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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of December 21, 2000, by and among Discovery Partners
International, Inc., a Delaware corporation ("Parent"), SI Acquisition
Corporation, an Arizona corporation and a wholly-owned subsidiary of Parent
("Acquisition Co."), Systems Integration Drug Discovery Company, Inc., an
Arizona corporation (the "Company") Xxxxx Xxxxxxxxx and Xxxxx Xxxxxxxx, Trustees
of the Xxxxxxxxx-Xxxxxxxx Family Trust U/A/D July 9, 1999, Xxxxx Xxxxxx and
Xxxxxx Xxxxxxxxx, Xx. (collectively, the "Principal Stockholders") and, solely
with respect to Article VIII hereof, High Throughput Genomics, Inc., a Delaware
corporation ("HTG").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Arizona Business Corporation Act (the "Arizona Law"), Parent
and the Company will enter into a business combination transaction pursuant to
which Acquisition Co. will merge with and into the Company (the "Merger").
B. The Board of Directors of Parent (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Parent and fair to, and in the best interests of, Parent and its stockholders,
and (ii) has approved this Agreement, the Merger and the other transactions
contemplated by this Agreement.
C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. Parent, Acquisition Co. and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger.
E. Concurrent with the execution of this Agreement, as a material
inducement to Parent and Acquisition Co., the Principal Stockholders, Aurora
BioSciences Corporation and certain other persons are entering into voting
agreements in the forms attached hereto as Exhibits A-1 and A-2 hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following defined
terms have the meanings indicated below:
"Acquisition Co." has the meaning set forth in the first paragraph of
this Agreement.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration, Order (as defined below), inquiry, hearing, or other litigation
(whether civil, criminal, administrative or investigative) commenced, brought,
conducted or heard by or before, or otherwise involving, any Governmental or
Regulatory Authority (as defined below).
"Affiliate" means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.
"Affiliated Group" means a group of corporations with which the Company
has filed (or was required to file) consolidated, combined, unitary or similar
Tax Returns.
"Affiliated Period" means any period in which the Company was a member
of an Affiliated Group.
"Agreement" has the meanings set forth in the first paragraph of this
Agreement and in Section 2.2.
"Arizona Law" has the meaning set forth in the first recital of this
Agreement.
"Articles of Merger" has the meaning set forth in Section 2.2.
"Assets and Properties" and "Assets or Properties" of any Person each
means all assets and properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person, including, without limitation, cash, cash equivalents, accounts and
notes receivable, chattel paper, documents, instruments, general intangibles,
real estate, equipment, inventory, goods and Intellectual Property.
"Benefit Plan" means any Plan established, arranged or maintained by the
Company or any corporate group of which the Company is or was a member, existing
at the Closing Date or prior thereto, to which the Company contributes or has
contributed, and under which any employee, officer, director or former employee,
officer or director of the Company or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"Books and Records" of any Person means all files, documents,
instruments, papers, books, computer files (including but not limited to files
stored on a computer's hard drive or on
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floppy disks), electronic files and records in any other medium relating to the
business, operations or condition of such Person.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of California or the State of Arizona are
authorized or obligated to close.
"Cash Consideration" has the meaning set forth in Section 2.6(a).
"Closing" has the meaning set forth in Section 2.10(a).
"Closing Date" has the meaning set forth in Section 2.10(a).
"Code" means the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder.
"Combichem Business" means the Company's combinatorial chemistry
business.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Common Stock" has the meaning set forth in Section 3.2(a) of
this Agreement.
"Company Disclosure Schedule" means the disclosure schedule attached
hereto which sets forth the exceptions to the representations and warranties
contained in Article III hereof and certain other information called for by
Article III.
"Company Financial Statements" means (i) the audited consolidated
balance sheets of the Company and the related audited consolidated statements of
income and retained earnings for the fiscal periods ended December 31, 1999 and
December 31, 1998, and (ii) the Interim Financial Statements.
"Company Indebtedness" means all obligations and liabilities created,
issued, or incurred by the Company for borrowed money, including, without
limitation, bank loans, mortgages, notes payable, capital lease obligations,
guarantees of indebtedness of others, and all principal, interest, fees,
prepayment penalties or amounts due or owing with respect thereto; and all
liabilities and obligations with respect to the other indebtedness and similar
obligations with respect to the matters set forth on Schedule 1.1 hereto which
by their inclusion thereon shall be deemed "Company Indebtedness."
"Company Preferred Stock" has the meaning set forth in Section 3.2(a).
"Company Stockholders" means the holders of Outstanding Common Stock,
including the Principal Stockholders and the holders of Outstanding Preferred
Stock.
"Company Stock Option Plan" means the Employee Stock Option Plan dated
April 11, 1997, as amended and restated December 7, 1999, as amended and
restated July 28, 2000.
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"Consortium Agreements" shall mean (1) the Research and Development
Agreement between the Company and Asahi Chemical Industry Co., Ltd. effective
June 1, 1997; (2) the Research and Development Agreement between the Company and
Kirin Brewery Co. effective February 1, 1998; (3) the Research and Development
Agreement between the Company and NPS Pharmaceuticals, Inc. effective July 16,
1997, as amended by the First Amendment effective September 5, 1997, the Second
Amendment effective January 30, 1998 and the Third Amendment effective December
14, 1999; and (4) the Research and Development Agreement between the Company and
COR Therapeutics, Inc. effective August 19, 1998.
"Convertible Company Securities" has the meaning set forth in Section
3.2(b).
"Copyrights" has the meaning set forth in the definition of
"Intellectual Property."
"Damages" has the meaning set forth in Section 8.2(a).
"Defined Benefit Plan" means each Benefit Plan which is subject to Part
3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Dissenting Shares" has the meaning set forth in Section 2.7.
"Dissenting Stockholder" has the meaning set forth in Section 2.7.
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrances" means any mortgage, pledge, assessment, security
interest, deed of trust, lien, adverse claim, levy, charge or other encumbrance
of any kind, or any conditional sale or title retention agreement or other
agreement to give any of the foregoing in the future.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the Department of Treasury and Department of Labor regulations
promulgated thereunder.
"ERISA Affiliate" means any entity which is a member of a "controlled
group of corporations" or which is or was under "common control" with the
Company as defined in Section 414 of the Code.
"Escrow Agent" has the meaning set forth in Section 2.6(c).
"Escrow Agreement" has the meaning set forth in Section 2.6(c).
"Escrow Period" has the meaning set forth in Section 8.3.
"Final Date" has the meaning set forth in Section 7.1(b).
"GAAP" means United States generally accepted accounting principles, as
currently in effect.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or other country, any state, county, city or other political
subdivision.
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"HTG" has the meaning set forth in the first paragraph of this
Agreement.
"HTG Business" has the meaning set forth in Section 2.10(b) (x).
"HTG Consideration" has the meaning set forth in Section 2.6(a).
"HTG Liabilities" means any and all liabilities (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due, including but not limited to Tax liability), related directly or
indirectly to HTG, the HTG Business or the spin-off of the HTG Business by the
Company (including any and all Tax liabilities of or attributable to the Company
as a result of such spin-off or the failure of the HTG Consideration to be
distributed in accordance herewith), including, without limitation, such
liabilities set forth on Schedule 2.10(b)(x) attached hereto.
"Indemnity Escrow Fund" has the meaning set forth in Section 2.6(c).
"Intellectual Property" means (i) inventions (whether patentable or
unpatentable and whether or not reduced to practice), and all improvements
thereto; (ii) all patents, patent applications and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof (collectively, "Patents"); (iii)
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith (collectively, "Trademarks"),
(iv) copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith and mask works and all applications,
registrations and renewals in connection therewith (collectively, "Copyrights");
(v) trade secrets and confidential business information (including without
limitation, product specifications, data, know-how, inventions and ideas, past,
current and planned research and development, customer lists, current and
anticipated customer requirements, price lists, market studies, business plans),
however documented; (vi) proprietary computer software and programs (including
object code and source code) and other proprietary rights and copies and
tangible embodiments thereof (in whatever form or medium); (vii) database
technologies, systems, structures and architectures (and related processes,
formulae, compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information) and any other
related information, however, documented; (viii) any and all information
concerning the business and affairs of a Person (which includes historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds
of key personnel and personnel training and techniques and materials), however
documented; (ix) any and all notes, analysis, compilations, studies, summaries,
and other material prepared by or for a Person containing or based, in whole or
in part, on any information included in the foregoing, however documented; (x)
all industrial designs and any registrations and applications therefor; (xi) all
databases and data collections and all rights therein (items (v)-(xi) shall be
referred to as "Trade Secrets and Other Proprietary
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Information"); and (xii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
"Interim Financial Statements" means the unaudited balance sheet and the
related unaudited statement of income and retained earnings for each of: (i) the
Combichem Business division; (ii) the HTG Business division (including HTG) and
(iii) the Company, in each case for the eleven (11) month period ended November
30, 2000.
"Knowledge Group" means the executive officers (being Xxxxx Xxxxxxxxx,
Xxxxxxx Xxxxx, Xxxxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxx) and directors of the
Company.
"Knowledge of the Company" or "Known to the Company" means the actual
knowledge of any executive officer (being Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxx) or director of the Company, in each case
after reasonable inquiry and investigation.
"Lease" has the meaning set forth in Section 3.14.
"Letter of Transmittal" has the meaning set forth in Section 2.8.
"Material Adverse Effect" means, for any Person, a material adverse
effect whether individually or in the aggregate (a) on the business, operations,
financial condition, Assets and Properties, liabilities or prospects of such
Person, or (b) on the ability of such Person to consummate the transactions
contemplated hereby; provided, however, that the term "Material Adverse Effect"
shall not include any effect attributable to general economic changes or general
changes in the industry in which the Person is engaged.
"Merger" has the meaning set forth in the first recital of this
Agreement.
"NeoGen" means NeoGen, L.L.C., an Arizona limited liability company.
"NeoGen Agreement" means the Technology License Agreement between the
Company and NeoGen dated November 24, 1997.
"NeoGen Option" means the option to purchase 300,000 shares of Company
Common Stock granted to NeoGen, pursuant to the NeoGen Agreement.
"NeoGen Price" has the meaning set forth in Section 2.6(a).
"NeoGen Release" has the meaning set forth in Section 2.6(a).
"Non-Competition Agreement" has the meaning set forth in Section
2.10(b)(iii).
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Ordinary Course of Business" means the action of a Person that is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
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"Outstanding Common Stock" has the meaning set forth in Section 2.6(a).
"Outstanding Preferred Stock" has the meaning set forth in Section
2.6(a).
"Outstanding Vested Options" has the meaning set forth in Section
2.6(a).
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Group" has the meaning set forth in Section 8.2(a).
"Participating Securities" means the Outstanding Common Stock, the
Outstanding Vested Options, the NeoGen Option and the Outstanding Preferred
Stock.
"Patents" has the meaning set forth in the definition of "Intellectual
Property."
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations and similar consents granted or issued
by any Governmental or Regulatory Authority.
"Permitted Encumbrance" means (a) any Encumbrance for Taxes not yet due
or delinquent, (b) any Encumbrance for Taxes assessments and other charges or
claims with respect to Taxes, the validity of which are being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (c) any minor imperfection of title or
similar Encumbrance which individually or in the aggregate with other such
Encumbrances does not impair the value of the property subject to such
Encumbrance or the use of such property in the conduct of the business of the
Company as it is currently conducted, (d) mechanic's and materialmen's liens for
construction or alterations in progress, (e) statutory liens of landlords and
workmen's, repairmen's warehousemen's and carrier's liens arising in the
Ordinary Course of Business, (f) requirements incurred or other Encumbrances
relating to deposits made in the Ordinary Course of Business in connection with
workers' compensation, unemployment insurance and other similar statutory
requirements and (g) Encumbrances constituted by the terms of the Lease.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workers' compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Pre-Closing Period" has the meaning set forth in Section 8.2(e)(i).
"Preferred Cash Price" has the meaning set forth in Section 2.6(a).
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"Preferred HTG Shares" has the meaning set forth in Section 2.6(a).
"Preferred Stock Consideration" has the meaning set forth in Section
2.6(a).
"Principals Indemnity Fund" has the meaning set forth in Section
8.2(a)(ii).
"Principal Stockholders" has the meaning set forth in the first
paragraph of this Agreement.
"Qualified Plan" means each Benefit Plan which is intended to qualify
under Section 401 of the Code.
"Xxxxxxxxx Escrow Agreement" has the meaning set forth in Section
2.6(c).
"Xxxxxxxxx Escrow Fund" has the meaning set forth in Section 2.6(c).
"Release" has the meaning set forth in Section 2.10(b)(vi).
"Securities Act" means the Securities Act of 1933 as amended, and the
rules and regulations promulgated thereunder.
"Securityholder Representative" has the meaning set forth in Section
2.9.
"Seligmann Trust" means Xxxxx Xxxxxxxxx and Xxxxx Xxxxxxxx, in their
capacities as Trustees of the Xxxxxxxxx-Xxxxxxxx Family Trust U/A/D July 9,
1999.
"Software" has the meaning set forth in Section 3.15(j).
"Securities Certificates" has the meaning set forth in Section 2.8.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" (and, with correlative meaning, "Taxes," "Taxable" and "Taxing")
means (i) any federal, state, local or foreign income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental or Regulatory
Authority responsible for the imposition of any such tax (domestic or foreign),
(ii) any liability for payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined, unitary or
other group for any Taxable period and (iii) any liability for the payment of
any amounts of the type described in (i) or (ii) as a result of any express or
implied obligation to indemnify any other person.
"Tax Losses" has the meaning set forth in Section 8.2(e).
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"Tax Return" means any return, report, information return, schedule or
other document (including any related or supporting information) filed or
required to be filed with respect to any taxing authority with respect to Taxes.
"Third Party Expenses" has the meaning set forth in Section 5.6.
"Trademarks" has the meaning set forth in the definition of
"Intellectual Property."
"Trade Secrets and Other Proprietary Information" has the meaning set
forth in the definition of "Intellectual Property."
"Unvested Company Stock Options" means all options to purchase Company
Common Stock under the Company Stock Option Plan which are unvested as of the
date of this Agreement.
1.2 CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of
this Agreement otherwise requires, (a) words of any gender include each other
gender; (b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; (e) the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or;" and (f) "including" means
"including without limitation." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
ARTICLE II
THE MERGER
2.1 THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the Arizona
Law, Acquisition Co. shall be merged with and into the Company, the separate
corporate existence of Acquisition Co. shall cease and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
2.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing the plan of
merger (which may be a copy of this Agreement) and articles of amendment and
merger in the form required by the Arizona Law (the "Articles of Merger") with
the Arizona Corporation Commission, in accordance with the relevant provisions
of the Arizona Law (the time of such filing (or such later time as may be agreed
in writing by the parties and specified in the Articles of Merger) being the
"Effective Time") as soon as practicable on the Closing Date. Unless the context
otherwise requires, the term "Agreement" as used herein refers collectively to
this Agreement and the Articles of Merger. After the filing of the Articles of
Merger, the parties hereto shall cause the Articles of Merger to be published
and an affidavit thereof to be filed with the Arizona Corporation Commission, as
required by the Arizona Law.
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2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the Arizona Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Acquisition Co. shall vest in the Surviving
Corporation, and all the debts, liabilities, obligations and duties of the
Company and Acquisition Co. shall become the debts, liabilities, obligations and
duties of the Surviving Corporation. The Surviving Corporation shall become a
wholly-owned subsidiary of Parent.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Articles of Incorporation of
Acquisition Co. shall be the Articles of Incorporation of the Surviving
Corporation, except that: (i) Article I thereof shall be amended to read in its
entirety as follows: "The name of the Corporation is Systems Integration Drug
Discovery Company, Inc."; (ii) Article IV regarding the initial Board of
Directors shall be deleted; and (iii) Article VII regarding the incorporator
shall be amended to list the original incorporator(s) of the Company.
(b) At the Effective Time, the Bylaws of Acquisition Co. shall
be the Bylaws of the Surviving Corporation, except that the Bylaws shall be
amended to reflect that the name of the Surviving Corporation shall be "Systems
Integration Drug Discovery Company, Inc."
2.5 DIRECTORS AND OFFICERS. The directors of Acquisition Co. immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of Acquisition Co. immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
to serve until their successors are duly elected or appointed or qualified.
2.6 EFFECT ON CAPITAL STOCK/MERGER CONSIDERATION.
(a) Participating Securities.
(i) At the Effective Time, by virtue of the Merger and
without any action on the part of any Person, each share of the Company Common
Stock issued and outstanding immediately prior to the Effective Time (the
"Outstanding Common Stock"), other than Dissenting Shares, shall be canceled and
automatically converted into the right to receive, upon surrender of the
certificates representing such shares and a Letter of Transmittal, a ratable
portion of Twelve Million Dollars ($12,000,000) (the "Cash Consideration") and
of the outstanding shares of common stock of HTG held by the Company (the "HTG
Consideration"), subject to the following adjustments:
(1) after giving effect to Section 2.6(c)
regarding the Indemnity Escrow Fund and
the Xxxxxxxxx Escrow Fund, after
satisfying Section 5.6 regarding Third
Party Expenses, and after satisfying the
condition set forth in Section 6.3(h)
regarding the Company Indebtedness;
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(2) after taking into account the
entitlements of the Outstanding Vested
Options holders as provided in (ii)
below;
(3) less the NeoGen Price; and
(4) less the Preferred Stock Price.
At the Effective Time, all rights in respect of such
Outstanding Common Stock shall cease to exist, other than the right to receive
the Cash Consideration, and all such shares shall be cancelled and retired.
(ii) At the Effective Time, by virtue of the Merger and
without any action on the part of any Person, each vested option to purchase
Company Common Stock under the Company Stock Option Plan issued and outstanding
immediately prior to the Effective Time including, without limitation, the
Unvested Company Stock Options, after taking into account their acceleration as
required pursuant to Section 6.3(i) hereto (collectively, the "Outstanding
Vested Options"), shall be cancelled and all rights thereof shall cease to exist
(or the Outstanding Vested Options shall be deemed exercised and the underlying
common stock shall cease to exist), except the right to receive, upon surrender
of the certificate representing such options, the same ratable portion of the
Cash Consideration and HTG Consideration as provided under subsection (i) above,
less a cash amount equal to the aggregate exercise price of each such option.
(iii) At the Effective Time, by virtue of the Merger and
without any action on the part of any Person, the NeoGen Option shall be
cancelled and terminated by agreement between the Company and NeoGen in form and
substance satisfactory to Parent and its counsel acting reasonably and in good
faith (the "NeoGen Release") pursuant to which all rights of NeoGen with respect
to the NeoGen Option as against the Company shall cease to exist, except the
right to receive the same ratable portion of the Cash Consideration as provided
under subsection (i) above, less a cash amount equal to $450,000 (being the
aggregate exercise price of the NeoGen Option) (the "NeoGen Price"). For greater
certainty, NeoGen shall have no entitlement to any portion of the Indemnity
Escrow Fund.
(iv) At the Effective Time, by virtue of the Merger and
without any action on the part of any Person, each share of Company Preferred
Stock issued and outstanding immediately prior to the Effective Time (the
"Outstanding Preferred Stock") shall be cancelled and all rights thereof shall
cease to exist, except the right to receive, upon surrender of the certificates
representing such Outstanding Preferred Stock, $750,000 in cash (the "Preferred
Cash Price") and 100,000 shares of common stock of HTG (the "Preferred HTG
Shares"; together with the Preferred Cash Price, the "Preferred Stock
Consideration"). For greater certainty the holder of the Company Preferred Stock
shall have no entitlement to any portion of the Indemnity Escrow Fund.
(b) Actions at the Effective Time. At the Effective Time:
(i) Except for Dissenting Shares and the securities
referred to in Section 2.6(b)(ii) below, each share of Outstanding Common Stock
will automatically, by virtue
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of the Merger and without any action on the part of the holder thereof, be
canceled and converted into a right to receive from Parent the Cash
Consideration and from the Company the HTG Consideration, in the amount as
determined pursuant to this Section 2.6.
(ii) Each share of Company Common Stock held in the
treasury of the Company shall be canceled and retired without payment of any
consideration therefor.
(iii) Each Outstanding Vested Option will automatically,
by virtue of the Merger and without any action on the part of the holder
thereof, be canceled and converted (or be deemed exercised and the underlying
common stock cancelled and converted) into a right to receive from Parent the
Cash Consideration and from the Company the HTG Consideration, in the amount as
determined pursuant to this Section 2.6, less any and all applicable Tax
withholdings.
(iv) The NeoGen Option will automatically, by virtue of
the Merger and without any further action on the part of the holder thereof, be
canceled and converted into a right to receive from Parent the Cash
Consideration, in the amount of the NeoGen Price.
(v) Each share of Outstanding Preferred Stock will
automatically, by virtue of the Merger and without any action on the part of the
holder thereof, be canceled and converted into a right to receive from Parent
the Preferred Cash Price and from the Company the Preferred HTG Shares.
(vi) Each outstanding share of common stock of
Acquisition Co. shall be converted into one (1) fully paid and non-assessable
share of common stock of the Surviving Corporation and shall constitute the only
shares of capital stock of the Surviving Corporation outstanding immediately
after the Effective Time.
(c) Cash Consideration Escrow Holdback/Xxxxxxxxx Escrow Fund.
(i) At the Closing, Parent shall withhold Two Million
Dollars ($2,000,000) (the "Indemnity Escrow Fund") from the Cash Consideration
payable by Parent to the holders of Outstanding Common Stock and the holders of
Outstanding Vested Options as a holdback for any indemnity claims that Parent
may have hereunder. The Indemnity Escrow Fund shall be deposited in escrow for a
period of eighteen (18) months following the Closing Date in accordance with the
terms and provisions hereof and an Escrow Agreement among Parent, the
Securityholder Representative (as defined in Section 2.9 below) the Surviving
Corporation and Xxxxx Fargo Corporate Trust Services (the "Escrow Agent") in a
form to be negotiated among the parties acting reasonably and in good faith (the
"Escrow Agreement").
(ii) At the Closing, Parent shall withhold $90,000 (the
"Xxxxxxxxx Escrow Fund") from the Cash Consideration payable by Parent to the
holders of Outstanding Common Stock and the holders of Outstanding Vested
Options to satisfy any obligations or liabilities of the Company under Section 2
of that certain Settlement Agreement dated December 21, 2000 by and between the
Company and Xxxxxx Xxxxxxxxx, Xx. The Xxxxxxxxx Escrow Fund shall be deposited
in escrow in accordance with the terms and provisions hereof and an escrow
agreement among Parent, the Securityholder Representative and the Escrow Agent
in a form to
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be negotiated among the parties acting reasonably and in good faith (the
"Xxxxxxxxx Escrow Agreement").
2.7 DISSENTERS' RIGHTS. Any of the Outstanding Common Stock and other
capital stock that has not been voted for approval of this Agreement and with
respect to which a demand for payment and appraisal has been properly made in
accordance with the Arizona Law, as applicable ("Dissenting Shares"), will not
be converted into the right to receive the Cash Consideration and the HTG
Consideration otherwise payable with respect to such Dissenting Shares at or
after the Effective Time but will be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the Arizona Law. If a holder of Dissenting Shares
("Dissenting Stockholder") withdraws his or her demand for such payment and
appraisal or becomes ineligible for such payment and appraisal, then, as of the
Effective Time or the occurrence of such event of withdrawal or ineligibility,
whichever last occurs, such holder's Dissenting Shares will cease to be
Dissenting Shares and will be converted into the right to receive, and will be
exchangeable for, the Cash Consideration and HTG Consideration into which such
Dissenting Shares would have been converted pursuant to Section 2.6 hereof. The
Company will give Parent and Acquisition Co. prompt notice of any demand
received by the Company from a holder of Dissenting Shares for appraisal of
shares, and Parent shall have the right to participate in, at its sole expense,
all negotiations and proceedings with respect to such demand. The Company agrees
that, except with the prior written consent of Parent and Acquisition Co., or as
required under the Arizona Law, it will not voluntarily make any payment with
respect to, or settle or offer or agree to settle, any such demand for
appraisal. Each Dissenting Stockholder who, pursuant to the provisions of the
Arizona Law, becomes entitled to payment of the value of the Dissenting Shares
will receive from Parent payment therefor as provided under the Arizona Law. Any
Cash Consideration that would have been payable with respect to Dissenting
Shares will be retained by Parent.
2.8 EXCHANGE PROCEDURE.
(a) Promptly after the Effective Date, Parent shall mail to each
holder of record of a certificate or certificates or a notice of grant or
notices of grant which immediately prior to the Effective Time represented
Participating Securities (the "Securities Certificates") whose securities are
being converted into the Cash Consideration and, if applicable, the HTG
Consideration, pursuant to Section 2.6 hereof (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Securities Certificates shall pass, only upon delivery of the Securities
Certificates to Parent and which shall be in such form and have such other
provisions as Parent may reasonably specify, including appropriate investment
representations) (the "Letter of Transmittal") and (ii) instructions for use in
effecting the surrender of the Securities Certificates in exchange for the Cash
Consideration and, if applicable, the HTG Consideration. Upon surrender of a
Securities Certificate for cancellation to Parent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal
duly executed, the holder of such Securities Certificate shall be entitled to
receive in exchange therefor, the Cash Consideration and, if applicable, the HTG
Consideration, to which the holder of the Participating Securities is entitled
pursuant to Section 2.6 hereof. The Securities Certificate so surrendered shall
forthwith be canceled. No interest will accrue or be paid to the holder of any
Participating Securities. From and after the Effective Date, until surrendered
as contemplated by this Section 2.8, each Securities Certificate shall be deemed
for
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all corporate purposes to evidence the amount of the Cash Consideration and the
HTG Consideration, if applicable, into which the Participating Securities
represented by such Securities Certificate have been converted. Notwithstanding
the foregoing, with respect to a holder of Participating Securities who
surrenders one or more Securities Certificates duly endorsed in blank (or duly
executed stock powers) and Letter of Transmittal on or before the second
Business Day prior to the Closing Date, Parent shall pay to such holder at the
Closing, the Cash Consideration, the Preferred Cash Price and the NeoGen Price,
as applicable, and a mutually agreeable exchange agent with respect to the HTG
Consideration and the Preferred HTG Shares shall deliver to such holder, as
applicable, at the Closing Date, the HTG Consideration and the Preferred HTG
Shares, in each case, if applicable, to which such holder of Participating
Securities is entitled pursuant to Section 2.6 hereof.
(b) The Cash Consideration and the HTG Consideration, if
applicable, delivered upon the surrender for exchange of shares of Participating
Securities in accordance with the terms hereof shall be deemed to have been
delivered in full satisfaction of all rights pertaining to such Participating
Securities. There shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of Participating Securities which
were outstanding immediately prior to the Business Day after the Closing Date.
If, after the Effective Date, Securities Certificates are presented to the
Surviving Corporation, they shall be canceled and promptly exchanged as provided
in this Section 2.8, provided that the presenting holder is listed on the
Company's stockholder list as a holder of Participating Securities.
(c) In the event that any Securities Certificates evidencing
Participating Securities shall have been lost, stolen or destroyed, Parent shall
pay in exchange for such lost, stolen or destroyed Securities Certificates, upon
the making of an affidavit of that fact by the holder thereof, such Cash
Consideration and HTG Consideration as may be required pursuant to Section 2.6
hereof; provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Securities Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
with respect to the Securities Certificates alleged to have been lost, stolen or
destroyed.
(d) Notwithstanding anything to the contrary in this Section
2.8, none of the Parent, the Surviving Corporation or any party hereto shall be
liable to a holder of Participating Securities for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.9 ADDITIONAL ESCROW AND INDEMNITY PROVISIONS. By their approval of the
Merger, each of the Participating Securities holders will be conclusively deemed
to have consented to, approved and agreed to be personally bound by, as
applicable: (i) the Escrow Agreement; (ii) the appointment of Xxxxx Xxxxxxxxx as
the representative of the Participating Securities holders, (the "Securityholder
Representative") and as the attorney-in-fact and agent for and on behalf of each
Participating Securities holder as provided in this Agreement and the Escrow
Agreement; and (iii) the taking by the Securityholder Representative of any and
all actions and the making of any decisions required or permitted to be taken by
the Securityholder Representative under this Agreement and under the Escrow
Agreement. The Securityholder Representative will have authority and power to
act on behalf of each Participating Securities holder with respect to the
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disposition, settlement or other handling of (a) indemnity claims under Article
VIII and (b) all claims governed by the Escrow Agreement, and all rights or
obligations arising under the Escrow Agreement so long as all Participating
Securities holders are treated in a consistent manner in accordance with their
interests and/or consent in writing to different treatment. Each Participating
Securities holder will be bound by all actions taken by the Securityholder
Representative in connection with indemnity claims under Article VIII and the
Escrow Agreement, and Parent will be entitled to rely on any action or decision
of the Securityholder Representative in connection therewith.
2.10 CLOSING.
(a) Time and Place. The consummation of the Merger under this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx, Phleger &
Xxxxxxxx LLP, 00000 Xx Xxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, at 10:00 a.m.
on the earlier to occur of January 12, 2001 and the second Business Day
following the approval of this Agreement and the transactions contemplated
hereby by the Company Stockholders, or at such other time and in such manner as
the parties mutually agree (the "Closing Date").
(b) Closing Deliveries by the Company and Others. At the
Closing, the Company shall have delivered or caused to be delivered to Parent
and/or Acquisition Co., as the case may be:
(i) the Articles of Merger, duly executed by the
Company;
(ii) the Escrow Agreement and the Xxxxxxxxx Escrow
Agreement, each duly executed by the Company and the Securityholder
Representative;
(iii) a Non-Competition Agreement by and between Parent
and Xxxxx Xxxxxxxxx, substantially in the form of Exhibit B (the
"Non-Competition Agreement"), duly executed by Xxxxx Xxxxxxxxx;
(iv) a Sublease and Shared Services Agreement between
the Surviving Corporation and HTG negotiated by such parties in good faith and
acting reasonably and containing the business terms set forth in Exhibit C
attached hereto (the "Sublease") with respect to the sublease of a portion of
the premises subject to the Lease and provision of certain transitional
services, together with any required consents of the landlord under the Lease,
duly executed by HTG and such landlord (if applicable);
(v) a certificate of the Secretary of the Company
certifying as of the Closing Date (A) a true and complete copy of the
organizational documents of the Company certified as of a recent date by the
Arizona Corporation Commission, (B) a certificate of each appropriate Secretary
of State or other officer certifying the good standing of the Company in its
state of incorporation and all states in which it is qualified to do business,
(C) a true and complete copy of the resolutions of the board of directors of the
Company and the resolutions of the stockholders of the Company, each authorizing
the execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby and (D) incumbency matters;
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(vi) a Release by each Principal Stockholder and Aurora
Biosciences Corporation, substantially in the forms of Exhibits D-1 and D-2,
respectively, attached hereto (the "Releases"), duly executed by each Principal
Stockholder and Aurora Biosciences Corporation, as the case may be;
(vii) a Waiver and Release of each of Xxxxx Xxxxxxxxx,
Xxxxxxxxx Xxxxxxxx, Xxxxx Xxxxxx and Xxxxxx Xxxxxxxxx, Xx., duly executed by
each such individual, whereby each such individual shall waive any and all
rights to receive options to purchase capital stock of the Company pursuant to
the resolutions of the Board of Directors of the Company dated June 1, 1998.
(viii) a resignation letter of each of the officers and
directors of the Company, dated effective as of the Closing, resigning solely in
their capacities as such; and a resignation of Xxxxx Xxxxxxxxx, dated effective
as of the Closing, resigning in his capacity as an employee of the Company and
trustee of the Company's 401(k) plan;
(ix) amendments substantially in the form of Exhibit E
hereto of each of the Consortium Agreements;
(x) evidence satisfactory to Parent that the Company has
completed, in a manner and on terms and conditions acceptable to Parent acting
reasonably, the transfer to and assumption by HTG of all of the Company's Assets
and Properties and liabilities (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
but not limited to any liability for Taxes) relating to its Multi-Array Plate
Screening technology, high density miniaturized screening technology and
directed sort (one compound, one support synthesis) technology businesses (the
"HTG Business"), including the assets and liabilities described on Schedule
2.10(b)(x);
(xi) an opinion of each of Torys, transaction counsel to
the Company, and Xxxxx Xxxx, Esq., Arizona counsel to the Company in forms
acceptable to Parent and its counsel acting reasonably and in good faith;
(xii) the NeoGen Release, duly executed by each of
NeoGen and the Company; and
(xiii) a schedule showing the amount of Cash
Consideration and HTG Consideration to be paid or distributed, as the case may
be, to each Person entitled to receive a portion thereof pursuant to the terms
hereof; and
(xiv) such other documents as Parent may reasonably
request for the purpose of facilitating the consummation of the transactions
contemplated herein.
(c) Closing Deliveries By Parent. At the Closing, Parent and/or
Acquisition Co., as the case may be, shall have delivered or caused to be
delivered to the Company and/or the Company Stockholders, as the case may be:
(i) Articles of Merger, duly executed by Acquisition
Co.;
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(ii) the Escrow Agreement and the Xxxxxxxxx Escrow
Agreement, each duly executed by Parent;
(iii) the Non-Competition Agreement, duly executed by
Parent;
(iv) the Sublease, duly executed by the Surviving
Corporation;
(v) a certificate of the Secretary of each of Parent and
Acquisition Co. certifying as of the Closing Date (A) a true and complete copy
of the organizational documents of Parent and Acquisition Co., respectively,
certified as of a recent date by the Secretary of State or other appropriate
officer of their respective states of incorporation, (B) a true and complete
copy of the resolutions of the board of directors of Parent and Acquisition Co.
authorizing the execution, delivery and performance of this Agreement by Parent
and Acquisition Co., respectively, the consummation of the transactions
contemplated hereby, (C) a certificate of each appropriate Secretary of State or
other officer certifying the good standing of the Company and Acquisition Co. in
their respective states of incorporation and (D) incumbency matters;
(vi) the appointment of a trustee for the Company's
401(k) plan to replace Xxxxx Xxxxxxxxx;
(vii) an opinion of Xxxxxxx, Phleger & Xxxxxxxx LLP,
counsel to Parent and Acquisition Co. in a form acceptable to the Company and
its counsel acting reasonably and in good faith; and
(viii) such other documents as the Company may
reasonably request for the purpose of facilitating the consummation of the
transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Acquisition Co. as of
the date hereof, except as set forth on the Company Disclosure Schedule
furnished to Parent specifically identifying the relevant subparagraph hereof,
which exceptions shall be deemed to be representations and warranties as if made
hereunder, as follows:
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Arizona. The Company is duly authorized to conduct business and is in good
standing in each jurisdiction where such qualification is required except for
any jurisdiction where failure so to qualify would not have a Material Adverse
Effect upon the Company. The Company has full power and authority, and holds all
Permits necessary to carry on its business and to own and use the Assets and
Properties owned and used by the Company except where the failure to have such
power and authority or to hold such Permit would not have a Material Adverse
Effect on the Company's business. The Company has delivered to Parent correct
and complete copies of its Articles of Incorporation and Bylaws, each as amended
to date.
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3.2 CAPITAL STOCK OF THE COMPANY.
(a) The authorized capital stock of the Company consists of (i)
10,000,000 shares of common stock, par value $0.001 per share ("Company Common
Stock"), of which 2,667,983 shares are issued and outstanding as of the date
hereof; (ii) no shares of capital stock of the Company in treasury; (iii)
1,000,000 shares of Class A Preferred Stock, $0.01 par value per share (the
"Company Class A Stock"), of which 80,000 shares are issued and outstanding as
of the date hereof; (iv) 1,000,000 shares of Class B Preferred Stock, $0.01 par
value per share (the "Company Class B Stock"), of which no shares are issued and
outstanding as of the date hereof; (v) 1,000,000 shares of Class C Preferred
Stock, $0.01 par value per share (the "Company Class C Stock"), of which no
shares are issued and outstanding as of the date hereof; and (vi) 1,000,000
shares of Class D Preferred Stock, $0.01 par value per share (the "Company Class
D Stock;" and together with the Company Class A Stock, the Company Class B
Stock, the Company Class C Stock, the "Company Preferred Stock"), of which no
shares are issued and outstanding as of the date hereof. Each share of the
issued and outstanding capital stock of the Company is duly authorized, validly
issued, fully paid and nonassessable. Section 3.2(a) of the Company Disclosure
Schedule sets forth a complete and accurate list specifying the number of shares
of Company Common Stock and Company Preferred Stock held by each registered
holder thereof.
(b) Section 3.2(b) of the Company Disclosure Schedule sets forth
a list and description of all subscriptions, options, warrants, calls,
commitments and other rights of any kind for the purchase or acquisition of, and
any securities convertible or exchangeable for, any capital stock of the Company
granted by the Company (collectively, the "Company Convertible Securities"),
including the holder thereof, the number of shares of Company Common Stock
subject thereto, the exercise price and date of grant thereof. Each of such
Company Convertible Securities has been granted in compliance with all
applicable laws, statutes and regulations, whether federal or state.
(c) There are no agreements to which the Company is a party or
by which it is bound with respect to the voting (including voting trusts or
proxies), registration under the Securities Act, or sale or transfer (including
agreements relating to pre-emptive rights, rights of first refusal, co-sale
rights or "drag-along" rights) of any securities of the Company. To the
Knowledge of the Company, there are no agreements among other parties, to which
the Company is not a party and by which it is not bound, with respect to the
voting (including voting trusts or proxies) or sale or transfer (including
agreements relating to rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company.
3.3 OWNERSHIP OF SHARES. Each of the Company Stockholders, owns of
record that number of shares of Company Common Stock listed opposite such
stockholder's name in Section 3.2(a) of the Company Disclosure Schedule. Each
holder of the Company Convertible Securities owns of record the Company
Convertible Securities disclosed with respect to such holder's name in Section
3.2(b) of the Company Disclosure Schedule.
3.4 AUTHORITY OF THE COMPANY. The Company has all necessary corporate
power and corporate authority and has taken all action necessary to enter into
this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder and
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no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than, the approval of this Agreement by the Company Stockholders in
accordance with the Arizona Law, and effecting the Merger). This Agreement has
been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other parties to this Agreement,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
3.5 NO AFFILIATES. Other than HTG or as otherwise set forth in Section
3.5 of the Company Disclosure Schedule, the Company does not have any Affiliates
or subsidiaries and is not a partner in any partnership or a party to a joint
venture.
3.6 NO CONFLICTS. The execution and delivery by the Company of this
Agreement does not, and the performance by the Company of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Articles of Incorporation or Bylaws
of the Company;
(b) conflict with or result in a violation or breach of any term
or provision of any law, Order, Permit, statute, rule or regulation of a
Governmental or Regulatory Authority applicable to the Company, the business or
Assets or Properties of the Company or the capital stock of the Company.
(c) result in a breach of, or default under (or give rise to
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other similar instrument or obligation to which the Company
or any of its Assets and Properties or, to the Knowledge of the Company, the
Company Common Stock may be bound, except for such breaches, defaults, rights of
termination, cancellation or acceleration as set forth in Section 3.6(c) of the
Company Disclosure Schedule; or
(d) result in an imposition or creation of any Encumbrance
(other than a Permitted Encumbrance) on the business or Assets or Properties of
the Company or, to the Knowledge of the Company, the Company Common Stock.
3.7 CONSENTS AND GOVERNMENTAL APPROVALS AND FILINGS. Except with respect
to the Articles of Merger, no consent, approval or other action of, filing with
or notice to any Governmental or Regulatory Authority on the part of the Company
is required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
3.8 BOOKS AND RECORDS. The minute books and other corporate records of
the Company as made available to Parent contain a true and complete record in
all material respects of all actions taken at all meetings and by all written
consents in lieu of meetings of the
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stockholders, the boards of directors and committees of the boards of directors
of the Company. The stock transfer ledgers and other similar records of the
Company accurately reflect all issuances and record transfers in the capital
stock of the Company.
3.9 COMPANY FINANCIAL STATEMENTS. The Company has previously delivered
to Parent the Company Financial Statements. Such Company Financial Statements
have been prepared in conformity with GAAP, and present fairly, in all material
respects, the financial position and results of operations of the Company as of
the respective dates thereof and for the periods covered thereby; provided that
the Interim Financial Statements are subject to normal year-end adjustments and
lack footnotes and certain other presentation items.
3.10 ABSENCE OF CHANGES. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on or prior to the
Closing Date, since November 30, 2000, there has not been any material adverse
change, or any event or development which, individually or together with other
such events, would reasonably be expected to have a Material Adverse Effect on
the Company.
3.11 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 3.11 of
the Company Disclosure Schedule or in the Company Financial Statements, and
except for liabilities incurred after November 30, 2000 in the Ordinary Course
of Business which have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company,
there are no liabilities (whether absolute, contingent, accrued or otherwise)
(including but not limited to any liability for Taxes) that are not so
disclosed, nor, to the Knowledge of the Company, any basis for any claim against
the Company for any such liabilities relating to or affecting the Company or any
of its Assets and Properties.
3.12 TANGIBLE PERSONAL PROPERTY. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under written agreements to use, all tangible personal property,
equipment, plants, buildings, structures, facilities and all other tangible
Assets and Properties (for greater certainty excluding Intellectual Property)
used in or reasonably necessary for the conduct of the Combichem Business,
including all tangible personal property reflected on the Company Financial
Statements and any tangible personal property acquired since that date other
than property disposed of since such date in the Ordinary Course of Business.
All such tangible personal property, equipment, plants, buildings, structures,
facilities and all other tangible Assets and Properties of the Company as of
November 30, 2000 having a depreciated value in excess of $1,000 are listed in
Section 3.12 of the Company Disclosure Schedule and are free and clear of all
Encumbrances, other than Permitted Encumbrances and such other Encumbrances as
are set forth in Section 3.12 of the Company Disclosure Schedule.
3.13 BENEFIT PLANS; ERISA.
(a) Section 3.13(a) of the Company Disclosure Schedule lists
each Benefit Plan. The Company has no commitment, proposal, or communication to
employees regarding the creation of an additional Plan or any increase in
benefits under any Benefit Plan. The Company has provided to Parent (i) a copy
of each Benefit Plan (including amendments) or, where substantially similar
arrangements exist, a sample copy and a list of persons participating
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in such arrangement and (ii) the most recent annual reports on the Form 5500
series for each Benefit Plan required to file such report.
(b) Neither the Company, an ERISA Affiliate or predecessor
thereof has ever maintained, contributed to or been obligated to contribute to
any Defined Benefit Plan or multiemployer plan (as defined in Section (3)(37) or
4001(a)(3) of ERISA) and no condition exists that presents a material risk to
the Company or an ERISA Affiliate of incurring a liability under Title IV of
ERISA.
(c) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and, as of the Closing Date, will
be in compliance in all material respects, in form and operation, with all
applicable laws (including but not limited to ERISA and the Code).
(d) Each Qualified Plan as required qualifies under Section
401(a) of the Code.
(e) No Benefit Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees of the Company or any ERISA Affiliate beyond their
termination of service (other than (i) coverage mandated by applicable law, (ii)
benefits under a Qualified Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or any ERISA Affiliate or (iv) benefits
the full cost of which is borne by any current or former employee (or his or her
beneficiary)).
(f) Except as set forth in Section 3.12(f) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not, either immediately or upon the occurrence of any event
thereafter, (i) entitle any current or former employee or officer or director of
the Company or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment, or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation otherwise due any such individual.
(g) There are no pending or, to the Knowledge of the Company,
anticipated or threatened claims by or on behalf of any Benefit Plan, by any
employee or beneficiary covered under any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits).
3.14 REAL PROPERTY. The Company does not own any real property. Section
3.14 of the Company Disclosure Schedule contains a complete and accurate list of
all documents comprising the real property lease entered into by the Company (as
lessee or lessor) (the "Lease"). The Company has a valid leasehold interest
pursuant to the Lease in all real property used in the operation of the
Company's business as currently conducted. The Company has rights of ingress and
egress with respect to the real property subject to the Lease, and all
buildings, structures and facilities thereon material for the operation of the
Company's business as currently conducted. To the Knowledge of the Company there
is no pending, contemplated or threatened condemnation of any of the parcels of
real property subject to the Lease or any part thereof. To the Knowledge of the
Company, none of such real property, buildings, structures,
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facilities, fixtures or other improvements, or the Company's current use
thereof, contravenes or violates any building, zoning, fire protection,
administrative, occupational safety and health or other applicable law, rule, or
regulation except for any contravention or violation which individually or in
the aggregate would not reasonably be expected to have a Material Adverse Effect
on the Company. The Lease is a legal, valid and binding agreement of the Company
subsisting in full force and effect enforceable in accordance with its terms,
and there is no, and the Company has not received notice of any material default
(or any condition or event which, after notice or lapse of time or both, would
constitute a material default) thereunder.
3.15 INTELLECTUAL PROPERTY RIGHTS.
(a) Generally. Section 3.15(a) of the Company Disclosure
Schedule sets forth, for the Intellectual Property owned by the Company, in
whole or in part, including jointly with others (such schedule specifies if such
Intellectual Property is owned jointly), a complete and accurate list of all
United States and foreign (a) Patents and Patent applications; (b) Trademark
registrations and applications and unregistered Trademarks; and (c) copyright
registrations and applications, indicating for each, the applicable
jurisdiction, registration number (or application number) and date issued (or
date filed).
(b) Trademarks.
(i) The Company owns no registered Trademarks and has no
applications therefor.
(c) Patents.
(i) All of the Company's Patents are currently in
compliance with legal requirements (including payment of filing, examination,
and maintenance fees and proofs of working or use) other than any requirement
that, if not satisfied, would not result in a revocation or lapse or otherwise
affect the enforceability of the Patent in question.
(ii) None of the Company's Patents has been or is now
involved in any interference, reissue, reexamination or opposing proceeding in
the United States Patent and Trademark Office or any foreign patent office and
no such action has been threatened in writing to the Company or its counsel
within the one (1)-year period prior to the date of this Agreement.
(iii) To the Knowledge of the Company, there is no
Patent of any person that claims the same subject matter as any Patent of the
Company or invalidates any claim of any Patent of the Company.
(d) Trade Secrets and Other Proprietary Information. Section
3.15(d) of the Company Disclosure Schedule contains a list of each of the
current employees and consultants of the Company who have not executed a
proprietary information and confidentiality agreement substantially in the
Company's standard form that protects the Intellectual Property of the Company.
Except under confidentiality obligations, to the Knowledge of the Company, there
has been no disclosure by the Company of confidential information or Trade
Secrets and Other Proprietary Information. Subject to the disclosure set forth
in Section 3.15(i) of the Company Disclosure Schedule, the Company has taken all
reasonable steps necessary to enforce the
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proprietary information and confidentiality agreements that have been entered
into by its employees, consultants, contractors and other entities.
(e) License Agreements. Section 3.15(e)(1) of the Company
Disclosure Schedule sets forth a complete and accurate list of all material
license agreements granting to the Company any right to use or practice any
rights under any Intellectual Property (other than over-the-counter "shrink
wrap" software, other commercially available software programs having a value of
$5,000 per license or less and software programs embedded in equipment used by
the Company) (collectively, the "Inbound License Agreements"), indicating for
each the title and the parties thereto. Section 3.15(e)(2) of the Company
Disclosure Schedule also sets forth a complete and accurate list of all license
agreements under which the Company grants licenses or other rights in or to use
or practice any rights under any Intellectual Property, other than pursuant to
the sales of products in the Ordinary Course of Business (collectively, the
"Outbound License Agreements"), indicating for each the title and the parties
thereto. Except as set forth in Section 3.15(e)(3) of the Company Disclosure
Schedule, there is no outstanding or, to the Knowledge of the Company,
threatened material dispute or disagreement with respect to any Inbound License
Agreement or any Outbound License Agreement.
(f) Ownership and Other Rights; Sufficiency of Intellectual
Property Assets. Except as set forth in Section 3.15(f) of the Company
Disclosure Schedule, to the Knowledge of the Company, the Company owns or
possesses adequate licenses, re-marketing or sublicensing rights, or other
rights to use, free and clear of Encumbrances (other than Permitted
Encumbrances), Orders and arbitration awards, all of its Intellectual Property
used in the conduct of the Company's business as presently conducted. The
Intellectual Property of the Company, including the Company's Trade Secrets and
Other Proprietary Information and the Company's unregistered Copyrights and
rights granted to the Company under the Inbound License Agreements, constitute
all the Intellectual Property rights and Inbound License Agreements material to
the conduct of the Combichem Business as presently conducted and, to the
Knowledge of the Company, are all such Intellectual Property rights and Inbound
License Agreements necessary to operate such business after the Effective Time
in substantially the same manner as such business has been operated by the
Company prior thereto.
(g) No Infringement by the Company. Except as disclosed in
Section 3.15(g) of the Company Disclosure Schedule, to the Knowledge of the
Company, the products used, manufactured, marketed, sold or licensed by the
Company, and all Intellectual Property material to the conduct of the Company's
business as currently conducted, do not infringe upon, violate or constitute the
unauthorized use of any rights owned or controlled by any third party, including
any Intellectual Property of any third party.
(h) No Pending or Threatened Infringement Claims. No litigation
is now or, within the three (3) years prior to the date of this Agreement, was
pending and no notice or other claim in writing has been received by the
Company, (A) alleging that the Company has engaged in any activity or conduct
that infringes upon, violates or constitutes the unauthorized use of the
Intellectual Property rights of any third party or (B) challenging the
ownership, use, validity or enforceability of any Intellectual Property owned or
exclusively licensed by or to the Company. No Intellectual Property that is
owned or licensed by the Company is subject to any outstanding Order,
stipulation or agreement, except as disclosed in the Inbound License Agreements
and
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Outbound License Agreements, restricting the use thereof by the Company or, in
the case of Intellectual Property licensed by the Company to others, restricting
the sale, transfer, assignment or licensing thereof by the Company to any
Person.
(i) No Infringement by Third Parties. Except as set forth in
Section 3.15(i) of the Company Disclosure Schedule, to the Knowledge of the
Company, no third party is misappropriating, infringing, or violating any
Intellectual Property owned or exclusively licensed by the Company, and no such
claims have been brought against any third party by the Company.
(j) Software. The Software (as defined below) owned or purported
to be owned by the Company, was either (i) developed by employees of the Company
within the scope of their employment; (ii) developed by independent contractors
who have assigned their rights to the Company pursuant to written agreements; or
(iii) otherwise acquired by the Company from a third party. Such Software does
not contain any programming code, documentation or other materials or
development environments that embody Intellectual Property rights of any person
other than the Company, except for such materials or development environments
obtained by the Company from other persons who make such materials or
development environments generally available to all interested purchasers or
end-users on standard commercial terms. For purposes of this Section 3.15(j),
"Software" means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise, (iii)
descriptions, schematics, flow-charts and other work product used to design,
plan, organize and develop any of the foregoing, and (iv) all documentation,
including user manuals and training materials, relating to any of the foregoing.
3.16 PROPRIETARY INFORMATION OF THIRD PARTIES. No third party has
claimed to any member of the Knowledge Group of the Company or, to the Knowledge
of the Company, has reason to claim that any person employed by the Company or
retained by the Company as a consultant or contractor in connection with and
during the Company's ownership and operation of its business has (i) violated or
may be violating any of the terms or conditions of such person's employment,
non-competition or non-disclosure agreement with such third party, (ii)
disclosed or may be disclosing or utilized or may be utilizing any Trade Secrets
and Other Proprietary Information or documentation of such third party, or (iii)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which relates to such a claim. To the
Knowledge of the Company, no person employed by the Company or retained by the
Company as a consultant or contractor in connection with and during the
Company's ownership and operation of its business has employed or proposes to
employ any trade secret or any information or documentation proprietary to any
former employer and, to the Knowledge of the Company, no person employed by the
Company or retained by the Company as a consultant or contractor in connection
with and during the Company's ownership and operation of its business has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any service or
proposed service of the Company, and to the Knowledge of the Company, there is
no reason to believe there will be any such employment or violation.
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3.17 LITIGATION. There are no Actions or Proceedings pending or, to the
Knowledge of the Company, threatened to any member of the Knowledge Group
against the Company, relating to or affecting (i) the Company, its Assets and
Properties or the Company's business, or (ii) the transactions contemplated by
this Agreement, and, to the Knowledge of the Company, there is no basis for any
such Action or Proceeding. The Company is not in default with respect to any
Order, and there are no unsatisfied judgments against the Company.
3.18 COMPLIANCE WITH LAW. The Company is in compliance with all
applicable laws, statutes, Orders, ordinances and regulations, whether federal,
state, local or foreign, except where the failure to comply, in each instance
and in the aggregate, would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company has not received any written notice
to the effect that, and no member of the Knowledge Group has been advised that,
the Company is not in compliance with any of such laws, statutes, Orders,
ordinances or regulations, where the failure to comply would reasonably be
expected to have a Material Adverse Effect on the Company.
3.19 CONTRACTS.
(a) Section 3.19 of the Company Disclosure Schedule sets forth a
true and complete list of each of the following contracts, agreements or other
arrangements to which the Company is a party or by which any of its Assets and
Properties is bound (and, to the extent oral, accurately describes the terms of
such contracts, agreements and arrangements):
(i) all collective bargaining or similar labor
agreements;
(ii) all contracts for the employment of any officer,
employee or other person or entity on a full time, part time, consulting or
other basis;
(iii) all loan agreements, indentures, debentures, notes
or letters of credit relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any material asset or material group of
assets of the Company;
(iv) all guarantees of the obligations of third parties;
(v) except for contracts and legally binding commitments
which have been disclosed anywhere in the Company Disclosure Schedule and for
which a true and complete copy has been provided to Parent, all commitments,
contracts, sales contracts, purchase orders, mortgage agreements which require
the Company to pay more than $25,000 in the aggregate over the remaining term of
the agreement, except for purchase and sales orders entered into in the Ordinary
Course of Business;
(vi) except for contracts and legally binding
commitments which have been disclosed anywhere in the Company Disclosure
Schedule and for which a true and complete copy has been provided to Parent, all
contracts or legally binding commitments that in any way restrict the Company
from carrying on its business anywhere in the world as it is currently
conducted; and
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(vii) all contracts or legally binding commitments that
in any way grant a third party a right of first refusal for the purchase of the
Company or any of its Assets or Properties.
(b) A correct and complete copy of each contract or agreement
disclosed in the Company Disclosure Schedule has been previously provided to
Parent. Except as set forth in Section 3.19(b) of the Company Disclosure
Schedule, each contract or agreement disclosed in the Company Disclosure
Schedule is in full force and effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of the Company, and to the
Knowledge of the Company, the other parties thereto; and the Company has
performed in all material respects all of its required obligations under, and is
not in violation or breach of or default under, any such contract or agreement.
To the Knowledge of the Company, the other parties to any such contract or
agreement are not in violation or breach of or default under any such contract
or agreement.
3.20 ENVIRONMENTAL MATTERS.
(a) The Company is in compliance with all applicable
"Environmental Laws" (as defined below) and, to the Knowledge of the Company,
there are no circumstances which are reasonably likely to materially prevent or
interfere with such compliance in the future. To the Knowledge of the Company,
the Company has not received any communication (whether written or oral),
whether from a Governmental or Regulatory Authority, citizen group, employee or
otherwise, that alleges that the Company or any of the Assets or Properties used
in the Company's business as currently conducted is not in full compliance with
Environmental Laws. All Permits, registrations and other governmental
authorizations currently held by the Company pursuant to Environmental Laws
(collectively, "Environmental Permits") are identified in Section 3.20(a) of the
Company Disclosure Schedule and represent all material Environmental Permits
necessary for the conduct of its business as currently conducted. The Company
has not been notified by any relevant Governmental or Regulatory Authority that
any Environmental Permit will be modified, suspended or revoked or cannot be
renewed in the Ordinary Course of Business, and, to the Knowledge of the
Company, no Environmental Permit will be modified, suspended or revoked, or
cannot be renewed in the Ordinary Course of Business of the Company.
(b) There is no "Environmental Notice" (as defined below) that
has been (i) received by the Company, (ii) to the Knowledge of the Company,
threatened against the Company or (iii) to the Knowledge of the Company, pending
or threatened against any Person whose liability for such Environmental Notice
may have been retained or assumed by or could reasonably be imputed or
attributed to the Company.
(c) There are no past or present actions, activities,
circumstances, conditions, events or incidents arising from the operation,
ownership or use of any property operated or used by the Company during the
Company's operation, ownership or use thereof, including, without limitation,
the release, emission, discharge or disposal of any "Material" (as defined
below) into the "Environment" (as defined below), that (i) would reasonably be
expected to result in the incurrence of costs under Environmental Laws or (ii)
would reasonably be expected to form the basis of any Environmental Notice
against or with respect to the Company or against any Person
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whose liability for any Environmental Notice may have been retained or assumed
by or could be imputed or attributed to the Company.
(d) Without in any way limiting the generality of the foregoing,
to the Knowledge of the Company (i) all underground storage tanks located on
property leased or used by the Company are identified in the Phase II
Environmental Site Assessment Report identified in Section 3.20(d) of the
Company Disclosure Schedule (the "Environmental Report"), (ii) there is no
friable asbestos contained in or forming part of any building, building
component, structure or office space leased or used by the Company except as
identified in the Environmental Report, (iii) no polychlorinated biphenyls
(PCB's) are used or stored on any property leased or used by the Company except
as identified in the Environmental Report and (iv) all locations leased or used
by the Company at which any Material generated, used, owned or controlled by the
Company or any former Affiliate of the Company (or by any previous owner or
operator) may have been disposed of or released into the Environment are
identified in Section 3.20(d) of the Company Disclosure Schedule.
(e) For purposes of this Section 3.20:
(i) "Environment" means any surface water, ground water,
drinking water supply, land surface or subsurface strata and ambient air.
(ii) "Environmental Notice" means any written notice by
any Person alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental costs,
harm or damages to person, property, natural resources or other fines or
penalties) arising out of, based on or resulting from (a) the emission,
discharge, disposal, release or threatened release in or into the Environment of
any Material or (b) circumstances forming the basis of any violation, or alleged
violation, of any applicable Environmental Law.
(iii) "Environmental Laws" means all national, state and
local laws, codes, regulations, common law, requirements, directives, Orders,
and judicial interpretations thereof, all as in effect on the date hereof or on
the Closing Date, that may be enforced by any Governmental or Regulatory
Authority, relating to pollution, the protection of the Environment or the
emission, discharge, disposal, release or threatened release of Materials in or
into the Environment.
(iv) "Material" means pollutants, contaminants or
chemical, industrial, hazardous or toxic materials or wastes, including, without
limitation, petroleum and petroleum products.
3.21 INVENTORY. The inventory of the Company is usable at its carrying
value in the Ordinary Course of Business. To the Knowledge of the Company, there
is no material adverse condition affecting the supply of materials available to
the Company and used in the operation of the Company's business as currently
conducted, except for supply issues affecting the Combichem industry generally.
3.22 ACCOUNTS RECEIVABLE. The accounts receivable and all other
receivables shown on the Company Financial Statements (subject to reserves for
noncollectability as reflected
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therein which reserves (if any) are in accordance with GAAP), and all
receivables acquired or generated by the Company since November 30, 2000 are
bona fide receivables and represent amounts due with respect to actual,
arms-length transactions entered into in the Ordinary Course of Business of the
Company and are legal, valid and binding obligations of the obligors therefor.
3.23 EQUIPMENT. All tangible personal property and equipment used by the
Company in the conduct of its business are in reasonable operating condition and
repair (subject to normal wear and tear) having regard to its current use
3.24 INSURANCE. Set forth in Section 3.24(1) of the Company Disclosure
Schedule is a complete and accurate list of all primary, excess and umbrella
policies, bonds and other forms of insurance currently owned or held by or on
behalf of and/or providing insurance coverage to the Company or the Assets and
Properties of the Company (or any of the Company's directors, officers,
salespersons, agents or employees). All policies set forth on the Company
Disclosure Schedule are in full force and effect, and with respect to such
policies, all premiums currently payable or previously due have been paid, and
no notice of cancellation or termination has been received by the Company with
respect to any such policy. All such policies are sufficient for material
compliance with all requirements of law and all agreements to which the Company
is a party or otherwise bound, and are valid, outstanding, collectible and
enforceable policies. Except as disclosed in Section 3.24(2) of the Company
Disclosure Schedule, none of such policies contains a provision that would
permit the termination, limitation, lapse, exclusion or change in the terms of
coverage of such policy (including, without limitation, a change in the limits
of liability) by reason of the consummation of the transactions contemplated by
this Agreement. Complete and accurate copies of all such policies and related
documentation have previously been provided to the Parent.
3.25 TAX MATTERS.
(a) The Company has filed on a timely basis all Tax Returns that
it was required to file, and all such Tax Returns were complete and accurate in
all material respects. The Company is not and has never been a member of a group
of corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns other than with HTG. The Company has paid on a
timely basis all Taxes that were due and payable. The unpaid Taxes of the
Company for tax periods through November 30, 2000 do not exceed the accruals and
reserves for Taxes (excluding accruals and reserves for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the November 30, 2000 balance sheets included in the Interim Financial
Statements. The Company has no actual or potential liability for any Tax
obligation of any other taxpayer (including any affiliated group of corporations
or other entities that included the Company during a prior period). All Taxes
that the Company is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.
(b) The Company has delivered to Parent complete and accurate
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company. The Company has
delivered to Parent complete and accurate copies of all other Tax Returns of the
Company, together with all related examination reports and statements of
deficiency for all periods from and after incorporation. To the Knowledge of the
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Company, no examination or audit of any Tax Return of the Company by any
Governmental Entity is currently in progress or threatened. The Company has not
been informed by any jurisdiction that the jurisdiction believes that the
Company was required to file any Tax Return that was not filed. The Company has
not waived any statute of limitations with respect to Taxes or agreed to an
extension of time with respect to a Tax assessment or deficiency..
(c) The Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code, and none of its assets is subject to an
election under Section 341(f) of the Code. The Company has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(l)(A)(ii)
of the Code. It has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that could obligate it to make any
payments that may be treated as an "excess parachute payment" under Section 280G
of the Code. It has no actual or potential liability for any Taxes of any person
(other than the Company) under Treasury Regulation Section 1.1502-6 (or any
similar provision of federal, state, local, or foreign law), or as a transferee
or successor, by contract, or otherwise. It is not and has not been required to
make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or
Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (iii) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(e) The Company has not undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481 of the Code
(f) No state or federal "net operating loss" of the Company
determined as of the Closing Date will be subject to limitation on its use
pursuant to Section 382 of the Code or comparable provisions of state law as a
result of any "ownership change" within the meaning of Section 382(g) of the
Code or comparable provisions of any state law occurring prior to the Closing
Date.
3.26 LABOR AND EMPLOYMENT RELATIONS. Except for the transactions to take
place pursuant hereto, to the Knowledge of the Company, no officer or group of
five (5) or more employees, acting as a group, of the Company has or have
decided to terminate his, her or their employment with the Company. The Company
is not a party to or bound by any collective bargaining agreement with any labor
organization, group or association covering any of its employees and, to the
Knowledge of the Company, there are no attempts to organize any of the Company's
employees by any person, unit or group seeking to act as their bargaining agent.
The Company has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining, discrimination against
race, color, national origin, religious creed, physical or mental disability,
sex, age, ancestry, medical condition, marital status or sexual orientation, and
the withholding and payment of social security and other Taxes. There are no
pending or, to the Knowledge of the Company, threatened charges made to a member
of the Knowledge Group
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(by employees, their representatives or governmental authorities) of unfair
labor practices or of employment discrimination or of any other wrongful action
with respect to any aspect of employment of any person employed or formerly
employed by the Company. To the Knowledge of the Company, no union
representation elections relating to the Company's employees have been scheduled
by any Governmental or Regulatory Authority and no investigation of the
Company's employment policies or practices by any Governmental or Regulatory
Authority is pending or threatened. The Company is not currently, and in the
past has not been, involved in labor negotiations with any unit or group seeking
to become the bargaining unit for any employees of the Company. The Company has
never experienced any work stoppages and to the Knowledge of the Company, no
work stoppage has been threatened or is planned by its employees.
3.27 CERTAIN EMPLOYEES. Set forth in Section 3.27(1)of the Company
Disclosure Schedule is a list of the names of the Company's employees as of the
date hereof, together with the title or job classification of each such person
and the total compensation (with wages and bonuses, if any, separately detailed)
paid in 2000 and the current rate of pay for each such person on the date of
this Agreement. Except as set forth in Section 3.27(2) of the Company Disclosure
Schedule and as required by law, none of such persons has an employment
agreement or understanding, whether oral or written, with the Company which is
not terminable on notice by the Company without cost or other liability to the
Company.
3.28 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the execution and
delivery of this Agreement and the transactions to take place pursuant hereto on
or prior to the Closing Date and except as set forth in Section 3.28 of the
Company Disclosure Schedule, since November 30, 2000, the Company has not:
(a) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(b) borrowed any amount or obtained any letters of credit in
excess of Twenty-Five Thousand Dollars ($25,000) in the aggregate;
(c) discharged or satisfied any material lien or Encumbrance or
paid any obligation or liability, other than current liabilities paid in the
Ordinary Course of Business and other than current federal income Tax
liabilities;
(d) declared or made any payment or distribution of cash or
other property to shareholders with respect to its stock, or purchased or
redeemed any shares of its capital stock;
(e) mortgaged or pledged any of its Assets or Properties, or
subjected them to any lien, charge or any other Encumbrance, except Permitted
Encumbrances;
(f) sold, leased, subleased, assigned or transferred any of its
Assets or Properties, except in the Ordinary Course of Business, or cancelled
any debts or claims in excess of Twenty-Five Thousand Dollars ($25,000);
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(g) made any changes in any employee compensation, severance or
termination agreement, commitment or transaction other than routine salary
increases and promotions in the Ordinary Course of Business or offered
employment to any individuals;
(h) entered into any material transaction, or modified any
existing transaction (the aggregate consideration for which is in excess of
Twenty-Five Thousand Dollars ($25,000));
(i) suffered any material damage, destruction or casualty loss,
not covered by insurance;
(j) made any capital expenditures, additions or improvements or
commitments for the same, except those made in the Ordinary Course of Business,
which in the aggregate exceed Twenty-Five Thousand Dollars ($25,000);
(k) entered into any transaction or operated the Company's
business, not in the Ordinary Course of Business;
(l) made any change in its accounting methods or practices
(unless required by GAAP) or ceased making accruals for taxes, obsolete
inventory, vacation and other customary accruals;
(m) ceased from reserving cash to pay taxes, principal and
interest on borrowed funds, and other customary expenses and payments;
(n) made any reevaluation of any of its Assets or Properties;
(o) entered into any amendment or termination of any lease,
customer or supplier contract or other material contract or agreement to which
it is a party, other than in the Ordinary Course of Business;
(p) made any material change in any of its business policies,
including, without limitation, advertising, distributing, marketing, pricing,
purchasing, personnel, sales, returns, budget or product acquisition or sale
policies;
(q) terminated or failed to renew, or received any written
threat (that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the Company's business as
currently conducted or its financial condition;
(r) permitted to occur or be made any other event or condition
of any character which has had a Material Adverse Effect on the Company;
(s) waived any rights material to its financial or business
condition;
(t) made any illegal payment or rebates; or
(u) entered into any agreement to do any of the foregoing.
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3.29 CUSTOMERS. The Company has previously provided or made available to
Parent a true and correct list of the Company's current material customers and
the Company's material customers during the 1998 and 1999 fiscal years related
to the Combichem Business. Except as set forth on Schedule 3.29 of the Company
Disclosure Schedule, since January 1, 2000, no single customer or group of
affiliated customers contributing more than Ten Thousand Dollars ($10,000) per
annum to the gross revenues of the Combichem Business has stopped doing business
with the Company, and no such customer has given notice to a member of the
Knowledge Group of an intention to discontinue doing business or reduce the
level of gross revenues from that in fiscal year 2000 with the Company.
3.30 BANK ACCOUNTS. Section 3.30 of the Company Disclosure Schedule
contains a complete and accurate list of each deposit or asset account
maintained by or on behalf of the Company with any bank, brokerage house or
other financial institution, specifying with respect to each the name and
address of the institution, the name under which the account is maintained, the
account number, and the name of each Person authorized to have access thereto.
3.31 PERMITS. Section 3.31 of the Company Disclosure Schedule contains a
true and complete list of all Permits used in and material, individually or in
the aggregate, to the Company's business as currently conducted. All such
Permits are currently effective and valid and have been validly issued. No
additional Permits are necessary to enable the Company to conduct its business
in material compliance with all applicable federal, state and local laws. To the
Knowledge of the Company, there is no pending Action or Proceeding by any
Governmental or Regulatory Authority which could affect such Permits in any
material respect or their sufficiency for the current conduct of the Company's
business or of the conduct of the Company's business after the Closing. The
Company has provided or made available to Parent true and complete copies of
such Permits.
3.32 THIRD PARTY CONSENTS. No consent, approval or authorization of any
third party is required in connection with the consummation of the transactions
contemplated hereunder except as otherwise provided in Section 3.32 of the
Company Disclosure Schedule or explicitly provided for in this Agreement.
3.33 BROKERS. Except as set forth in Section 3.34 of the Company
Disclosure Schedule, neither the Principal Stockholders nor the Company has
retained any broker in connection with the transactions contemplated hereunder.
Parent has, and will have, no obligation to pay any broker's, finder's,
investment banker's, financial advisor's or similar fee in connection with this
Agreement or the transactions contemplated hereby by reason of any action taken
by or on behalf of the Principal Stockholders or the Company.
3.34 HTG. The Board of Directors of the Company has determined in good
faith that the aggregate fair market value of HTG shall not be in excess of
$300,000.
3.35 COMPANY STOCK OPTION PLAN AMENDMENTS. Any and all amendments and
modifications to the Company Stock Option Plan made or to be made in connection
with the transactions contemplated hereby have been made (or will be made) in
compliance with all applicable laws, statutes and regulations, whether federal
or state.
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3.36 KNOWLEDGE. Each member of the Knowledge Group has exercised
reasonable inquiry and investigation with respect to those representations and
warranties set forth in this Article III which are qualified by the phrase "to
the Knowledge of the Company."
3.37 MATERIAL MISSTATEMENTS AND OMISSIONS. The statements,
representations and warranties of the Company and the Principal Stockholders
contained in this Agreement (including the exhibits and schedules hereto) and in
each document, statement, certificate or exhibit furnished or to be furnished by
or on behalf of the Company and the Principal Stockholders pursuant hereto, or
in connection with the transactions contemplated hereby, taken together, do not
contain and will not contain any untrue statement of a material fact and do not
or will not omit to state a material fact necessary to make the statements or
facts contained herein or therein, in light of the circumstances made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CO.
Parent and Acquisition Co., jointly and severally, represent and warrant
to the Company as of the date hereof and as of the Closing Date, as follows:
4.1 ORGANIZATION. Each of Parent and Acquisition Co. is a corporation
duly organized, validly existing, and in good standing under the laws of its
state of incorporation. Each of Parent and Acquisition Co. has the requisite
power and authority to carry on its respective business and own its Assets and
Properties except where failure to have such power and authority would not have
a Material Adverse Effect on Parent or Acquisition Co., respectively. Each of
Parent and Acquisition Co. is duly qualified to conduct its respective business
and is in good standing under the laws of each jurisdiction where such
qualification is required except for any jurisdiction where failure so to
qualify would not have a Material Adverse Effect upon Parent or Acquisition Co.,
as the case may be.
4.2 AUTHORITY. Each of Parent and Acquisition Co. has all necessary
corporate power and corporate authority and has taken all corporate action
necessary to enter into this Agreement, to consummate the transactions
contemplated hereby and to perform its respective obligations hereunder and no
other proceedings on the part of Parent or Acquisition Co. are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and Acquisition Co. and (assuming due authorization, execution and
delivery by the other parties to this Agreement) constitutes a legal, valid and
binding obligation of each of Parent and Acquisition Co., respectively,
enforceable against each of Parent and Acquisition Co. in accordance with its
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
4.3 LITIGATION. There are no Actions or Proceedings pending or, to the
Knowledge of Parent or Acquisition Co., threatened against either Parent or
Acquisition Co., relating to or
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affecting the transactions contemplated by this Agreement and, to the Knowledge
of each of Parent or Acquisition Co., there is no basis for any such Action or
Proceeding.
4.4 REPORTS AND FINANCIAL STATEMENTS. Parent has previously furnished or
made available to the Company (via the SEC's XXXXX filing system) complete and
accurate copies, as amended or supplemented, of its (a) Form 10-Q for the period
ended September 30, 2000 as filed with the Securities and Exchange Commission
("SEC") and (b) all other reports filed by Parent under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act (such reports are
collectively referred to herein as the "Parent Reports"). The Parent Reports
constitute all of the documents required to be filed by Parent under Section 13
or subsections (a) or (c) of Section 14 of the Exchange Act with the SEC since
the date of its initial public offering through the date of this Agreement. The
Parent Reports have been duly filed, were in compliance in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder when filed, and were complete and correct in all material respects as
of the dates at which the information therein was furnished. As of their
respective dates, the Parent Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of Parent included in the Parent Reports
(i) complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto when filed, (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of Parent as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of
Parent. Since the date of the filing with the SEC of Parent's most recent Form
10-Q, there has been no material adverse change in the financial condition or
results operations of Parent that has resulted in a material adverse change in
the businesses, assets, properties, operations or condition (financial or
otherwise) of Parent.
4.5 BROKERS. Neither Parent nor Acquisition Co. has retained any broker
in connection with the transactions contemplated hereunder. Neither the Company
nor the Principal Stockholders has, and will have, any obligation to pay any
broker's, finder's investment banker's, financial advisor's or similar fee in
connection with this Agreement or the transactions contemplated hereby by reason
of any action taken by or on behalf of Parent or Acquisition Co.
4.6 NO CONFLICTS. The execution and delivery by Parent and Acquisition
Co. of this Agreement does not, and the performance by the Company and
Acquisition Co. of their obligations under this Agreement and the consummation
of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or
Bylaws of Parent and Acquisition Co.;
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(b) conflict with or result in a violation or breach of any term
or provision of any law, Order, Permit, statute, rule or regulation of a
Governmental or Regulatory Authority applicable to Parent or Acquisition Co.,
the business or Assets or Properties of Parent or Acquisition Co. or the capital
stock of Parent or Acquisition Co.; or
(c) result in a material breach of, or constitute a material
default under (or give rise to right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, license, agreement, lease or other similar
instrument or obligation to which Parent or Acquisition Co. or any of their
Assets and Properties may be bound.
4.7 CONSENTS AND GOVERNMENTAL APPROVALS AND FILINGS. Except with respect
to the Articles of Merger, no consent, approval or other action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Parent or
Acquisition Co. is required in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
4.8 FINANCING. Parent has all funds necessary to pay the Cash
Consideration and to timely consummate the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS
5.1 OPERATION OF BUSINESS PRIOR TO EFFECTIVE TIME. Except as otherwise
expressly provided in this Agreement, between the date hereof and the Effective
Time, the Company will operate its business in the Ordinary Course of Business
and, to the extent consistent therewith, with no less diligence and effort than
would be applied in the absence of this Agreement, use all commercially
reasonable efforts to seek to preserve intact its current business organization,
keep available the service of its current officers and employees and preserve
its relationships with customers, suppliers, distributors, lessors, creditors,
employees, contractors and others having business dealings with it with the
intention that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement, prior to the Effective Time:
(a) the Company shall not do any of the following without the
prior written consent of Parent:
(i) amend its Articles of Incorporation or Bylaws (or
other similar governing instrument);
(ii) except as set forth in the Company Disclosure
Schedule, authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other debt or equity securities or equity equivalents
(including any stock options or stock appreciation rights);
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(iii) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, make any other actual, constructive or deemed distribution in
respect of its capital stock or otherwise make any payments to stockholders in
their capacity as such, or redeem or otherwise acquire any of its securities or
any securities other than shares repurchased from employees at their original
cost;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries or otherwise permit the
corporate existence of the Company or the rights or franchises or any license or
Permit under which its Combichem Business operates to be suspended, lapsed or
revoked;
(v) create or form any subsidiary;
(vi) (A) except for borrowing under existing lines of
credit in the Ordinary Course of Business, incur or assume any long-term or
short-term debt or issue any debt securities, or modify or agree to any
amendment of the terms of any of the foregoing; (B) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; (C) make any loans, advances
or capital contributions to or investments in any other person; (D) pledge or
otherwise encumber shares of capital stock of the Company; or (E) mortgage or
pledge any of its assets, tangible or intangible, or create or suffer to exist
any Encumbrances thereupon (except for Permittted Encumbrances);
(vii) except as may be required by law or as permitted
pursuant to clause (viii) below, enter into, adopt or amend or terminate any
bonus, profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
health, life, or disability insurance, dependent care, severance or other
employee benefit plan agreement, trust, fund or other arrangement for the
benefit or welfare of any director, officer or employee in any manner or
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan and arrangement
as in effect as of the date hereof (including the granting of stock appreciation
rights or performance units) except in the Ordinary Course of Business;
(viii) hire additional employees of the Company,
materially increase the compensation of employees, or enter into employment
agreements or contracts;
(ix) (A) acquire, sell, lease, license, transfer or
otherwise dispose of any assets in any single transaction or series of related
transactions having a fair market value in excess of Ten Thousand Dollars
($10,000) in the aggregate or that are otherwise material to the Company other
than sales of its products (other than exclusive licenses) in the Ordinary
Course of Business, or (B) enter into any exclusive license, distribution,
marketing, sales or other similar agreement;
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(x) except as may be required as a result of a change in
law or by GAAP, change any of the accounting principles, practices or methods
used by it;
(xi) revalue any of its assets, including writing down
the value of inventory or writing-off notes or accounts receivable;
(xii) (A) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other entity or
division thereof or any equity interest therein; (B) enter into any contract or
agreement that would be material to the Company, (C) amend, modify, waive or
terminate any right under any material contract in any material way; (D) modify
its standard Company warranty terms for its products or amend or modify any
product warranties in effect as of the date hereof in any manner that is adverse
to the Company or any of its subsidiaries; or (E) authorize any new capital
expenditure or expenditures that individually is in excess of Ten Thousand
Dollars ($10,000) or in the aggregate are in excess of Twenty Thousand Dollars
($20,000);
(xiii) make any tax election or settle or compromise any
income tax liability;
(xiv) settle or compromise any pending or threatened
suit, action or claim that (A) relates to the transactions contemplated hereby
or (B) the settlement or compromise of which would be for more than Ten Thousand
Dollars ($10,000) in any single case, or Twenty Thousand Dollars ($20,000) in
the aggregate, or that would otherwise be material to the Company;
(xv) make any payment to any stockholder, officer,
director or employee of the Company or any affiliate or relative of any of them
except payment for services rendered by any such person as an employee or
independent contractor of the Company in the Ordinary Course of Business;
(xvi) commence any software, hardware or other
technology development project or terminate any software, hardware or other
technology development project that is currently ongoing;
(xvii) sell or license to any third party any of the
Company's Intellectual Property other than non-exclusive licenses in the
Ordinary Course of Business; or
(xviii) take any action that would make any of the
representations or warranties of the Company contained in this Agreement untrue
or incorrect.
(b) The Company shall:
(i) maintain the assets and properties of the Company in
the Ordinary Course of Business, reasonable wear and tear, damage by fire and
other casualty excepted;
(ii) promptly repair, restore or replace any assets or
properties of the Company in the Ordinary Course of Business;
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(iii) upon any damage, destruction or loss to any of the
assets or properties of the Company, apply any and all insurance proceeds
received with respect thereto to the prompt repair, replacement and restoration
thereof;
(iv) comply in all material respects with all applicable
laws;
(v) file all Tax Returns required to be filed and make
timely payment of all applicable Taxes when due and payable and pay the expenses
of preparation therefor (other than where the Company is disputing any such
obligation in good faith);
(vi) take all actions reasonably necessary to be in
compliance with all material contracts and to maintain the effectiveness of all
of the Company's material Permits;
(vii) notify Parent of any action, event, condition or
circumstance, or group of actions, events, conditions or circumstances, relating
to the Company or any other Person that results in, or would reasonably be
expected to have a Material Adverse Effect on the Company;
(viii) notify Parent in writing of the commencement of
any Actions or Proceedings by or against the Company or any of its subsidiaries;
(ix) pay accounts payable and pursue collection of its
accounts receivable in the Ordinary Course of Business;
(x) use commercially reasonable efforts to ensure that
no insurance policy naming the Company as a beneficiary or loss payee expires,
or is cancelled or terminated, unless a comparable insurance policy reasonably
acceptable to Parent is obtained and in effect; and
(xi) use commercially reasonable efforts to ensure that
the Company's rights in its Intellectual Property and not allowed to be
abandoned or otherwise lost.
5.2 NO SOLICITATION OR NEGOTIATION. Between the date hereof and the
earlier of the termination of this Agreement and January 1, 2001, except as
otherwise provided in this Agreement or in the furtherance of the transactions
contemplated or permitted hereby, the Company will not (nor will the Company
permit any of the Company's officers, directors, employees, agents,
representatives or affiliates to) directly or indirectly, take any of the
following actions with any person other than Parent and Acquisition Co.: (i)
solicit, initiate, entertain or encourage any proposals or offers from, or
conduct discussions with or engage in negotiations with any person relating to
any possible acquisition of the Company or any of its subsidiaries (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity interest
in the Company; (ii) provide information with respect to it or any of its
subsidiaries to any person, other than Parent and Acquisition Co., relating to,
or otherwise cooperate with, facilitate or encourage any effort or attempt by
any such person with regard to, any possible acquisition of the Company (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise),
any portion of its or their capital stock or assets or any equity interest in
the Company; or (iii) enter into any agreement with any person providing for the
possible acquisition
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of the Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any portion of its or their
capital stock or assets or any equity interest in the Company. In addition, the
Company also agrees that, unless and until this Agreement is terminated in
accordance with its terms, it will not commence, be involved in, or take any
actions in furtherance of, the process of becoming a public company through an
initial public offering.
5.3 ACCESS TO INFORMATION. Between the date hereof and the Effective
Time, the Company shall give Parent and its authorized representatives
(including, without limitation, its attorneys and accountants), upon reasonable
notice from Parent, reasonable access to all employees, customers, plants,
offices, warehouses and other facilities, to (and where necessary, provide
copies of) all books and records, contracts and all personnel files of current
employees of the Company and its subsidiaries as Parent may reasonably require,
and will cause its officers and those of its subsidiaries to furnish Parent with
such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Parent may from
time to time reasonably request.
5.4 PUBLIC ANNOUNCEMENTS; COMPANY LITERATURE. None of Parent,
Acquisition Co. or the Company shall issue any press release or otherwise make
any public statements with respect to the transactions contemplated by this
Agreement, including the Merger, without the prior consent of Parent or
Acquisition Co. (in the case of the Company) or the Company (in the case of
Parent or Acquisition Co.), except as may be required by applicable law,
including any determination by Parent that a press release or other public
statement is required under applicable securities or regulatory rules. If any
party determines, with the advice of counsel, that it is required by applicable
law to make this Agreement or any terms thereof public, it shall, consult with
the other parties regarding such disclosure and seek confidential treatment for
such terms or portions of this Agreement as may be requested by the other
parties. The parties agree there shall be no public announcement of this
Agreement or the consummation of the Merger except as may be required by
applicable law or as necessary for furtherance of the transactions contemplated
hereby. The parties agree to announce this Agreement promptly after signing, and
the consummation of the Merger promptly after consummation to the Company's
employees, customers, vendors and strategic partners in such form as is mutually
agreed upon by all parties to this Agreement.
5.5 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to Parent of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which has caused or would be likely to cause any representation or warranty by
the Company contained in this Agreement to be untrue or inaccurate at or prior
to the Effective Time and (ii) any failure by the Company to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.5(a) shall not cure such breach or
non-compliance by the Company, limit or otherwise affect the remedies available
hereunder to Parent, or constitute an amendment of any representation, warranty
or statement in this Agreement or the Company Disclosure Schedule.
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(b) Parent and Acquisition Co. shall give prompt notice to the
Company of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which has caused or would be likely to cause any representation
or warranty contained in this Agreement by Parent or Acquisition Co. to be
untrue or inaccurate at or prior to the Effective Time on (ii) any failure by
Parent or Acquisition Co. to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.5(b) shall not cure such breach or non-compliance by Parent or
Acquisition Co., as the case may be, limit or otherwise affect the remedies
available hereunder to the Company, or constitute an amendment of any
representation, warranty or statement in this Agreement.
5.6 FEES AND EXPENSES. Whether or not the Merger is consummated, all
fees, costs and expenses incurred in connection with the Merger, this Agreement
and the other agreements and transactions contemplated hereby and thereby,
including all legal, accounting, financial advisory, broker's, consulting and
other fees and expenses of third parties incurred by a party in connection with
the negotiation, documentation and effectuation of the terms and conditions of
the Merger, this Agreement and the other agreements and transactions
contemplated hereby and thereby ("Third Party Expenses"), shall be the
obligation of the respective party incurring such Third Party Expenses, subject
to (i) any different allocation provided for in Schedule 1.1(a) hereto and (ii)
the fees and expenses of the Escrow Agreement being Third Party Expenses
incurred by Parent. Any and all such Third Party Expenses of the Company shall
be paid by application of the Cash Consideration as provided in Section 2.6(a)
hereof payable at the Closing in an amount equal to such Third Party Expenses.
It is expressly understood and agreed by the Company that none of Parent,
Acquisition Co. or the Surviving Corporation shall have any obligation
whatsoever with respect to the Third Party Expenses incurred by any of the
Company, or any Participating Securities holders or HTG. The Company shall
provide to Parent at least forty-eight (48) hours in advance of the Closing,
instructions as to any of the Company's Third Party Expenses that the Company is
electing to have paid by reduction of the Cash Consideration at Closing.
5.7 CONFIDENTIALITY. Each of the parties hereto will maintain in
confidence, and will cause its respective directors, officers, employees,
agents, Affiliates and advisors to maintain in confidence any written, oral or
other information furnished at any time by another party to this Agreement in
connection with the transactions contemplated by this Agreement, unless (a) such
information is already known to such party or to such others other than on a
confidential basis, (b) such information becomes publicly available through no
fault of such party, (c) the use of such information is necessary or appropriate
in making any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated by this Agreement, or (d) the
furnishing or use of such information is required by law. If the Merger is not
consummated, the confidentiality obligations of each party pursuant to this
Section 5.7 will continue, and each party will, at the request of the party
supplying the information, return or destroy (and provide appropriate
certification thereof) any and all such written, electronic or computer-based
information.
5.8 CONSENT OF OPTION HOLDERS. The Company shall use all commercially
reasonable efforts to obtain at or prior to the Closing the consent in writing
of each holder of Unvested Company Stock Options and Outstanding Vested Options
to the cancellation of such
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holder's Unvested Company Stock Options and/or Outstanding Vested Options (or
deemed exercise and purchase of the underlying common stock) upon the terms and
conditions set forth herein (including Section 2.9 above) and in the amendments
made or to be made to the Company Stock Option Plan and related stock option
agreements.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) no statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or enforced
by any United States federal or state court or United States federal or state
Governmental or Regulatory Authority that prohibits, restrains, enjoins or
restricts the consummation of the Merger; and
(b) all governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby shall
have been given, obtained or complied with, as applicable.
(c) resolution of the matters disclosed in Section 3.15(e) of
the Company Disclosure Schedule with respect to Asahi Chemical Industry Co.,
Ltd. in form and substance satisfactory to each of Parent and the Company acting
reasonably and in good faith.
6.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
Co. contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time with the same effect as if made at and
as of the Effective Time ((i) except to the extent such representations
specifically relate to an earlier date, in which case such representations shall
be true and correct in all material respects as of such earlier date and (ii)
subject to and qualified by the transactions contemplated herein) and, at the
Closing, Parent and Acquisition Co. shall have delivered to the Company a
certificate to that effect, executed by an executive officer of Parent and
Acquisition Co.;
(b) each of the covenants and obligations of Parent and
Acquisition Co. to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed in all material respects
at or before the Effective Time and, at the Closing, Parent and Acquisition Co.
shall have delivered to the Company a certificate to that effect, executed by an
executive officer of Parent and Acquisition Co.; and
(c) Parent shall have delivered all of the required Closing
deliveries set forth in Section 2.10(c) above.
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6.3 CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITION CO. The
respective obligations of Parent and Acquisition Co. to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects at and as
of the Effective Time with the same effect as if made at and as of the Effective
Time ((i) except to the extent such representations specifically relate to an
earlier date, in which case such representations shall be true and correct in
all material respects as of such earlier date and (ii) subject to and qualified
by the transactions contemplated herein) and, at the Closing, the Company shall
have delivered to Parent and Acquisition Co. a certificate to that effect,
executed by an executive officer of the Company;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition Co. a certificate to that effect, executed by an
executive officer of the Company;
(c) the Company shall have obtained all requisite approvals of
the Company Stockholders for this Agreement and the Merger,
(d) any material third party consents necessary to consummate
the transactions contemplated hereby shall have been given, obtained or complied
with as applicable;
(e) there shall have been no events, changes or effects,
individually or in the aggregate, with respect to the Company or its
subsidiaries having, or that would reasonably be expected to have, a Material
Adverse Effect on the Company;
(f) no more than 5% of the Outstanding Common Stock shall be
Dissenting Shares, with respect to which dissenters' rights have not terminated;
(g) the Company and the Principal Stockholders (and others
contemplated by Section 2.10(b)), as the case may be, shall have delivered all
of the required Closing deliveries set forth in Section 2.10(b) above;
(h) all of the Company Indebtedness shall have been paid in
full, and all mortgages, security interests and other Encumbrances securing or
otherwise arising under or relating to such Company Indebtedness shall have been
released, discharged and terminated in full, in each case in form and substance
satisfactory to Parent and its counsel acting reasonably, it being understood
that the payment of such Company Indebtedness by application of the Cash
Consideration payable at the Closing of the amount necessary to discharge such
Company Indebtedness in full; and
(i) all Unvested Company Stock Options shall have either vested
according to their respective terms or been accelerated for vesting purposes and
shall constitute a portion of
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the Outstanding Vested Options exchangeable for a portion of the Cash
Consideration in accordance with Sections 2.6(a)(i)(2) and 2.6(a)(ii).
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time whether before or after
approval and adoption of this Agreement by the Company Stockholders:
(a) by written consent of Parent, Acquisition Co., and the
Company;
(b) by either Parent and Acquisition Co. or the Company on
written notice to the others if (i) any court of competent jurisdiction in the
United States or other United States federal or state governmental entity shall
have issued a final order, decree or ruling, or taken any other final action,
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is or shall have become non-appealable, or (ii)
the Merger has not been consummated by January 31, 2001 (the "Final Date");
provided that no party may terminate this Agreement pursuant to this clause (ii)
if such party's failure to fulfill any of its obligations under this Agreement
shall have been a principal reason that the Effective Time shall not have
occurred on or before said date.
(c) by the Company on written notice to Parent if (i) there
shall have been a material breach of any representations or warranties on the
part of Parent or Acquisition Co. set forth in this Agreement or if any
representations or warranties of Parent or Acquisition Co. shall have become
untrue in any material respect, provided that the Company has not breached any
of its obligations hereunder in any material respect; (ii) there shall have been
a breach by Parent or Acquisition Co. of any of their respective covenants or
agreements hereunder in any material respect or materially adversely affecting
(or materially delaying) the ability of Parent, Acquisition Co. or the Company
to consummate the Merger, and Parent or Acquisition Co., as the case may be, has
not cured such breach within ten (10) Business Days after notice by the Company
thereof, provided that the Company has not breached any of its obligations
hereunder in any material respect; or (iii) Parent or any of its subsidiaries
shall have acquired on or before January 1, 2001 another company that is
primarily engaged in the business of providing combinatorial chemistry products
and services and terminated this Agreement other than pursuant to this Article
VII; or
(d) by Parent and Acquisition Co. or written notice to the
Company if (i) there shall have been a material breach of any representations or
warranties on the part of the Company set forth in this Agreement or if any
representations or warranties of the Company shall have become untrue in any
material respect, provided that neither Parent nor Acquisition Co. has breached
any of their respective obligations hereunder in any material respect; or (ii)
there shall have been a breach by the Company of any of its covenants or
agreements hereunder in any material respect or materially adversely affecting
(or materially delaying) the ability of Parent, Acquisition Co. or the Company
to consummate the Merger, and the Company has not cured such breach within ten
(10) Business Days after notice by Parent or Acquisition
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Co. thereof, provided that neither Parent nor Acquisition has breached any of
their respective obligations hereunder in any material respect.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement or abandonment of the Merger pursuant to Section 7.1 above, this
Agreement shall forthwith become void and have no effect and there shall be no
liability on the part of any party hereto or its Affiliates, directors, officers
or stockholders except that the provisions of this Section 7.2 and Sections 5.6,
5.7, 7.3, 7.4, 7.5 and Article IX shall continue in full force and effect.
7.3 AMENDMENT. This Agreement may be amended by action taken by the
Company, Parent and Acquisition Co. at any time before or after approval of the
Merger by the Company Stockholders but after any such approval no amendment
shall be made that requires the approval of such stockholders under applicable
law without such approval. This Agreement (including the Company Disclosure
Schedule) may be amended only by an instrument in writing signed on behalf of
all of the parties hereto.
7.4 BREAK-UP FEE. In the event Parent terminates this Agreement pursuant
to Section 7.1(d) above other than because any representations or warranties, or
covenants or agreements of the Company not reasonably within its control shall
have become untrue or shall have been breached, as applicable, in any material
respect, the Company shall pay Parent a break-up fee of $750,000. In the event
the Company terminates this Agreement pursuant to Section 7.1(c) above other
than because any representations or warranties, or covenants or agreements of
Parent or Acquisition Co. not reasonably within their control shall have become
untrue or shall have been breached, as applicable, in any material respect,
Parent shall pay the Company a break-up fee of $750,000.
7.5 EXTENSION; WAIVER. Each party hereto may, only by action taken in
writing, (i) extend the time for the performance of any of the obligations or
other acts of the other parties, (ii) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other parties with any of the agreements or conditions
contained herein. No such extension or waiver by any party hereto on any one or
more instances, shall be deemed to be or construed as an extension or waiver of
the same or any other obligation, other act, inaccuracy or compliance on any
future occasion. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument, in
writing, signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE VIII
ACTIONS BY THE PARTIES AFTER THE CLOSING
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC. The representations,
warranties and covenants contained in or made pursuant to this Agreement or any
certificate, document or instrument delivered pursuant to or in connection with
this Agreement in the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the Closing hereunder and
thereafter the representations and warranties the parties herein shall continue
to
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survive in full force and effect for a period of eighteen (18) months after the
Closing Date; provided, however, (i) representations and warranties in Sections
3.1-3.4 with respect to each Company Stockholder shall survive the longer of
three (3) years after the Closing Date and (if applicable) the death of such
Company Stockholder; (ii) representations and warranties in Sections 4.1 and 4.2
shall survive indefinitely, and (iii) the representations and warranties in
Section 3.25 shall survive for a period of three (3) years after the Closing
Date.
8.2 INDEMNIFICATION.
(a)
(i) Out of the Indemnity Escrow Fund. Subject to Section
8.2(g) below, the Parent, the Surviving Corporation and their respective
officers, directors, employees, affiliates, agents, successors, subsidiaries and
assigns (collectively the "Parent Group") shall be indemnified, defended and
held harmless out and to the extent of the Indemnity Escrow Fund from and
against any and all costs, losses (including, without limitation, diminution in
value), liabilities, damages, lawsuits, deficiencies, claims and expenses,
including without limitation, interest, penalties, costs of mitigation, lost
profits and other losses resulting from any shutdown or curtailment of
operations, attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing, but excluding punitive damages
(collectively, the "Damages"), incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any covenant, representation,
warranty or agreement or the inaccuracy of any representation, made by the
Company in or pursuant to this Agreement, or in the other documents delivered in
connection with the transactions contemplated in this Agreement, (ii) any and
all liabilities arising out of or in connection with the failure or refusal of
any holder of Outstanding Vested Options or Unvested Company Stock Options to
provide written consent to the transactions contemplated hereby, including,
without limitation, the cancellation and termination (or deemed exercise and
purchase of the underlying common stock) of such holder's Outstanding Vested
Options or Unvested Company Stock Options, as the case may be, in accordance
with the terms hereof ("Option Liabilities") and (iii) the HTG Liabilities;
provided, however, from and after the date which is eighteen (18) months after
the Closing Date, HTG shall be solely responsible for any Damages suffered or
incurred by Parent or any other member of the Parent Group arising out of or in
connection with any HTG Liabilities.
(ii) By the Principal Stockholders. Subject to Section
8.2(g) below, the Principal Stockholders shall indemnify, defend and hold
harmless the Parent Group from and against the Principal Stockholders
proportionate share of: (A) any Tax Losses in excess of the Indemnity Escrow
Fund (such obligation to survive the Closing Date for a period of three years
thereafter); (B) any Damages suffered or incurred by any member of the Parent
Group arising out of or in connection with any Option Liabilities or any
breaches or inaccuracies in the representations and warranties made by the
Company in Sections 3.1-3.4 hereof in excess of the Indemnity Escrow Fund (such
obligation to survive with respect to each Principal Stockholder the longer of
three (3) years after the Closing Date and (if applicable) the death of such
Principal Stockholder); and (C) any and all other Damages indemnifiable under
Section 8.2(a)(i) suffered or incurred by any member of the Parent Group in
excess of the Indemnity Escrow Fund (such obligations to survive the Closing
Date for a period of eighteen (18) months thereafter). Notwithstanding the
foregoing, the Principal Stockholders shall in no event be obligated to pay
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their proportionate share of Tax Losses or Damages in excess of the aggregate
amount of $1,000,000 after complete liquidation of the Indemnity Escrow Fund
(the "Principals Indemnity Fund"); provided that for every $1.00 of Tax Losses
or Damages, as the case may be, each Principal Stockholder shall only be
severally, and not jointly, liable for its or his proportionate share based on
the number of shares (including shares underlying Company Convertible
Securities) of Participating Securities held by it or him on the date hereof
relative to the aggregate number of shares (including shares underlying
Convertible Company Securities) held by all the Participating Securities holders
on the date hereof. Notwithstanding anything to the contrary contained in clause
(C) of this Section 8.2(a)(ii), with respect to Damages arising out of or in
connection with the HTG Liabilities, the only Principal Stockholder that shall
be liable therefor is the Seligmann Trust (and not any of the other Principal
Stockholders) and the Seligmann Trust's obligations shall be to pay its
proportionate share of any such liability based on the number of shares
(including shares underlying Company Convertible Securities) of Participating
Securities held by it on the date hereof relative to the aggregate number of
shares (including shares underlying Company Convertible Securities) held by all
Principal Stockholders on the date hereof.
(b) By Parent. Subject to Section 8.2(g) below, Parent and
Acquisition Co. shall, jointly and severally, indemnify, defend and hold
harmless the Participating Securities holders and their respective officers,
directors, employees, affiliates, agents, successors, subsidiaries and assigns
from and against any and all Damages incurred in connection with, arising out
of, resulting from or incident to any breach of any covenant, representation,
warranty or agreement or the inaccuracy of any representation, made by Parent or
Acquisition Co. in or pursuant to this Agreement, or in any other documents
delivered in connection with the transactions contemplated in this Agreement.
(c) By HTG. HTG shall indemnify, defend and hold harmless any
member of the Parent Group and any Company Stockholder and their respective
officers, directors, employees, affiliates, agents, successors, subsidiaries and
assigns from and against any and all Damages incurred in connection with,
arising out of, resulting from the HTG Liabilities. Notwithstanding the
foregoing reference to the Company Stockholders, nothing contained in this
Section 8.2(c) shall be deemed or construed to limit or restrict in any way any
member of the Parent Group's rights to indemnification hereunder with respect to
HTG Liabilities.
(d) Third Party Claims; Defense of Claims. If any Action or
Proceeding is filed or initiated against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party (or if the indemnification is out of the Indemnity Escrow Fund, the
Securityholder Representative) as promptly as practicable (and in any event
within ten (10) days after the service of the citation or summons); provided,
however, that a delay or failure of any indemnified party to give timely notice
shall not affect rights to indemnification hereunder except to the extent that
the indemnifying party (or the Securityholder Representative, as applicable)
demonstrates actual damage caused by such failure. Any such notice shall state
(with reasonable specificity) the basis on which indemnification is being
asserted, the amount of Damages for which indemnification is being asserted and
copies of all relevant pleadings, demands and other papers being served on the
indemnified party. After such notice, the indemnifying party (or the
Securityholder Representative, as applicable) may, if it so elects, take control
of the defense and investigation of such Action or Proceeding and employ
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and engage attorneys of its own choice to handle and defend the same, such
attorneys to be reasonably satisfactory to the indemnified party, at the
indemnifying party's (or the Indemnity Escrow Fund's, as applicable) sole cost,
risk and expense, and compromise or settle such Action or Proceeding, which
compromise or settlement shall be made only with the written consent of the
indemnified party (or the Securityholder Representative, as applicable), such
consent not to be unreasonably withheld. If the indemnifying party (or the
Securityholder Representative, as applicable) fails to assume the defense of
such Action or Proceeding within fifteen (15) days after receipt of notice
thereof pursuant to this Section 8.2, the indemnified party against which such
Action or Proceeding has been filed or initiated (or the Securityholder
Representative, as applicable) will (upon delivering notice to such effect to
the indemnifying party or the Securityholder Representative, as applicable) have
the right to undertake, at the indemnifying party's (or the Indemnity Escrow
Fund's, as applicable) own cost and expense, the defense, compromise or
settlement of such Action or Proceeding on behalf of and for the account and
risk of the indemnifying party (or the Indemnity Escrow Fund, as applicable);
provided, however, that such Action or Proceeding shall not be compromised or
settled without the written consent of the indemnifying party (or the
Securityholder Representative, as applicable), which consent shall not be
unreasonably withheld. In the event the indemnified party (or the Securityholder
Representative, as applicable) assumes defense of the Action or Proceeding, the
indemnified party (or Securityholder Representative, as applicable) will keep
the indemnifying party (or the Securityholder Representative, as applicable)
reasonably informed of the progress of any such defense, compromise or
settlement and will consult with, when appropriate, and consider any reasonable
advice from, the indemnifying party (or the Securityholder Representative, as
applicable) on any such defense, compromise or settlement. The indemnifying
party (or the Indemnity Escrow Fund, as applicable) shall be liable for any
settlement of any action subject to indemnification and effected pursuant to and
in accordance with this Section 8.2 and for any final judgment (subject to any
right of appeal), and the indemnifying party agrees to indemnify and hold
harmless the indemnified party (or the indemnified party shall be indemnified
and held harmless out and to the extent of the Indemnity Escrow Fund, as
applicable) from and against any Damages by reason of such settlement or
judgment.
Regardless of whether the indemnifying party (or the Securityholder
Representative, as applicable) or the indemnified party (or the Securityholder
Representative, as applicable) takes up the defense, the indemnifying party will
pay (or out and to the extent of the Indemnity Escrow Fund shall be paid, as
applicable) reasonable costs and expenses in connection with the defense,
compromise or settlement for any Action or Proceeding subject to indemnification
under this Section 8.2.
The indemnified party (or the Securityholder Representative, as
applicable) shall cooperate in all reasonable respects with the indemnifying
party (or the Securityholder Representative, as applicable) and its attorneys in
the investigation, trial and defense of such Action or Proceeding and any appeal
arising therefrom; provided, however, that the indemnified party (or the
Securityholder Representative, as applicable) may, at its own cost (or the cost
of the Indemnity Escrow Fund, as applicable) participate in the investigation,
trial and defense of such Action or Proceeding and any appeal arising
therefrom..
(e) Indemnity Claims. A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice to the party from
whom indemnification
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is sought (or the Securityholder Representative, as applicable) pursuant to the
terms and conditions set forth in the Escrow Agreement.
(f) Tax Indemnification. Notwithstanding anything in this
Agreement to the contrary, all members of the Parent Group shall be indemnified,
reimbursed, defended and held harmless out and to the extent of the Indemnity
Escrow Fund and Principals Indemnity Fund for, from and against all Damages
arising in respect of any "Pre-Closing Period" (as defined below) asserted
against or incurred by members of the Parent Group resulting from a breach or
inaccuracy of the representations or warranties set forth in Section 3.25
herein, including without limitation the Company Disclosure Schedule referred to
therein and relating to such Section ("Tax Losses"). For purposes of this
Agreement, the computation of Tax Losses shall be made only after giving full
effect to the utilization (or the utilization that could have been made but for
actions taken or caused to be taken by Purchaser or Acquisition Co.) of net
operating losses of the Company or HTG attributable to any Pre-Closing Period.
Notwithstanding the foregoing or any other provision of this Agreement, no
indemnification shall be made for the loss or reduction of any net operating
loss of the Company or HTG.
(i) "Pre-Closing Period" means any taxable period ending
on or before the Closing Date, and the portion of any taxable period beginning
on or before but ending after the Closing Date which portion begins on the first
day of such a taxable period and ends on the Closing Date.
(ii) Notwithstanding anything in this Agreement to the
contrary, Parent shall have the obligation to prepare and file any and all Tax
Returns for any Pre-Closing Period not required to have been filed by the
Closing Date and the right, for any Pre-Closing Period, to control any audit or
determination by any taxing authority, initiate any claim for refund or amended
return, contest, defend against, resolve, and settle any assessment, notice of
deficiency or other adjustment or proposed adjustment of Taxes or otherwise
resolve any issue pertaining to any Tax Losses (collectively, including the
preparation and filing of any Tax Return for any Pre-Closing Period, a "Tax
Proceeding"); provided, however, that the Securityholder Representative shall
have the right to fully participate in any Tax Proceeding (including with
counsel of its choice), at its own expense, and Parent shall cooperate with the
Securityholder Representative in connection with such participation (including
by properly informing the Securityholder Representative of the fact of any Tax
Proceeding) and shall, in good faith, consider any reasonable suggestions of the
Securityholder Representative as regards any Tax Proceeding; provided, that if
and to the extent that Parent elects to not follow such reasonable suggestions,
any resulting incremental Tax Losses shall not be subject to indemnification
hereunder. Parent will not complete or settle any Tax Proceeding without the
Securityholder Representative's prior written consent, which consent shall not
be unreasonably withheld or delayed. The Securityholder Representative shall
have the right to receive in a timely manner copies of all non-privileged
correspondence, records and relevant documentation and to be timely informed of
and to attend all meetings with third parties relating to any Tax Proceeding or
claimed Tax Losses.
(g) Limitations on Indemnification.
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(i) Neither Parent nor any other member of the Parent
Group shall have a right to indemnification out of the Indemnity Escrow Fund or
by the Principal Stockholders, and Parent shall have no liability to the
Participating Securities holders, for amounts payable pursuant to the applicable
indemnification provisions in this Section 8.2 until (i) the Damages incurred by
the indemnified party in any one claim exceed $10,000 and (ii) the total of all
such Damages incurred by the indemnified party exceed One Hundred Thousand
Dollars ($100,000) in the aggregate (the "Threshold Amount"), in which case the
indemnified party shall be entitled to indemnification from the indemnifying
party or out of the Indemnity Escrow Fund and the Principals Indemnity Fund, as
applicable, for all Damages due hereunder including the Threshold Amount. The
limitations set forth in this Section 8.2(g)(i) shall not apply to Damages
arising out of or in connection with the HTG Liabilities.
(ii) The limitations in Section 8.2(g)(i) on the
Parent's indemnification obligations shall not apply to any fraud or intentional
breach by Parent or Acquisition Co. of any representation, warranty, covenant or
agreement or obligation of such party. The limitations in Section 8.2(g)(i) and
the time and $1,000,000 limitations contained in Section 8.2(a)(ii) on the
indemnification obligations set forth in Section 8.2(a) hereof, shall not apply
to any Damages arising out of or in connection with any fraud or intentional
breach by any Participating Securities holder or the Company, as the case may
be, of any representation, warranty, covenant or agreement or obligation of such
party. The limitations in Section 8.2(g)(i) on the indemnification obligations
set forth in Section 8.2(a) hereof, shall not apply to any Damages arising out
of or in connection with any breach or inaccuracy of any representation or
warranty of the Company in Section 3.15 above. Except for any Participating
Securities holder's indemnification obligations with respect to fraud or
intentional breach by any Participating Securities holder or the Company, as the
case may be, of any representation, warranty, covenant or agreement or
obligation of such party, no Participating Securities holder shall be liable
with respect to Damages indemnifiable hereunder in excess of such Participating
Securities holder's portion of the Cash Consideration.
(iii) There are no limitations on HTG's indemnification
obligation under this Agreement for any Damages incurred by any member of the
Parent Group arising out of or in connection with the HTG Liabilities.
8.3 INDEMNITY ESCROW ACCOUNT. The Indemnity Escrow Fund shall be
maintained in the escrow account established pursuant to the Escrow Agreement
until the date which is eighteen (18) months following the Closing Date (the
"Escrow Period") for the purpose of satisfying claims by Parent and the Parent
Group for indemnification under this Article VIII. Upon expiration of the Escrow
Period, and subject to the terms of this Section 8.3 and the Escrow Agreement,
the Escrow Agent shall deliver or cause to be delivered to the Participating
Securities holders the balance, if any, remaining in the escrow account,
according to their respective interests therein. If, upon expiration of the
Escrow Period, Parent or any member of the Parent Group shall have asserted a
claim for indemnity in accordance with this Article VIII and such claim is
pending or unresolved at the time of such expiration, the Escrow Agent shall
retain in escrow an amount of cash equal to the value of the asserted claim
until such matter is resolved. In the event that Parent or any member of the
Parent Group is entitled to indemnification under this Article VIII, Parent or
any member of the Parent Group's first recourse for indemnification shall be the
Indemnity Escrow Fund pursuant to the terms of this
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Agreement and the Escrow Agreement. After the Indemnity Escrow Fund is exhausted
or the Indemnity Escrow Agreement is terminated, Parent or any member of the
Parent Group shall be entitled to seek indemnification under this Article VIII
directly from the Principal Stockholders (or any of them), subject to the
limitations set forth in this Article VIII.
8.4 FURTHER ASSURANCES. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, all the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
this Article VIII).
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail, return
receipt requested) or by overnight courier to the parties at the following
addresses or facsimile numbers:
If to Securityholder Representative, to:
Xxxxx Xxxxxxxxx
0000 Xxxxx Xxxxxxx Xxxxx
Xxxxxx, XX 00000
with copies to:
Torys
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
If to Parent or Surviving Corporation:
Discovery Partners International, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Chief Executive Officer
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with copies to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 9.1, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section 9.1, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
9.2 ENTIRE AGREEMENT. This Agreement (and all exhibits and schedules
attached hereto, all other documents delivered in connection herewith) supersede
all prior discussions and agreements among the parties with respect to the
subject matter hereof and contains the sole and entire agreement among the
parties hereto with respect thereto.
9.3 NO THIRD PARTY BENEFICIARY. Other than with respect to Sections 2.7,
2.8 and 8.3, the terms and provisions of this Agreement are intended solely for
the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person other than any Person entitled to
indemnity under Article VIII.
9.4 NO ASSIGNMENT; BINDING EFFECT. Except in connection with the sale of
all or substantially all of the assets or capital stock of Parent or the
Surviving Corporation or a merger or consolidation in which the Parent or
Surviving Corporation, as the case may be, is not the survivor thereof, neither
this Agreement nor any right, interest or obligation hereunder may be assigned
by any party hereto without the prior written consent of the other parties
hereto and any attempt to do so will be void, except that any party's rights to
indemnification under Article 8 may be freely assigned. This Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
9.5 HEADINGS. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.6 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law or public
policy, (i) such provision will be fully severable, (ii) this Agreement will be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or
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unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and mutually acceptable to the parties herein, acting reasonably.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
executed and performed in such State, without giving effect to conflicts of laws
principles.
9.8 CONSENT TO JURISDICTION AND FORUM SELECTION. The parties hereto
agree that all actions or proceedings arising in connection with this Agreement
shall be initiated and tried exclusively in the State and Federal courts located
in either the County of San Diego, State of California or the County of Pima,
State of Arizona. The aforementioned choice of venue is intended by the parties
to be mandatory and not permissive in nature, thereby precluding the possibility
of litigation between the parties with respect to or arising out of this
Agreement in any jurisdiction other than either of those specified in this
Section 9.8. Each party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts located in the County of San Diego,
State of California and the County of Pima, State of Arizona, shall have in
personam jurisdiction and venue over each of them for the purposes of litigating
any dispute, controversy or proceeding arising out of or related to this
Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this Section 9.8 by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in this
Agreement, or in the manner set forth in Section 9.1 of this Agreement for the
giving of notice. Any final judgment rendered against a party in any action or
proceeding shall be conclusive as to the subject of such final judgment and may
be enforced in other jurisdictions in any manner provided by law.
9.9 CONSTRUCTION. No provision of this Agreement shall be construed in
favor of or against any party on the ground that such party or its counsel
drafted the provision. Any remedies provided for herein are not exclusive of any
other lawful remedies which may be available to either party, except as
otherwise provided in this Agreement. This Agreement shall at all times be
construed so as to carry out the purposes stated herein. Time shall be of the
essence.
9.10 COMPANY DISCLOSURE SCHEDULE. The fact that any disclosure on any
Section of the Company Disclosure Schedule is not required to be disclosed in
order to render the applicable representation or warranty true and correct,
shall not be deemed or construed to expand the scope of any representation or
warranty hereunder or to establish a standard of disclosure in respect of any
representation or warranty. Disclosure of a particular matter on any Section of
the Company Disclosure Schedule shall not in any circumstance be construed to
mean that such matter should be considered material. In addition, references to
specific dollar amounts in Article III are for convenience of disclosure only
and do not establish or imply a standard of materiality, a standard for what is
or is not in the Ordinary Course of Business, or any other standard for
disclosure set forth in this Agreement. No implication shall be drawn that any
condition, set of facts or other disclosure set forth in the Company Disclosure
Schedule is
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necessarily material or is otherwise required to be disclosed or that the
inclusion of such disclosure establishes or implies a standard of materiality, a
standard for what is or is not in the Ordinary Course of Business, or any other
standard for disclosure set forth in this Agreement.
9.11 PROTOTYPES. Each of the parties hereto acknowledges and agrees that
the directed sort prototypes and technology (e.g., sorting algorithm and related
reaction apparatuses and methods) and all related intellectual property owned by
the Company as of the date hereof (the "Prototypes") shall be an asset
transferred by the Company to HTG in connection with the spin-off of the HTG
Business. Notwithstanding the ownership of the Prototype by HTG upon
consummation of such spin-off, from and after the Effective Time, the Surviving
Corporation shall have reasonable and necessary access to and use of the
Prototypes so long as the Sublease and Shared Services Agreement shall remain in
effect, provided that the Surviving Corporation shall maintain such Prototypes
as confidential information of HTG. Notwithstanding the earlier termination or
expiration of the Sublease and Shared Services Agreement, for a period of two
(2) years following the Closing Date, the Surviving Corporation shall have the
right (at its sole discretion) and any and all necessary licenses (any and all
of which shall be considered fully paid-up and royalty-free licenses) to build
one (1) replica of the Prototypes including any and all modifications and
enhancements made thereto by HTG during such time period (the "Replica") which
Replica shall be owned by the Surviving Corporation. Without limitation, the
Surviving Corporation shall have the right and any and all necessary licenses
(any and all of which shall be considered fully paid-up and royalty-free
licenses) to utilize either the Prototypes (so long as the Sublease and Shared
Services Agreement remains in effect) or the Replica to synthesize libraries
based on chemical protocols in the possession of the Company at the time of
Closing that have been developed for or in relation to grafted surfaces (or
protocols developed from time to time and based substantially upon protocols in
the possession of the Company at the time of Closing). For greater certainty,
the Company shall retain all chemistry protocols for its own exclusive use
whether or not relating in any way to the Prototypes. For greater certainty, the
protocols in the possession of the Company at the time of Closing developed for
or in relation to grafted surfaces include the following scaffolds:
Quinazolones, Hydantions, Imidazopyridines, Benzimidazoles, Purines,
Dioxopiperazines, Aminothiazoles, 4-hydroxy-quinozalines, 2-aminoquinazolinones,
guanidines, triazines, benzodiazepines (unfinished testing scheme), alkyl
aminomethyl benzimides, Tertiary amines, and Tracerless 2-aryl amino
benzimidazides. Notwithstanding anything to the contrary, HTG will have the
right to use the information derived from the synthetic protocols that were
validated on grafted surfaces prior to Closing based on literature references
for purposes of disclosing the scaffold as a generic structure (but not
identifying specific compounds), the generic nature of each building block
(e.g., aldehyde, primary amine, etc.) and the analytical data confirming the
purity and yield and use such disclosure for any purpose; provided, however, HTG
will not have any title to the protocols which shall at all times be owned by
the Company.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by facsimile, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto, or their duly authorized officer, as of the date first
above written.
DISCOVERY PARTNERS INTERNATIONAL, INC,
a Delaware corporation
By: /s/ Xxxxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxxx
-------------------------------------
Title: C.E.O.
------------------------------------
SI ACQUISITION CORPORATION,
a Delaware Corporation
By: /s/ Xxxxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxxx
-------------------------------------
Title: C.E.O.
------------------------------------
SYSTEMS INTEGRATION DRUG DISCOVERY
COMPANY, INC., an Arizona corporation
By: /s/ Xxxxx Xxxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxxx, President
By: /s/ Xxxxxxx Xxxxx
---------------------------------------
Xxxxxxx Xxxxx, Vice President Business
XXXXXXXXX-XXXXXXXX FAMILY TRUST
U/A/D July 9, 1999
By: /s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx, Trustee
By: /s/ Xxxxx Xxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxx, Trustee
[SIGNATURE PAGE TO
AGREEMENT AND PLAN OF REORGANIZATION]
55
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxxx, Xx.
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Xxxxxx Xxxxxxxxx, Xx.
Solely with respect to Article VIII hereof:
HIGH THROUGHPUT GENOMICS, INC.
By: /s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx, President
[SIGNATURE PAGE TO
AGREEMENT AND PLAN OF REORGANIZATION]
