock is presented to the Exchange Agent and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4.3, each Certificate shall be
deemed at any time after the Closing Date to represent the right to receive upon
such surrender such whole number of shares of Ansan Common Stock or Ansan
Preferred Stock as provided by Section 2.3 and the provisions of the DGCL.
2.4.4 No dividends or distributions payable to Holders after the
Effective Time, or cash payable in lieu of fractional shares, shall be paid to
the Holder of any unsurrendered Certificate until the Holder of the Certificate
shall surrender such Certificate.
2.4.5 All Ansan Common Stock and Ansan Preferred Stock delivered upon
the surrender for exchange of shares of Discovery Stock in accordance with the
terms hereof shall be deemed to have been delivered in full satisfaction of all
rights pertaining to such shares of Discovery Stock. There shall be no further
registration of transfers on the stock transfer books of Discovery or its
transfer agent of the shares of Discovery Stock that were outstanding
immediately prior to the Effective Time. If, after
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the Closing Date, Certificates are presented for any reason, they shall be
canceled and exchanged as provided in Section 2.4.
2.5. Appraisal Shares. Holders of Appraisal Shares shall have those
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rights, but only those rights, of holders of "appraisal shares" under Section
262 of the DGCL. Each party shall give the other party prompt notice of any
demand, purported demand or other communication received by it with respect to
any Appraisal Shares or shares claimed to be Appraisal Shares. Each party
agrees that, without the prior written consent of the other party, which consent
shall not be unreasonably withheld, it shall not voluntarily make any payment
with respect to, or settle or offer to settle, any demand or purported demand
respecting such shares.
2.6. Registration on Form S-4. The Ansan Common Stock to be issued
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in the Merger (and the Ansan Common Stock underlying the Ansan Preferred Stock
to be issued in the Merger) and the Ansan Preferred Stock to be issued in the
Merger shall be registered under the 1933 Act on Form S-4. As promptly as
practicable after the date hereof, Ansan shall prepare and file with the SEC the
Proxy Statement and any other documents required by the Exchange Act in
connection with the Merger, and Ansan shall prepare and file with the SEC the
Form S-4 and any other documents required by the 1933 Act in connection with the
Merger (including, without limitation the filing of Form 8-K by Ansan when
appropriate). Ansan shall use its reasonable efforts to have the Form S-4
declared effective under the 1933 Act as promptly as practicable after such
filing. Ansan shall afford Discovery a reasonably opportunity to review and
comment on the Proxy Statement prior to its distribution. To the greatest
extent practicable, information required to be disclosed in both the Proxy
Statement and the consent solicitation to be distributed by Discovery to its
stockholders pursuant to Section 2.7 shall be disclosed in an identical manner.
Ansan shall also take any action required to be taken under any applicable state
securities or "blue sky" laws in connection with the issuance of the Ansan Stock
in the Merger. Discovery shall furnish to Ansan all information in Discovery's
possession and reasonably accessible by Discovery concerning Discovery and ATI
and the holders of Discovery Stock as may be reasonably requested in connection
with any action contemplated by this Section 2.6.
2.7. Information Statement. Discovery shall afford Ansan a
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reasonable opportunity to review and comment on any solicitation materials,
including solicitation of action by written consent, that Discovery distributes
to its stockholders in connection with the Merger. To the greatest extent
practicable, information required to be disclosed in both the Proxy Statement
and any such solicitation materials shall be disclosed in an identical manner.
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2.8. Tax Free Reorganization. The parties intend to adopt this
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Agreement as a tax free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a) of the Code.
2.9. Ansan Common Stock Split. If mutually agreed upon by Ansan and
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Discovery, prior to the Effective Time, Ansan shall file a Restated Certificate
of Incorporation with the Delaware Secretary of State for the recombination of
each authorized share of Ansan Common Stock into such lesser number of shares of
Ansan Common Stock as shall be mutually agreed upon by Ansan and Discovery to
maintain the listing of the Ansan Common Stock on the Nasdaq SmallCap Market.
Such recombined Ansan Common Stock shall have the same rights, privileges and
restrictions as the currently authorized Ansan Common Stock with Ansan being
authorized to pay in cash, in lieu of any resulting fractional share, the Fair
Market Value of Ansan Common Stock so as to eliminate the necessity for the
issuance of fractional shares upon such recombination. The exchange ratios and
provisions in the preceding sections of this Article II shall be adjusted to
reflect any recombination of Ansan Common Stock pursuant to this Section 2.9 of
the Agreement.
ARTICLE III
MUTUAL REPRESENTATIONS AND WARRANTIES
Each of Ansan, Discovery and ATI is a "Company" as contemplated by
this Article III. Any disclosure delivered by one Company to the other hereto
pursuant to this Article shall have been delivered on or prior to the date
hereof shall specifically refer to this Agreement and shall identify the Section
of this Agreement requiring the delivery of such disclosure (each such
disclosure being referred to herein as a " Disclosure Statement"). Except as
set forth in the Disclosure Statement of such Company and except for the
transactions contemplated by this Agreement, Ansan hereby represents and
warrants to Discovery and Discovery hereby represents and warrants to Ansan,
that:
3.1. Organization and Authority. The Company and each of its
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Subsidiaries: (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (ii) has all
necessary corporate power to own and lease its properties, to carry on its
business as now being conducted and to enter into and perform this Agreement and
all agreements to which the Company is or will be a party that are exhibits to
this Agreement; and (iii) is qualified to do business in all jurisdictions in
which the failure to so qualify would have a material adverse effect on its
business or financial condition. The Company has made available to the other
party for inspection complete and correct copies of its Certificate of
Incorporation, as amended, Bylaws as in effect on the date hereof and a record
of any and all proceedings and actions at all meetings of, or taken by written
consent by, its Board of Directors and stockholders,
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since its inception, in each case, certified as true, complete and correct
copies by the Company's Secretary.
3.2. Authority Relating to this Agreement; No Violation of Other
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Instruments.
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3.2.1 The execution and delivery of this Agreement and all agreements
to which the Company is or will be a party that are exhibits to this Agreement
and the performance hereunder and thereunder by the Company have been duly
authorized by all necessary corporate action on the part of the Company, other
than stockholder approval as is contemplated by this Agreement, and, assuming
execution of this Agreement and such other agreements by the other party
thereto, this Agreement and such other agreements will constitute legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject as to enforcement: (i) to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other laws of general
applicability relating to or affecting creditors' rights; and (ii) to general
principles of equity, whether such enforcement is considered in a proceeding in
equity or at law.
3.2.2 Neither the execution of this Agreement nor any other agreement
to which the Company is or will be a party that is an exhibit to this Agreement
nor the performance of any of them by the Company will: (i) conflict with or
result in any breach or violation of the terms of (a) any decree, judgment or
order of any court or other governmental body of which the Company has knowledge
or (b) any law or regulation now in effect applicable to the Company; (ii)
conflict with, or result in, with or without the passage of time or the giving
of notice, a material breach of any of the terms, conditions and provisions of,
or constitute a material default under or otherwise give another party the right
to terminate, or result in the creation of any lien, charge, or encumbrance upon
any of the material assets or properties of the Company pursuant to, any
indenture, mortgage, lease, agreement or other instrument to which the Company
is a party or by which it or any of its assets or properties are bound,
including all Contracts (as defined in Section 3.16); (iii) permit the
acceleration of the maturity of any material indebtedness of the Company or of
any other person secured by the assets or properties of the Company; or (iv)
violate or conflict with any provision of the Company's Certificate of
Incorporation, Bylaws, or similar organizational instruments.
3.2.3 Except as contemplated in Sections 2.6, 6.8, 6.16, 7.6 and 7.12
of this Agreement, no consent from any third party and no consent, approval or
authorization of, or declaration, filing or registration with, any government or
regulatory authority is required to be made or obtained by the Company in order
to permit the execution, delivery or performance of this Agreement or any other
agreement to which the Company is or will be a party that is an exhibit to this
Agreement by the Company, or
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the consummation of the transactions contemplated by this Agreement and such
other agreements.
3.3. Compliance with Law. The Company holds, and has at all times
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since December 31, 1995 held, all licenses, permits and authorizations necessary
for the lawful conduct of the Company's business wherever conducted pursuant to
all applicable statutes, laws, ordinances, rules and regulations of all
governmental bodies, agencies and subdivisions having, asserting or claiming
jurisdiction over the Company or over any part of the Company's operations, and
the Company knows of no violation thereof. The Company is not in violation of
any decree, judgment, or order known to it, or any law or regulation of any
court or other governmental body (including without limitation, applicable
environmental protection legislation and regulations, equal employment and civil
rights regulations, wages, hours and the payment of social security taxes and
occupational health and safety legislation), which violation could have a
material adverse effect on the condition, financial or otherwise, assets,
liabilities, business or results of operations of the Company.
3.4. Investments in Others. Section 3.4 of the Disclosure Statement
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of the Company contains a list of each corporation, association, partnership,
joint venture or other entity in which the Company, directly or indirectly, owns
an equity interest and sets forth the Company's percentage interest by voting
rights and by profits, in each such entity. Except for the entities identified
in such list, the Company does not conduct any part of its business operations
through any subsidiaries or through any other entity in which the Company has an
equity investment.
3.5. Tax Returns and Payments. All tax returns and reports with
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respect to the Company required by law to be filed under the laws of any
jurisdiction, domestic or foreign, have been duly and timely filed and all
taxes, fees or other governmental charges of any nature which were required to
have been paid have been paid or provided for. The Company has no knowledge of
any unpaid taxes or any actual or threatened assessment of deficiency or
additional tax or other governmental charge or a basis for such a claim against
the Company. The Company has no knowledge of any tax audit of the Company by
any taxing or other authority in connection with any of its fiscal years; the
Company has no knowledge of any such audit currently pending or threatened, and
the Company has no knowledge of any tax liens on any of the properties of the
Company.
3.6. Absence of Certain Changes or Events. Since the date (the
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"Balance Sheet Date") of the most recent balance sheet delivered by the Company
to the other party hereto pursuant to Section 4.3 or 5.2, as the case may be
(the "Balance Sheet"), except as contemplated by this Agreement, there have been
no material changes in the condition, financial or otherwise, assets,
liabilities, business or the results of operations of the Company, other than
changes in the ordinary course of business which in the aggregate
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have not been materially adverse. Without limiting the foregoing, since the
Balance Sheet Date, except as contemplated by this Agreement:
(i) the Company has not entered into any transaction other than in
the ordinary course of business;
(ii) there have been no losses or damage to any of the assets or
properties of the Company due to fire or other casualty, whether or not insured,
amounting to more than Ten Thousand Dollars ($10,000) in the aggregate;
(iii) there has been no increase or decrease in the rates of direct
compensation payable or to become payable by the Company to any employee, agent
or consultant (other than routine increases made in the ordinary course of
business or pursuant to a collective bargaining agreement), or any bonus,
percentage compensation, service award or other like benefit, granted, made or
accrued to or to the credit of any such employee, agent or consultant, or any
material welfare, pension, retirement or similar payment or arrangement made or
agreed to be made by the Company (other than such events occurring pursuant to
any previously existing benefit plan or collective bargaining agreement);
(iv) the Company has not executed, created, amended or terminated
any contract except in the ordinary course of business;
(v) the Company has not declared or paid any dividend or made any
distribution on its capital stock, nor redeemed, purchased or otherwise acquired
any of its capital stock nor issued any capital stock;
(vi) the Company has not received notice that there has been a
cancellation of an order for its products or a loss of a customer of the
Company, the cancellation or loss of which would materially adversely affect the
condition, financial or otherwise, assets, liabilities, business or results of
operations of the Company;
(vii) there has been no material change in the contingent
obligations of the Company by way of guaranty, endorsement, indemnity, warranty
or otherwise;
(viii) there have been no loans made by the Company to its employees,
officers or directors, other than travel advances and other advances made in the
ordinary course of business;
(ix) to the Company's knowledge there has been no waiver or
compromise by the Company of a material right or of a material debt owed to it;
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(x) the Company has not made or agreed to make any disbursements
or payments of any kind to any member or members of its Board of Directors;
(xi) there have been no capital expenditures by the Company in
excess of Fifty Thousand Dollars ($50,000) in the aggregate;
(xii) there has been no change in accounting methods or practices
(including without limitation, any change in depreciation or amortization
policies or rates) by the Company;
(xiii) there has been no revaluation by the Company of any of the
assets or properties of the Company;
(xiv) there has been no sale or transfer of any of the assets or
properties of the Company, except in the ordinary course of business;
(xv) there has been no loan by the Company to any person or entity;
(xvi) there has been no commencement or notice of threat of
commencement of any governmental proceeding against or investigation of the
Company or its affairs;
(xvii) there has been no revocation of license or right to do
business granted to the Company;
(xviii) the Company has not paid any obligation or liability (fixed,
contingent or otherwise) or discharged or satisfied any lien, or settled any
liability, claim, dispute, proceeding, suit or appeal pending or threatened
against it, except for current liabilities incurred in the ordinary course of
business; and
(xix) there has been no agreement or commitment by the Company to do
or perform any of the acts described in this Section 3.6.
3.7. Personal Property. The Company has good title, free and clear
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of all title defects, objections and liens, including without limitation,
leases, chattel mortgages, conditional sales contracts, collateral security
arrangements and other title or interest-retaining arrangements, to all of its
machinery, equipment, furniture, inventory and other personal property. All
such personal property is in operable condition. All of the leases to personal
property utilized in the business of the Company are valid and enforceable by
the Company and neither the Company nor, to the Company's knowledge any other
party, is in material default under any such lease.
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3.8. Real Property. The Company does not own any real property.
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Section 3.8 of the Disclosure Statement of the Company contains a list of all
leases for real property to which the Company is a party, the square footage
leased with respect to each lease and the expiration date of each lease. All
such leases are valid and enforceable by the Company and neither the Company
nor, to the Company's knowledge any other party, is in material default under
any such lease. The real property owned, leased or occupied by the Company, the
improvements located thereon, and the furniture, fixtures and equipment relating
thereto (including plumbing, heating, air conditioning and electrical systems),
conform to any and all applicable health, fire, safety, zoning, land use and
building laws, ordinances and regulations. There are no outstanding contracts
made by the Company for any improvements made to the real property owned, leased
or occupied by the Company that have not been paid for.
3.9. Patents, Trademarks, Trade Names and Copyrights. All patents,
-----------------------------------------------
trademarks, trade names, copyrights, processes, designs, formulas, inventions,
trade secrets, know-how, technology or other proprietary rights which are used
by the Company and material to the Company's operations, or proposed to be used
by the Company and that would be material to the Company's operations, are owned
or are licensed by the Company. The conduct of any business conducted by the
Company does not, to the Company's knowledge, infringe any patent, trademark,
trade name, copyright, trade secret, or other proprietary right of any other
person. No litigation is pending or, to the knowledge of the Company, has been
threatened against the Company or any officer, director or employee of the
Company, or to the Company's knowledge, any stockholder or agent of the Company,
for the infringement of any patents, trademarks or trade names of any other
party or for the misuse or misappropriation of any trade secret, know-how or
other proprietary right owned by any other party nor, to the best knowledge of
the Company, does any basis exist for such litigation. To the best of the
Company's knowledge, there has been no infringement or unauthorized use by any
other party of any patent, trademark, trade name, copyright, process, design,
formula, invention, trade secret, know-how, technology or other proprietary
right belonging to the Company. Each license set forth in Section 3.9 of the
Disclosure Statement is valid and enforceable in accordance with its terms and
is not the subject of any notice of termination or nonrenewal. The Company has
taken reasonable and practicable steps designed to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights in, any patent,
trademark, trade name, copyright, process, design, formula, invention, trade
secret, know-how or technology, of which it owns or has a right to use.
3.10. Litigation. Neither the Company nor any officer, director,
----------
stockholder, employee or agent of the Company is a party to any pending or, to
the Company's knowledge, threatened action, suit, proceeding or investigation,
at law or in equity or otherwise in, for or by any court or other governmental
body which could have a material adverse effect on: (i) the financial
condition, or results of operations of the
14
Company; or (ii) the transactions contemplated by this Agreement. The Company is
not and has not been subject to any pending or, to its knowledge, threatened
product liability claim; nor, to its knowledge, does any basis exist for any
such claim. The Company is not subject to any decree, judgment, or order, of any
court or other governmental body of which it has knowledge which is reasonably
likely to have a material adverse effect on the financial condition or results
of operations of the Company or which could prevent the transactions
contemplated by this Agreement.
3.11. Protection of Intangible Property. Each employee and
---------------------------------
consultant of the Company who has worked on or contributed to the development of
the Company's technology, trade secrets and other proprietary rights, executed a
proprietary rights and information agreement in the form attached to the
Disclosure Statement. The Company's trade secrets have not been used,
distributed or otherwise commercially exploited under circumstances which have
caused, or with the passage of time could cause, the loss of copyright or trade
secret status.
3.12. Personnel. Section 3.12 of the Disclosure Statement of the
---------
Company contains a list of: (i) all employment, bonus, profit sharing,
percentage compensation, employee benefit plans, incentive plans, pension or
retirement plans, stock purchase and stock option plans, oral or written
contracts or agreements with directors, officers, employees or unions, or
consulting agreements, to which the Company is a party or is subject as of the
date of this Agreement; and (ii) all group insurance programs in effect for
employees of the Company. The Company is not in default with respect to any of
the obligations so listed. The Company has delivered complete and correct
copies of all such obligations (to the extent they are in writing or written
descriptions to the extent they are oral) to the other Company. The Company has
no union contracts or collective bargaining agreements with, or any other
obligations to, employee organizations or groups relating to the Company's
business, nor is the Company currently engaged in any labor negotiations except
in minor grievances not involving any employee organization or group, nor, to
the knowledge of the Company, is the Company the subject of any union
organization affecting its business. There is no pending or, to the Company's
knowledge, threatened labor dispute, strike or work stoppage affecting the
Company's business. All plans described in Section 3.12 of the Disclosure
Statement are in full compliance with applicable provisions of the Employees
Retirement Income Security Act of 1974 ("ERISA") and regulations issued under
ERISA, and there is no unfunded liability with respect to such plans. Section
3.12 of the Disclosure Statement also lists the amount payable to employees of
the Company under other fringe benefit plans.
3.13. Insurance. The insurance coverage maintained by the Company is
---------
adequate for the conduct of the business of the Company.
15
3.14. Certain Payments. To the knowledge of the Company, neither the
----------------
Company, nor any stockholder, director, officer, employee or agent of the
Company, has made or caused to be made, directly or indirectly, the payment of
any consideration whatsoever to any public official, candidate for public
office, political party, or other third person in connection with the business
or operations of the Company, or pertaining to the Company's relations with any
customer, supplier, or creditor, in contravention of the law of any applicable
jurisdiction.
3.15. Brokers and Finders. Neither the Company nor any stockholder,
-------------------
director, officer, employee or agent of the Company has retained any broker,
finder or investment banker in connection with the transactions contemplated by
this Agreement, except as set forth in Section 11.2. The Company will indemnify
and hold the other Company harmless against all claims for brokers', finders' or
investment bankers' fees made or asserted by any party claiming to have been
employed by the Company or any stockholder, director, officer, employee or agent
of the Company and all costs and expenses (including the reasonable fees of
counsel) of investigating and defending such claims.
3.16. Contracts. Section 3.16 of the Disclosure Statement lists all
---------
oral or written agreements, notes, instruments, or contracts to which the
Company is a party or by which its assets or properties may be bound which
involve the payment or receipt of more than Fifty Thousand Dollars ($50,000) (on
an annual basis), or which have a term of more than two years, or which involve
intellectual property, or which are employment or consulting agreements other
than those terminable at will (the "Contracts"). The Company is not in material
default in performance of its obligations under any such Contracts. The Company
has no knowledge of any material violation of any Contract by any other party
thereto and has no knowledge of any intent by any other party to a Contract not
to perform its obligations under such Contract.
3.17. Stockholders and Employees. Except as set forth in Section
--------------------------
3.16 of the Disclosure Statement, none of the stockholders, directors or
management personnel of the Company is presently a party to any transaction with
the Company, including without limitation, any contract, agreement or other
arrangement: (i) providing for the furnishing of services to or by; (ii)
providing for rental of real or personal property to or from; or (iii) otherwise
requiring payments to or from, any stockholder, director or management
personnel, or any member of the family of any stockholder, director or
management personnel or any corporation, trust or other entity in which any
stockholder, director or management personnel has a substantial interest or is
an officer, director, investor or partner.
3.18. Absence of Environmental Liabilities. The Company has, and to
------------------------------------
the Company's knowledge, all previous owners, lessees and occupants of real
property leased
16
by the Company have complied with all applicable environmental laws, orders,
regulations, rules and ordinances adopted, imposed or promulgated by any
governmental or regulatory entity relating to such real property. The Company is
not in violation of any federal, state or local law, ordinance or regulation
relating to industrial hygiene, worker safety, environmental hazardous materials
or waste or toxic materials on, under or about such real property, including
soil and waste water conditions. No current use of the real property leased by
the Company constitutes a public or private nuisance. The environmental
licenses, permits, clearances, covenants and authorizations material to the
operation of the Company are in full force and effect. Any handling,
transportation, storage, treatment or use of Hazardous Material (as defined
below) by the Company or, to the Company's knowledge, all previous owners,
lessees and occupants of real property leased by the Company, has been in
compliance with all laws, regulations and orders relating to Hazardous Material.
As used herein, the term "Hazardous Material" means any hazardous or toxic
substance, material or waste which is or becomes regulated by any local
government authority, the State of California, any other state or the United
States Government.
3.19. Power of Attorney; Suretyships. The Company has no power of
------------------------------
attorney outstanding, nor has any obligation or liability, either actual,
accrued, accruing or contingent, as guarantor, surety, cosigner, endorser, co-
maker, indemnitor or otherwise in respect of the obligation of any other person,
corporation, partnership, joint venture, association, organization or other
entity.
3.20. Business Practices. The Company has not made, offered or
------------------
agreed to offer anything of value to any government official, political party or
candidate for government office nor has it taken any action which would cause it
to be in violation of the Foreign Corrupt Practices Act of 1977.
3.21. Accuracy of Documents and Information. The copies of all
-------------------------------------
instruments, agreements, other documents and written information set forth as,
or referenced in, schedules or exhibits to this Agreement or specifically
required to be furnished pursuant to this Agreement by the Company to the other
Company, including, without limitation, the Disclosure Statement of the Company,
are and will be complete and correct in all material respects. All information
in the Disclosure Statement of the Company is as of the date hereof or such
earlier date as is specified therein, which in no case is before June 30, 1997
and there have been no material changes in the information set forth therein
between the date so specified and the date of this Agreement. No
representations or warranties made by the Company in this Agreement, nor any
document, written information, statement, financial statement, certificate,
schedule or exhibit furnished directly to the other party hereto pursuant to
this Agreement or in the Disclosure Statement of the Company contains any untrue
statement of a material fact. There is no fact which materially and adversely
affects the Company, its financial
17
position, assets, liabilities, business or results of operations known to the
Company which has not been expressly and fully set forth in (i) with respect to
Ansan, the S-4 and the Proxy Statement and (ii) with respect to Discovery and
ATI, information provided to Ansan in writing expressly for inclusion in the
Proxy Statement or the S-4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DISCOVERY
Discovery hereby represents and warrants to Ansan that, except as set
forth in the Disclosure Statement of Discovery:
4.1. Capitalization of Discovery. The authorized capital stock of
---------------------------
Discovery is 10,000,000 shares of Preferred Stock, of which 2,200,256 shares are
issued and outstanding, and 50,000,000 shares of Common Stock, of which
6,712,256 shares are issued and outstanding. The outstanding shares of
Preferred Stock of Discovery are convertible into 8,801,024 shares of Discovery
Common at the conversion price currently in effect with respect thereto. All
such issued and outstanding shares have been duly authorized and validly issued,
and are fully paid and non-assessable. Discovery has outstanding options and
warrants to purchase 906,943 shares of Discovery Common Stock and 220,026 shares
of Discovery Preferred Stock pursuant to the Discovery Options and Discovery
Warrants and a list of such Discovery Options and Discovery Warrants (including
the exercise prices thereunder) is included in Schedule 4.1 of the Disclosure
Statement of Discovery. Except as set forth in the preceding sentence, there
are no outstanding warrants, options, agreements, convertible or exchangeable
securities (other than the Preferred Stock described above) or other commitments
pursuant to which Discovery is or may become obligated to issue, sell, purchase,
retire or redeem any shares of capital stock or other securities.
4.2. Capitalization of ATI. The authorized capital stock of ATI is
---------------------
1,000,000 shares of Preferred Stock, of which 602,200 shares are issued and
outstanding, and 2,000,000 shares of Common Stock, of which 200,000 shares are
issued and outstanding. The outstanding shares of Convertible Preferred Stock
of ATI are convertible into 600,000 shares of ATI Common Stock. All such issued
and outstanding shares have been duly authorized and validly issued, and are
fully paid and non-assessable. ATI has outstanding options and warrants to
purchase 200,000 shares of ATI Common Stock and no shares of ATI Preferred Stock
and a list of such options and warrants (including the exercise prices
thereunder) is included in Section 4.2 of the Disclosure Statement of Discovery.
Except as set forth in the preceding sentence, there are no outstanding
warrants, options, agreements, convertible or exchangeable securities (other
than the Preferred Stock described above) or other commitments pursuant to which
18
ATI is or may become obligated to issue, sell, purchase, retire or redeem any
shares of capital stock or other securities.
4.3. Financial Statements. Discovery has delivered the following
--------------------
financial statements (the "Discovery Financial Statements") to Ansan: Audited
Consolidated Balance Sheet of Discovery dated as of December 31, 1996, together
with Audited Consolidated Statements of Operations, Consolidated Stockholders'
Equity and Consolidated Changes in Cash Flow during the year ended December 31,
1996; and Unaudited Consolidated Balance Sheet of Discovery dated as of March
31, 1997, together with Unaudited Consolidated Statements of Operations,
Stockholders' Equity and Changes in Cash Flows for the three months then ended.
Each Discovery Financial Statement together with the notes thereto is in
accordance with the books and records of Discovery, fairly presents the
consolidated financial position of Discovery and ATI and the consolidated
results of operations of Discovery and ATI for the period indicated, and has
been prepared in accordance with generally accepted accounting principles
consistently applied.
4.4. Absence of Undisclosed Liabilities. As of March 31, 1997
----------------------------------
neither Discovery nor ATI had any indebtedness or liability (absolute or
contingent) which are not shown or provided for in full on the Balance Sheet
dated March 31, 1997 included in the Discovery Financial Statements. Except as
set forth in the Balance Sheet dated March 31, 1997 included in the Discovery
Financial Statements, Discovery and ATI do not have outstanding on the date
hereof, nor will they have outstanding on the Closing Date, any indebtedness or
liability (absolute or contingent) other than those incurred since March 31,
1997 in the ordinary course of business which are not material to the operations
of Discovery and ATI.
4.5. Compliance With Law. Section 4.5 of the Disclosure Statement of
-------------------
Discovery contains a true and complete list of all licenses, permits and
authorizations necessary for the lawful conduct of Discovery's and ATI's
businesses wherever conducted pursuant to all applicable statutes, laws,
ordinances, rules and regulations of all governmental bodies, agencies and
subdivisions having, asserting or claiming jurisdiction over Discovery or ATI or
over any part of their operations.
4.6. Patents, Trademarks and Trade Names. Section 4.6 of the
-----------------------------------
Disclosure Statement of Discovery sets forth a list of all patents, patent
applications, trademarks, registered and unregistered, and trade names,
registered and unregistered, owned by Discovery and ATI.
4.7. Employees. Section 4.7 of the Disclosure Statement of Discovery
---------
contains a list of the names, current salary rates, bonuses paid during the last
fiscal year,
19
and accrued vacation and sick leave for all the employees of Discovery and ATI
as of June 30, 1997.
4.8. Insurance. Section 4.8 of the Disclosure Statement of Discovery
---------
contains a list of all insurance policies and bonds in force with respect to
Discovery and ATI showing for each such policy or bond: (i) the owner; (ii) the
coverage of such policy or bond; (iii) the amount of premium properly allocable
to such policy or bond; (iv) the name of the insurer; and (v) the termination
date of the policy or bond. Copies of all such insurance policies and bonds
have been furnished to Ansan. All such insurance policies and bonds are in full
force and effect.
4.9. Bank Accounts. Section 4.9 of the Disclosure Statement of
-------------
Discovery contains a list of all bank accounts of Discovery and ATI, identifying
the name of the bank, the account number, and the authorized signatories to the
account.
4.10. ATI. Section 3.4 of the Disclosure Statement of Discovery sets
---
forth Discovery's percentage ownership of the outstanding capital stock of ATI.
Such stock is free and clear of any liens and encumbrances and is not subject
to any preemptive rights or right of first refusal.
4.11. Proxy Statement and S-4. Discovery shall provide all
-----------------------
information related to Discovery and ATI and their respective officers,
directors and stockholders reasonably requested by Ansan for inclusion in the
Proxy Statement and S-4, including all amendments and supplements related
thereto to the extent such information is within Discovery's possession or
reasonably accessible by Discovery. None of such information shall contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the written information previously provided by Discovery expressly for
inclusion in the Proxy Statement and S-4 (to the extent not superseded) and in
light of the other circumstances under which they are made, not misleading. If
requested by Ansan, Discovery shall confirm from time to time that as of the
date of such request the information previously provided by Discovery to Ansan
for the express purpose of inclusion in the Proxy Statement or S-4, including
any amendments or supplements thereto, continues to be true and correct in all
material respects and does not omit to state any material fact necessary to make
such information not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ANSAN
Ansan hereby represents and warrants to Discovery that, except as set
forth in the Officer-Certified Disclosure Statement of Ansan:
20
5.1. Capitalization. The authorized capital stock of Ansan is
--------------
5,000,000 shares of Ansan Preferred Stock, none of which are issued and
outstanding, and 20,000,000 shares of Ansan Common Stock, of which 2,851,954 are
issued and outstanding. All such issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and non-assessable. Ansan has
outstanding options to purchase 355,377 shares of Ansan Common Stock pursuant to
its existing plans and has reserved an additional 19,623 shares of Ansan Common
Stock for issuance under such plans. Ansan has outstanding Class A Warrants and
Class B Warrants exercisable for 2,207,500 shares of Ansan Common Stock and
3,702,500 shares of Ansan Common Stock, respectively. Ansan has outstanding
underwriters' options to purchase 520,000 shares of Ansan Common Stock. A list
of all outstanding options and warrants, and the exercise prices thereunder, is
set forth in Section 5.1 of the Disclosure Statement of Ansan. Except as set
forth in this Section 5.1 of the Agreement, there are no outstanding warrants,
options, agreements, convertible or exchangeable securities or other commitments
pursuant to which Ansan is or may become obligated to issue, sell, purchase,
retire or redeem any shares of capital stock or other securities.
5.2. Financial Statements. Ansan has delivered the following
--------------------
consolidated financial statements of Ansan ("Ansan Financial Statements") to
Discovery: Audited Balance Sheets of Ansan dated as of December 31, 1996,
together with audited Statements of Operations, Stockholders' Equity and Changes
in Cash Flow during the three years ended December 31, 1996 included in Ansan's
Annual Report on Form 10-K filed with the SEC for the year ended December 31,
1996 and unaudited Balance Sheets of Ansan together with Statements of
Operations, and Changes in Cash Flow for the three months ended March 31, 1997
included in Ansan's Quarterly Report on Form 10-Q. Each Ansan Financial
Statement together with the notes thereto is in accordance with the books and
records of Ansan, fairly presents the financial position of Ansan and the
results of operations of Ansan for the period indicated, and has been prepared
in accordance with generally accepted accounting principles consistently
applied.
5.3. Absence of Undisclosed Liabilities. As of March 31, 1997, Ansan
----------------------------------
had no indebtedness or liability (absolute or contingent) which is not shown or
provided for in full on the Balance Sheet dated March 31, 1997 included in the
Ansan Financial Statements. Except as set forth in the Balance Sheet dated
March 31, 1997 included in Ansan Financial Statements, Ansan does not have
outstanding on the date hereof, nor will it have outstanding on the Closing
Date, any indebtedness or liability (absolute or contingent) other than those
incurred since March 31, 1997 in the ordinary course of business which are not
material to the operations of Ansan.
5.4. Shares Issued in Connection With the Merger. The Ansan Stock to
-------------------------------------------
be issued to the Holders pursuant to the Merger, when issued in accordance with
this Agreement and the Certificate of Merger, will be duly authorized, validly
issued, fully
21
paid and non-assessable. The shares of Ansan Stock to be issued to the holders
of Discovery Options and Discovery Warrants upon exercise of Discovery Options
and Discovery Warrants after the Merger, when issued upon exercise of Discovery
Options and Discovery Warrants assumed by Ansan in accordance with this
Agreement and the Certificate of Merger, will be duly authorized, validly
issued, fully paid and non-assessable. The agreements evidencing the Discovery
Options and Discovery Warrants, upon assumption by Ansan on the Effective Date
pursuant to Section 2.3.1 of this Agreement, will constitute legal, valid and
binding obligations of Ansan, enforceable against Ansan in accordance with their
terms, subject as to enforcement: (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other laws of general applicability relating to or
affecting creditors' rights; and (ii) to general principles of equity, whether
such enforcement is considered in a proceeding in equity or at law.
5.5. Compliance With Law. Section 5.5 of the Disclosure Statement of
-------------------
Ansan contains a true and complete list of all licenses, permits and
authorizations necessary for the lawful conduct of Ansan's business wherever
conducted pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all governmental bodies, agencies and subdivisions having,
asserting or claiming jurisdiction over Ansan or over any part of its
operations.
5.6. Patents, Trademarks and Trade Names. Section 5.6 of the
-----------------------------------
Disclosure Statement of Ansan sets forth a list of all patents, patent
applications, trademarks, registered and unregistered, and trade names,
registered and unregistered, owned by Ansan.
5.7. Exchange Act Filings. All reports, schedules and statements
--------------------
(including all exhibits and schedules thereto and all documents incorporated by
reference therein) required to be filed by Ansan within the year prior to the
date of this Agreement under the Exchange Act, copies of which have been
furnished to Discovery, have been duly filed, were in substantial compliance
with the requirements of their respective forms, and were complete and correct
in all material respects as of the dates at which the information was furnished.
As of the date of filing, no such report contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
5.8. Employees. Section 5.8 of the Disclosure Statement of Ansan
---------
contains a list of the names, current salary rates, bonuses paid during the last
fiscal year, and accrued vacation and sick leave for all the employees of Ansan
as of June 30, 1997.
5.9. Insurance. Section 5.9 of the Disclosure Statement of Ansan
---------
contains a list of all insurance policies and bonds in force with respect to
Ansan showing
22
for each such policy or bond: (i) the owner; (ii) the coverage of such policy or
bond; (iii) the amount of premium properly allocable to such policy or bond;
(iv) the name of the insurer; and (v) the termination date of the policy or
bond. Copies of all such insurance policies and bonds have been furnished to
Discovery. All such insurance policies and bonds are in full force and effect.
5.10. Bank Accounts. Section 5.10 of the Disclosure Statement of
-------------
Ansan contains a list of all bank accounts of Ansan, identifying the name of the
bank, the account number, and the authorized signatories to the account.
5.11. Proxy Statement and S-4. None of the information relating to
-----------------------
Ansan or its respective officers and directors included or incorporated by
reference in the Proxy Statement or the S-4 will, in the case of the Proxy
Statement or any amendments or supplements thereto, at the time of the mailing
of the Proxy Statement and any amendments or supplements thereto, and at the
time of the meeting of stockholders of the Company to vote upon this Agreement,
the Merger and related transactions, or, in the case of the S-4, at the time it
becomes effective under the 1933 Act and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The S-4
will comply as to form with the 1933 Act and the rules and regulations
thereunder. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any event with respect
to Ansan, its officers or directors should occur which is or is required to be
described in an amendment or a supplement to the Proxy Statement or the S-4
Ansan shall so amend or supplement to Proxy Statement or the S-4.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF ANSAN
The obligations of Ansan to consummate the Merger is subject to the
fulfillment, at or before the Closing of all the following conditions, any one
or more of which may be waived by Ansan:
6.1. Representations and Warranties True at Closing. The
----------------------------------------------
representations and warranties of Discovery contained in this Agreement, except
those set forth in Section 3.6 of this Agreement, shall be deemed to have been
made again at and as of the Closing (including the update of the Disclosure
Statement of Discovery referred to in Section 8.1 of this Agreement) and shall
be true in all material respects.
23
6.2. Covenants Performed. All of the obligations of Discovery to be
-------------------
performed at or before the Closing pursuant to the terms of this Agreement shall
have been duly performed in all material respects.
6.3. Certificate. At the Closing, Ansan shall have received a
-----------
certificate signed by the President of Discovery to the effect that the
conditions set forth in Sections 6.1, 6.2 and 6.14 have been satisfied.
6.4. Stockholder Approval. This Agreement and the Certificate of
--------------------
Merger shall have been duly approved by the stockholders of Discovery and Ansan.
6.5. Titan. Titan shall have executed the Titan Agreement with Ansan.
-----
All Ansan Stock owned by Titan shall be repurchased and all indebtedness, except
for $100,000, owing by Ansan to Titan shall be retired, in accordance with the
Titan Agreement.
6.6. Appraisal Shares. The aggregate number of Appraisal Shares with
----------------
respect to each of Ansan and Discovery shall not exceed five (5%) percent of the
aggregate Ansan Stock outstanding immediately prior to the Merger or the
aggregate Discovery Stock outstanding immediately prior to the Merger, as the
case may be.
6.7. Tax-Free Reorganization. Ansan shall have received the opinion
-----------------------
of its counsel to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code, which opinion
shall be substantially similar to the opinion delivered to Discovery pursuant to
Section 7.5. In preparing the tax opinion, counsel may rely upon (and to the
extent reasonably required, the parties shall make and use their best efforts to
cause their directors and stockholders to make) reasonable representations
relating thereto.
6.8. Nasdaq Approval. Ansan and Discovery, on a pro-forma basis,
---------------
shall satisfy the applicable and proposed initial listing requirements for the
Nasdaq SmallCap Market and Ansan shall be approved by Nasdaq for listing its
Common Stock on the Nasdaq SmallCap Market immediately following the Merger.
The shares of Ansan Common Stock to be issued in the Merger and upon conversion
of the Ansan Preferred Stock (including Ansan Preferred Stock to be issued upon
exercise of Ansan warrants to be issued to Discovery securityholders in
connection with the Merger) and the exercise of Ansan options and Ansan warrants
to be issued to Discovery securityholders in connection with the Merger shall
have been listed on the Nasdaq SmallCap Market. There shall be no proceedings
pending or threatened by Nasdaq that are reasonably likely to result in the
delisting of the Ansan Common Stock from the Nasdaq SmallCap Market.
6.9. Affiliates Agreements. Discovery shall have delivered to Ansan
---------------------
a letter identifying all persons who are Affiliates of Discovery, and each such
Affiliate shall
24
have executed and delivered an Affiliates Agreement to Ansan in the form and
subject to the restrictions provided in Exhibit 6.9.
6.10. Lockup Agreements. Discovery stockholders holding 85% or more
-----------------
of the outstanding securities of Discovery shall have executed and delivered a
Lockup Agreement in the form and subject to the restrictions provided in
Exhibits 6.10A or 6.10B, as applicable.
6.11. Fairness Opinion. The Board of Directors of Ansan shall have
----------------
received an opinion, dated on or before the date hereof from Xxxxx Securities
that the terms of the Merger as contemplated by this Agreement are fair to the
stockholders of Ansan, which opinion shall be in form and substance reasonably
satisfactory to Ansan.
6.12. S-4. The S-4 shall have become effective under the 1933 Act
---
and shall not be the subject of any stop order or proceedings seeking a stop
order and the Proxy Statement shall on the Closing Date not be subject to any
proceeding commenced or threatened by the SEC.
6.13. Certificate of Merger. The Certificate of Merger shall have
---------------------
been filed with the Secretary of State of the State of Delaware.
6.14. Material Changes in the Business of Discovery and ATI. There
-----------------------------------------------------
shall have been no material adverse change in the business of Discovery or ATI,
provided that insofar as solely the financial condition (including without
limitation the assets, liabilities and results of operations) of Discovery and
ATI are concerned, no such material adverse change shall be deemed to have
occurred so long as Discovery Working Capital is at least $5,000,000.
6.15. No Action to Prevent Completion. Ansan shall not have
-------------------------------
determined, in the reasonable exercise of its discretion, that the transactions
contemplated by this Agreement have become inadvisable or impractical by reason
of the institution of litigation or other proceedings with respect to or
affecting the transactions contemplated by this Agreement.
6.16. Consents. Ansan shall have received in writing all consents,
--------
approvals, and waivers required in connection with the Merger (a) from parties
to Discovery's agreements, indentures, mortgages, franchises, licenses, permits,
leases, and other instruments set forth in Section 3.16 of the Disclosure
Statement of Discovery, and (b) from all governmental authorities, except to the
extent that the failure to receive any such consent would not reasonably be
expected to have a material adverse effect on the business of the corporation
surviving the Merger.
25
6.17. Ansan Board. Effective as of the Effective Time, all action
-----------
shall have been taken so that the Ansan Board shall consist of seven members
designated by Discovery, two members designated by Ansan and one member
designated by X. X. Xxxxx & Co.
6.18. Documentation. All actions, proceedings, instruments,
-------------
resolutions, certificates, and documents reasonably requested by Ansan to be
executed and delivered to Ansan in order to carry out this Agreement and to
consummate the Merger, and all of the relevant legal matters, shall be
reasonably satisfactory to Ansan and its counsel.
6.19. Liquidation Preference. Ansan shall be reasonably satisfied
----------------------
(through the receipt of stockholder waivers to the extent reasonably required)
that the consummation of the Merger will not confer upon preferred stockholders
of Discovery or ATI the right to a distribution of the liquidation preference
afforded to such stockholders.
6.20. Legal Opinion of Discovery Counsel. Ansan shall receive an
----------------------------------
opinion dated the Closing Date of Xxxxxxx, Xxxxxxxx & Kotel, a professional
corporation, counsel to Discovery and ATI, in substantially the form attached
hereto as Exhibit 6.20.
6.21. Discovery Working Capital. As of the Closing Date, Discovery
-------------------------
Working Capital shall be no less than $5,000,000.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF DISCOVERY
The obligations of Discovery to consummate the Merger are subject to
the fulfillment, at or before the Closing, of all of the following conditions,
any one or more of which may be waived by Discovery:
7.1. Representations and Warranties True at Closing. The
----------------------------------------------
representations and warranties of Ansan contained in this Agreement, except for
those in Section 3.6 of this Agreement, shall be deemed to have been made again
at and as of the Closing (including the update of the Disclosure Statement of
Ansan referred to in Section 8.1 of this Agreement) and shall be true in all
material respects.
7.2. Covenants Performed. All of the obligations of Ansan to be
-------------------
performed at or before the Closing pursuant to the terms of this Agreement shall
have been duly performed in all material respects.
7.3. Certificate. At the Closing, Discovery shall have received a
-----------
certificate signed by the President of Ansan to the effect that the conditions
set forth in Sections 7.1, 7.2 and 7.10 have been satisfied.
26
7.4. Stockholder Approval. This Agreement and the Certificate of
--------------------
Merger shall have been duly approved by the stockholders of Ansan and Discovery.
7.5. Tax-Free Reorganization. Discovery shall have received the
-----------------------
opinion of its counsel to the effect that the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code, which opinion
shall be substantially similar to the opinion delivered to Ansan pursuant to
Section 6.7. In preparing the tax opinion, counsel may rely upon (and to the
extent reasonably required, the parties shall make and use their reasonable best
efforts to cause their directors and stockholders to make) reasonable
representations relating thereto.
7.6. Nasdaq Approval. Ansan and Discovery, on a pro-forma basis,
---------------
shall satisfy the applicable and proposed initial listing requirements for the
Nasdaq SmallCap Market and Ansan shall be approved by Nasdaq for listing its
Common Stock on the Nasdaq SmallCap Market immediately following the Merger.
The shares of Ansan Common Stock to be issued in the Merger and upon conversion
of the Ansan Preferred Stock (including Ansan Preferred Stock to be issued upon
exercise of Ansan warrants to be issued to Discovery securityholders in
connection with the Merger) and the exercise of Ansan Options and Ansan Warrants
to be issued to Discovery security holders in connection with the Merger shall
have been listed on the Nasdaq SmallCap Market. There shall be no proceedings
pending or threatened by Nasdaq that are reasonably likely to result in the
delisting of the Common Stock of Ansan from the Nasdaq SmallCap Market.
7.7. Titan. Titan shall have executed the Titan Agreement with Ansan.
-----
All Ansan Stock owned by Titan shall be repurchased and all indebtedness, except
for $100,000, owing by Ansan to Titan shall be retired, in accordance with the
Titan Agreement.
7.8. S-4. The S-4 shall have become effective under the 1933 Act and
---
shall not be the subject of any stop order or proceedings seeking a stop order
and the Proxy Statement shall on the Closing not be subject to any proceeding
commenced or threatened by the SEC.
7.9. Certificate of Merger. The Certificate of Merger shall have
---------------------
been filed with the Secretary of State of the State of Delaware.
7.10. Material Changes in the Business of Ansan. There shall have
-----------------------------------------
been no material adverse change in the financial position, results of
operations, assets, liabilities or business of Ansan between the date of this
Agreement and the Closing; provided that such changes as are contemplated by the
budget included in Section 10.3 of
27
the Disclosure Statement of Ansan shall not be deemed material for the purposes
of this Section 7.10.
7.11. No Action to Prevent Completion. Discovery shall not have
-------------------------------
determined, in the reasonable exercise of its discretion, that the transactions
contemplated by this Agreement have become inadvisable or impractical by reason
of the institution of litigation or other proceedings with respect to or
affecting the transactions contemplated by this Agreement.
7.12. Consents. Discovery shall have received in writing all
--------
consents, approvals, and waivers required in connection with the Merger (a) from
parties to Ansan's agreements, indentures, mortgages, franchises, licenses,
permits, leases, and other instruments set forth in Section 3.16 of the
Disclosure Statement of Ansan, and (b) from all governmental authorities, except
to the extent that the failure to receive any such consent would not reasonably
be expected to have a material adverse effect on the business of the corporation
surviving the Merger. Such consents shall include consent from Boehringer
Ingelheim, if required.
7.13. Ansan Board. Effective as of the Effective Time, all action
-----------
shall have been taken so that the Ansan Board shall consist of seven members
designated by Discovery, two members designated by Ansan and one member
designated by X. X. Xxxxx & Co.
7.14. Documentation. All actions, proceedings, instruments,
-------------
resolutions, certificates, and documents reasonably requested by Discovery to be
executed and delivered to Discovery in order to carry out this Agreement and to
consummate the Merger, and all of the relevant legal matters, shall be
reasonably satisfactory to Discovery and its counsel.
7.15. Legal Opinion of Ansan Counsel. Discovery shall receive an
------------------------------
opinion dated the Closing Date of Xxxxxx Xxxxxx White & XxXxxxxxx, counsel to
Ansan, in substantially the form attached hereto as Exhibit 7.15.
7.16. Fairness Opinion. The Board of Directors of Discovery shall
----------------
have received an opinion, dated no later than August 17, 1997, from a reputable
and independent investment banking firm that the terms of the Merger are fair to
the stockholders of Discovery, which opinion shall be in form and substance
reasonably satisfactory to Discovery.
7.17. Appraisal Shares. The aggregate number of Appraisal Shares
----------------
with respect to each of Ansan and Discovery shall not exceed five (5%) percent
of the aggregate Ansan Stock outstanding immediately prior to the Merger or the
aggregate Discovery Stock outstanding immediately prior to the Merger, as the
case may be.
28
ARTICLE VIII
PRE-CLOSING COVENANTS
During the period from the date of this Agreement until the Effective
Time, Ansan and Discovery (each sometimes referred to as a "Company" for the
purposes of this Article VIII) each covenants and agrees as follows:
8.1. Advice of Changes. Each Company will promptly advise the other
-----------------
Company in writing (i) of any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of such Company
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, (ii) of any material
adverse change in such Company's financial position, results of operations,
assets, liabilities or business, and (iii) the occurrence of material
noncompliance with Sections 8.3.21 (in the case of Ansan) or 8.15 (in the case
of Discovery) of this Agreement. Not less than four days before the Closing,
each Company shall deliver to the other Company hereto an update of the
Disclosure Statement previously delivered by such Company, showing any changes
which have occurred with respect to the information contained therein since it
was originally issued and containing a description of any representation or
warranty in this Agreement which is no longer true as of such date.
8.2. Maintenance of Business. Each Company will use its reasonable
-----------------------
best efforts to carry on and preserve its business and its relationships with
customers, suppliers, employees and others in substantially the same manner as
it has prior to the date hereof. If either Company becomes aware of a
deterioration in the relationship with any customer, supplier or key employee,
it will promptly bring such information to the attention of the other Company in
writing.
8.3. Conduct of Business. Ansan will continue to conduct its
-------------------
business and use reasonable efforts to maintain its business relationships in
the ordinary and usual course and, except as provided in this Agreement, will
not, without the prior written consent of Discovery:
8.3.1 borrow any money;
8.3.2 incur any liability except for those that may be incurred
(i) in the ordinary course of business, consistent with past practice, and are
not material in amount or (ii) in connection with the performance or
consummation of this Agreement;
8.3.3 encumber or permit to be encumbered any of its assets except
in the ordinary course of its business consistent with past practice;
29
8.3.4 dispose of any of its assets, except inventory in the ordinary
course of business, consistent with past practice;
8.3.5 enter into any material lease or contract for the purchase or
sale of any property, real or personal, except in the ordinary course of
business, consistent with past practice;
8.3.6 fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained such equipment
and other assets to the date of this Agreement, subject only to ordinary wear
and tear;
8.3.7 pay any bonus, increased salary, or special remuneration to any
officer, employee (other than those paid in the ordinary course of business,
consistent with past practice) or consultant or enter into any new employment or
consulting agreement with any such person, except in the ordinary course of
business, consistent with past practice;
8.3.8 change accounting methods;
8.3.9 declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
its capital stock (except pursuant to employee stock repurchase agreements upon
termination of an employee consistent with its past practice);
8.3.10 amend or terminate any contract, agreement or license to which
it is a party except those amended or terminated in the ordinary course of
business consistent with past practice, and which are not material in amount;
8.3.11 loan any amount to any person or entity, other than advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practice, not material in amount and documented by receipts
for the claimed amounts;
8.3.12 guarantee or act as a surety for any obligation except for the
endorsement of checks and other negotiable instruments in the ordinary course of
business, consistent with past practice, which are not material in amount;
8.3.13 waive or release any material right or claim except in the
ordinary course of business, consistent with past practice;
8.3.14 issue or sell any shares of its capital stock of any class
(except upon the exercise of an option currently outstanding, as disclosed in
Section 4.1, 4.2 or 5.1, as the case may be, or granted in accordance with this
Section 8.3.14), or any other of
30
its securities, or issue or create any warrants, obligations, subscriptions,
options, convertible securities, or other commitments to issue shares of capital
stock without the prior written consent of the other party hereto, which consent
shall not be withheld unreasonably if options are being granted for the purpose
of recruiting new personnel in accordance with the past practices regarding the
pricing, the total number of options granted, the options awarded in relation to
the job title of the recipient and the timing of the option awards;
8.3.15 accelerate the vesting of any outstanding options;
8.3.16 split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other of
its securities;
8.3.17 merge, consolidate or reorganize with, or acquire any
entity, except for the Merger;
8.3.18 amend its Certificate of Incorporation or Bylaws, except as
expressly contemplated by this Agreement;
8.3.19 other than pursuant to the Titan Agreement, license any of its
technology or intellectual property, except in the ordinary course of business;
8.3.20 agree to do any of the things described in the preceding
clauses 8.3.1 through 8.3.19; or
8.3.21 fail to conduct itself in material compliance with the budget
of Ansan set forth on Section 10.3 to the Ansan Disclosure Statement.
8.4. Stockholder Meetings. Each Company will use its reasonable best
--------------------
efforts to submit this Agreement and related matters for approval of their
stockholders, which approval shall be recommended by each Company's Board of
Directors and management, subject to the fiduciary obligations of its directors
and officers.
8.5. Proxy Statement. Ansan will send to its stockholders, for the
---------------
purpose of considering and voting upon the Merger, the Proxy Statement.
Discovery shall promptly provide to Ansan information in accordance with
Sections 2.6 and 4.11 of this Agreement. Neither Company shall provide to its
stockholders or publish any material that violates the 1933 Act or Exchange Act
with respect to the transactions contemplated hereby.
8.6. Regulatory Approvals. Prior to the Closing, each Company shall
--------------------
execute and file, or join in the execution and filing, of any application or
other document
31
that may be necessary in order to obtain the authorization, approval or consent
of any governmental body, federal, state, local or foreign which may be
reasonably required, or which the other Company may reasonably request, in
connection with the consummation of the transactions contemplated by this
Agreement. Each Company shall use reasonable commercial efforts to obtain all
such authorizations, approvals and consents.
8.7. Necessary Consents. Prior to the Closing, each Company will use
------------------
reasonable commercial efforts to obtain such written consents and take such
other actions as may be necessary or appropriate in addition to those set forth
in Section 8.6 to allow the consummation of the transactions contemplated hereby
and to allow such Company to carry on its business after the Closing.
8.8. Litigation. Prior to the Closing, each Company will notify the
----------
other Company in writing promptly after learning of any material actions, suits,
proceedings or investigations by or before any court, board or governmental
agency, initiated by or against it or any of its Subsidiaries, or known by it to
be threatened against it or any of its Subsidiaries.
8.9. Exclusivity. From the date hereof until the earlier of
-----------
termination of this Agreement or consummation of the Merger, neither Ansan nor
Discovery nor any of their officers, directors, employees, representatives
(including any investment banker, attorney or accountant retained by them),
agents or affiliates shall directly or indirectly encourage, solicit, initiate,
facilitate or conduct discussions or negotiations with, provide any information
to, or enter into any agreement with, any corporation, partnership, person or
other entity or group concerning or expressing an interest in or proposing any
merger, consolidation, reorganization, share exchange, business combination,
liquidation, dissolution sale of all or significant assets or securities or
other similar transaction involving Ansan or Discovery, except to the extent
required by their fiduciary duties as determined by the Boards of Directors of
Ansan or Discovery, as the case may be, after discussion with their counsel.
8.10. Due Diligence. Until the Closing, each Company shall provide
-------------
the other Company (including, subject to the receipt of any necessary
confidentiality undertakings, accounting, legal, and investment banking
representatives) with reasonable access to its offices and its senior employees
for the purpose of due diligence, in accordance with procedures established by
the parties to minimize disruptions of their businesses. Each party shall
provide the other party with all material documents requested in the course of
performing due diligence, including documents requested prior to execution of
this Agreement, within 30 days of such request.
8.11. Satisfaction of Conditions Precedent. Subject to the fiduciary
------------------------------------
obligations of its directors and officers, each Company will use its
commercially
32
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 6 and 7, and each Company will use its
commercially reasonable efforts to cause the transactions contemplated by this
Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby.
8.12. Representations Regarding Tax Matters. Each Company, its
-------------------------------------
officers, directors, and stockholders, will make such representations as are
reasonably requested by counsel to both parties in order that such counsel may
render the tax opinions required by Sections 6.7 and 7.5 hereof.
8.13. Notification of Customers, Suppliers and Employees. Prior to
--------------------------------------------------
the Closing, Discovery will notify each customer, supplier of products and
employee who is material to Discovery's business of the basic facts relating to
the transactions contemplated by this Agreement.
8.14. Fairness Opinion. Discovery shall use commercially reasonable
----------------
efforts to satisfy the condition set forth in Section 7.16.
8.15. Discovery Working Capital. Through the Closing Date, Discovery
-------------------------
shall use its best commercial efforts to maintain Discovery Working Capital of
at least $5,000,000.
ARTICLE IX
CONFIDENTIALITY COVENANT AND ANNOUNCEMENTS
9.1. Confidentiality. Neither party to this Agreement shall use or
---------------
disclose any non-public information obtained from the other party for any
purpose unrelated to the Merger, and, if this Agreement is terminated for any
reason whatsoever, each party shall return to the other or destroy all originals
and copies of all documents and papers containing technical, financial, and
other information furnished to such party pursuant to this Agreement or during
the negotiations which preceded this Agreement, and shall neither use nor
disclose any such information except to the extent that such information is
available to the public, is rightfully obtained from third parties or is
independently developed or is required to be disclosed by law or legal process.
9.2. Announcements. Neither party to this Agreement shall issue a
-------------
press release or other public communication relating to this Agreement, the
Certificate of Merger or the Merger without the prior approval of the other
party. Notwithstanding the
33
foregoing, (i) Ansan may make such announcements regarding the Merger as, in the
judgment of its management after consultation with legal counsel, are necessary
to comply with securities laws or Nasdaq regulations (provided that Discover
shall be afforded a reasonable opportunity to review the same), and (ii)
Discovery may communicate with its stockholders regarding the foregoing matters.
ARTICLE X
TERMINATION
10.1. Mutual Agreement. This Agreement may be terminated at any time
----------------
prior to the Effective Time by the consent of Ansan and Discovery, even if and
after the stockholders of Discovery and Ansan have approved this Agreement and
the Certificate of Merger.
10.2. Termination by Ansan. This Agreement may be terminated by
--------------------
Ansan alone, by means of written notice to Discovery if (a) Discovery fails to
perform any material covenant of Discovery contained in this Agreement, or (b)
any of the conditions set forth in Article VI of this Agreement shall not have
been satisfied by December 31, 1997, or shall have become incapable of being
satisfied by Discovery unless waived by Ansan.
10.3. Termination by Discovery. This Agreement may be terminated by
------------------------
Discovery alone, by means of written notice to Ansan if (a) Ansan fails to
perform any material covenant of Ansan contained in this Agreement or (b) any of
the conditions set forth in Article VII of this Agreement shall not have been
satisfied by December 31, 1997, or shall have become incapable of being
satisfied by Ansan unless waived by Discovery, (c) Ansan fails to comply in any
material respect with the operating budget dated as of the date hereof and
included as Section 10.3 to the Disclosure Statement of Ansan, or (d) if before
August 17, 1997, the conditions set forth in Section 7.16 has not been satisfied
provided Discovery has complied with Section 8.14, which termination must be
elected, if at all, by Discovery by August 17, 1997.
10.4. Limitation on Damages. In no event shall any party to this
---------------------
Agreement be liable for any damages (including punitive and compensatory
damages), costs or expenses aggregating in excess of $3,500,000 arising under or
related to breaches or alleged breaches of this agreement and the transactions
contemplated hereby.
34
ARTICLE XI
MISCELLANEOUS
11.1. Future Structure. Concurrent with the Effective Time, Ansan
----------------
shall change its name to a name mutually agreed-upon by both Ansan and
Discovery.
11.2. Expenses. Each of Ansan and Discovery shall pay its own costs
--------
and expenses, including legal, accounting and investment banking fees and
expenses, relating to this Agreement, the negotiations leading up to this
Agreement and the transactions contemplated by this Agreement. Ansan represents
and warrants that it has not used any broker, finder or financial advisor in
connection with the Merger other than Xxxxx Securities Corporation. Discovery
represents and warrants that it has not used any broker, finder or financial
advisor in connection with the Merger but that it intends to retain a financial
advisor to render a fairness opinion in accordance with Section 7.16 of this
Agreement.
11.3. Amendment. This Agreement shall not be amended except by a
---------
writing duly executed by both parties.
11.4. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of this State of Delaware as applied to
agreements entered into by Delaware residents and entirely to be performed
within Delaware.
11.5. Headings. The headings contained in this Agreement are
--------
intended for convenience and shall not be used to determine the rights of the
parties.
11.6. Mutual Contribution. The parties to this Agreement and their
-------------------
counsel have mutually contributed to its drafting.
11.7. Notices. All notices, requests, demands, and other
-------
communications made in connection with this Agreement shall be in writing and
shall be deemed to have been duly given on the date of delivery if delivered by
hand delivery or by facsimile to the persons identified below or five days after
mailing if mailed by certified or registered mail postage prepaid return receipt
requested addressed as follows:
35
If to Ansan:
Ansan Pharmaceuticals, Inc.
000 Xxxxxx Xxxxx Xxxx.
Xxxxx Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
Confirmation Number: (000) 000-0000
With a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: August X. Xxxxxxx
Facsimile: (000) 000-0000
Confirmation Number: (000) 000-0000
If to Discovery:
Discovery Laboratories, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
Confirmation Number: (000) 000-0000
With a copy to:
Xxxxxxx, Xxxxxxxx & Kotel, A Professional Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
Confirmation Number: (000) 000-0000
Such addresses may be changed, from time to time by means of a notice
given in the matter provided in this section.
11.8. Severability. If any provision of this Agreement is held to be
------------
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order
36
to achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
11.9. Termination of Representation and Warranties. All
--------------------------------------------
representations and warranties contained in this Agreement, including the
exhibits, schedules and other documents delivered pursuant to this Agreement
shall terminate at the Effective Time.
11.10. Waiver. Waiver of any term or condition of this Agreement by
------
any party shall not be construed as a waiver of a subsequent breach or failure
of the same term or condition, or a waiver of any other term or condition in
this Agreement.
11.11. Assignment. Neither party may assign, by operation of law or
----------
otherwise, all or any portion of its rights or duties under this Agreement
without the prior written consent of the other party, which consent may be
withheld in the absolute discretion of the party asked to give consent.
11.12. Counterparts. This Agreement may be signed in counterparts
------------
with the same effect as if the signatures to each party were upon a single
instrument. All counterparts shall be deemed an original of this Agreement.
11.13. Voting Agreements of Certain Discovery Stockholders. Within 14
---------------------------------------------------
days of the execution of this Agreement, each director of Discovery, as well as
RAQ, LLC, shall enter into a voting agreement and irrevocable proxy in the form
attached hereto as Exhibit 11.13, pursuant to which they shall agree to vote all
the shares of Discovery Stock held by them in favor of the Merger.
11.14. Voting Agreements of Ansan Stockholder. Within 14 days of the
--------------------------------------
execution of this Agreement, Titan shall enter into a voting agreement and
irrevocable proxy in substantially the form attached hereto as Exhibit 11.14,
pursuant to which Titan shall agree to vote all the shares of Ansan Stock held
by it in favor of the Merger.
11.15. Other Remedies. No remedies contained in this Agreement or in
--------------
any of the exhibits or schedules hereto shall be in lieu of, or constitute a
waiver of, any remedies at law or in equity (not based upon negligent
misrepresentation) that one party may otherwise have against the other party
hereto or against any present or former officer, director or controlling
stockholder of such party.
11.16. No Solicitation of Employees. Until the Effective Date or six
----------------------------
months after termination of this Agreement, whichever is later, each of Ansan
and Discovery agrees that it will not solicit for hire any of the employees of
the other.
11.17. Entire Agreement. This Agreement, including the exhibit,
----------------
schedules, and other documents delivered pursuant to this Agreement, contains
all the terms and
37
conditions agreed upon by the parties relating to the subject matter of this
Agreement and supersedes all prior agreements, negotiations, correspondence,
undertakings, and communications of the parties, whether oral or
[INTENTIONALLY LEFT BLANK]
38
11.18. written, respecting that subject matter, except the
nondisclosure agreements between Discovery and Ansan and ATI and Ansan,
IN WITNESS WHEREOF, Ansan and Discovery have executed this Agreement
as of the date first above written.
ANSAN PHARMACEUTICALS, INC.
By: /s/ V.H.J. SHALSON
-----------------------------
Title: PRESIDENT AND CEO
--------------------------
DISCOVERY LABORATORIES, INC.
By: /s/ XXXXX X. XXX M.D.
-----------------------------
Title: PRESIDENT AND CEO
--------------------------
39
TABLE OF EXHIBITS
EXHIBIT A Certificate of Designation
EXHIBIT B Certificate of Merger
EXHIBIT C Titan Agreement
EXHIBIT 6.9 Affiliates Agreement
EXHIBIT 6.10A and 6.10B Lockup Agreements
EXHIBIT 6.20 Legal Opinion of Discovery Counsel
EXHIBIT 7.15 Legal Opinion of Ansan Counsel
EXHIBIT 11.13 Voting Agreements of Certain Stockholders of Discovery
EXHIBIT 11.14 Voting Agreement of Ansan Stockholder
i
