1
EXHIBIT 2.3
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CARDIOVASCULAR DYNAMICS, INC.,
IDI ACQUISITION CORPORATION
AND
INTRALUMINAL DEVICES, INC.
DATED AS OF
OCTOBER 2, 1996
2
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.................................................................................. 1
1.1 The Merger........................................................................... 1
1.2 Closing; Effective Time.............................................................. 2
1.3 Effect of the Merger................................................................. 2
1.4 Articles of Incorporation; Bylaws.................................................... 2
1.5 Directors and Officers............................................................... 2
1.6 Effect on Capital Stock.............................................................. 3
1.7 Surrender of Certificates............................................................ 4
1.8 No Further Ownership Rights in Target Capital Stock.................................. 6
1.9 Lost, Stolen or Destroyed Certificates............................................... 6
1.10 Tax and Accounting Consequences...................................................... 6
1.11 Exemption from Registration.......................................................... 6
1.12 Taking of Necessary Action; Further Action........................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET................................................... 7
2.1 Organization, Standing and Power..................................................... 7
2.2 Capital Structure.................................................................... 7
2.3 Authority............................................................................ 8
2.4 Financial Statements................................................................. 9
2.5 Absence of Certain Changes........................................................... 9
2.6 Absence of Undisclosed Liabilities................................................... 10
2.7 Litigation........................................................................... 10
2.8 Restrictions on Business Activities.................................................. 10
2.9 Governmental Authorization........................................................... 10
2.10 Title to Property.................................................................... 10
2.11 Intellectual Property................................................................ 11
2.12 Environmental Matters................................................................ 12
2.13 Taxes................................................................................ 13
2.14 Employee Benefit Plans............................................................... 15
2.15 Certain Agreements Affected by the Merger............................................ 17
2.16 Employee Matters..................................................................... 17
2.17 Interested Party Transactions........................................................ 18
2.18 Insurance............................................................................ 18
2.19 Compliance With Laws................................................................. 18
2.20 Minute Books......................................................................... 18
2.21 Complete Copies of Materials......................................................... 18
2.22 Brokers' and Finders' Fees........................................................... 18
2.23 Registration Statement; Proxy Statement/Prospectus on Form S-1....................... 18
i.
3
2.24 Affiliate and Shareholder Agreement; Irrevocable Proxies............................. 19
2.25 Vote Required........................................................................ 19
2.26 Board Approval....................................................................... 19
2.27 Inventory............................................................................ 19
2.28 Accounts Receivable.................................................................. 20
2.29 Customers and Suppliers.............................................................. 20
2.30 Representations Complete............................................................. 20
2.31 Liabilities Assumed.................................................................. 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
MERGER SUB............................................................................................. 21
3.1 Organization, Standing and Power..................................................... 21
3.2 Capital Structure.................................................................... 21
3.3 Authority............................................................................ 21
3.4 SEC Documents; Financial Statements.................................................. 22
3.5 Absence of Certain Changes........................................................... 23
3.6 Absence of Undisclosed Liabilities................................................... 24
3.7 Broker's and Finders' Fees........................................................... 24
3.8 Registration Statement............................................................... 24
3.9 Representations Complete............................................................. 24
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................................................ 25
4.1 Conduct of Business of Target and Acquiror........................................... 25
4.2 Conduct of Business of Target........................................................ 26
4.3 No Negotiation or Solicitation....................................................... 28
ARTICLE V ADDITIONAL AGREEMENTS....................................................................... 29
5.1 Consent Solicitation................................................................. 29
5.2 Stockholders Consents/Proxies........................................................ 29
5.3 Access to Information................................................................ 30
5.4 Confidentiality...................................................................... 30
5.5 Public Disclosure.................................................................... 30
5.6 Consents; Cooperation................................................................ 31
5.7 Affiliate and Shareholder Agreements................................................. 31
5.8 Irrevocable Proxies.................................................................. 31
5.9 FIRPTA............................................................................... 31
5.10 Legal Requirements................................................................... 32
5.11 Blue Sky Laws........................................................................ 32
5.12 Employee Benefit Plans............................................................... 32
5.13 Escrow Agreement..................................................................... 33
5.14 Registration Rights.................................................................. 33
5.15 Shareholder Agreements............................................................... 33
5.16 Listing of Additional Shares......................................................... 33
5.17 Employee............................................................................. 33
ii.
4
5.18 Reorganization....................................................................... 33
5.19 Expenses............................................................................. 33
5.20 Intentionally Omitted................................................................ 34
5.21 Reasonable Commercial Efforts and Further Assurances................................. 34
5.22 Purchase Price Adjustment............................................................ 34
ARTICLE VI CONDITIONS TO THE MERGER................................................................... 35
6.1 Conditions to Obligations of Each Party to Effect the Merger......................... 35
6.2 Tax Opinion.......................................................................... 36
6.3 Additional Conditions to Obligations of Target....................................... 36
6.4 Additional Conditions to the Obligations of Acquiror and Merger Sub.................. 36
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER......................................................... 38
7.1 Termination.......................................................................... 38
7.2 Effect of Termination................................................................ 39
7.3 Expenses and Termination Fees........................................................ 39
7.4 Amendment............................................................................ 40
7.5 Extension; Waiver.................................................................... 40
ARTICLE VIII ESCROW AND INDEMNIFICATION............................................................... 41
8.1 Escrow Fund.......................................................................... 41
8.2 Indemnification...................................................................... 41
8.3 Damage Threshold..................................................................... 42
8.4 Escrow Period........................................................................ 43
8.5 Claims upon Escrow Fund.............................................................. 43
8.6 Objections to Claims................................................................. 44
8.7 Resolution of Conflicts; Arbitration................................................. 44
8.8 Shareholders' Agent.................................................................. 45
8.9 Actions of the Shareholders' Agent................................................... 46
8.10 Third-Party Claims................................................................... 46
ARTICLE IX GENERAL PROVISIONS......................................................................... 46
9.1 Non-Survival at Effective Time....................................................... 46
9.2 Notices.............................................................................. 46
9.3 Interpretation....................................................................... 47
9.4 Counterparts......................................................................... 48
9.5 Entire Agreement; Nonassignability; Parties in Interest.............................. 48
9.6 Severability......................................................................... 48
9.7 Remedies Cumulative.................................................................. 49
9.8 Governing Law........................................................................ 49
9.9 Rules of Construction................................................................ 49
9.10 Attorneys' Fees...................................................................... 49
iii.
5
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Affiliate and Shareholder Agreement
Exhibit C - Irrevocable Proxies
Exhibit D - FIRPTA Notice
Exhibit E - Escrow Agreement
Exhibit F - Declaration of Registration Rights
Exhibit G - Acquiror's Corporate Legal Opinion
Exhibit H - Target's Corporate Legal Opinion
Exhibit I - Form of Employment Agreement
SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
Schedule 2.10 - Target Real Property
Schedule 2.11 - Target Intellectual Property,
Schedule 2.14 - Target Employee Benefit Plans
Schedule 2.21 - Material Contracts and Agreements
Schedule 2.31 - Assumed Liabilities
Schedule 5.7 - Target "Affiliates"
Schedule 5.12 - Holders of Outstanding Options
Schedule 6.4(a) - Representations and Warranties
Schedule 6.4(c) - List of Third Party Consents
iv.
6
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of October 2, 1996, by and among CardioVascular Dynamics, Inc.,
a Delaware corporation ("Acquiror"), IDI Acquisition Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Acquiror, and
Intraluminal Devices, Inc., a California corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub believe
it is in the best interests of their respective companies and the shareholders
of their respective companies that Target and Merger Sub combine into a single
company through the statutory merger of Target with and into Merger Sub (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares
of Target Preferred Stock ("Target Preferred Stock") and Target Common Stock
("Target Common Stock") shall be converted into shares of Acquiror Common Stock
("Acquiror Common Stock"), at the rate set forth herein.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization that will qualify as a reorganization under the provisions of
sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Certificate
of Merger attached hereto as Exhibit A (the "Agreement of Merger") and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Target shall be merged with and into Merger Sub, the separate corporate
existence of Target shall cease and Merger Sub shall continue as the surviving
corporation. Merger Sub as the surviving
1.
7
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the "Closing
Date"). The Closing shall take place at the offices of Xxxxxxx, Xxxxxxx &
Xxxxxxxx LLP, 0000 XxxXxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx, or at
such other location as the parties hereto agree. In connection with the Closing,
the parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger with the Secretary of State of the State of Delaware, in
accordance with the relevant provisions of Delaware Law (the time of such filing
being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is IDI Acquisition Corporation.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
directors of the Surviving Corporation, until their respective successors are
duly elected or appointed and qualified. The officers of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the initial officers of
the Merger Sub, until their respective successors are duly elected or appointed
and qualified.
2.
8
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of Merger Sub, Target or the holders of any of the following
securities:
(a) Conversion of Target Common Stock. At the Effective Time, each
share of Target Common Stock and Target Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Target Capital
Stock ("Target Capital Stock") to be canceled pursuant to Section 1.6(b)) will
be canceled and extinguished and be converted automatically into the right to
receive that number of shares of Acquiror Common Stock obtained by first
dividing $1,400,000 by the average of the closing prices of Acquiror Common
Stock as reported by the National Association of Securities Dealers through the
Nasdaq National Market System for the three Trading Days immediately preceding
the Closing (the "Closing Price") and then dividing that amount by the
outstanding Target Capital Stock (which shall include all shares of Target
Common Stock subject to outstanding options), which quotient is referred to as
the "Exchange Ratio." A "Trading Day" is a date on which a purchase or sale of
Acquiror Common Stock has occurred on the Nasdaq National Market System. No
other adjustment shall be made in the Exchange Ratio as a result of any cash
proceeds received by Target from the date hereof to the Closing Date pursuant to
the exercise of currently outstanding options to acquire Target Common Stock.
Each Target shareholder shall receive a number of shares of Acquiror Common
Stock based on the percentage of Target Capital Stock owned by such shareholder
relative to all issued and outstanding shares of Target Capital Stock.
(b) Cancellation of Target Capital Stock Owned by Target. At the
Effective Time, all shares of Target Capital Stock that are owned by Target as
treasury stock, shall be canceled and extinguished without any conversion
thereof.
(c) Target Stock Option Plan. At the Effective Time, the 1995
Intraluminal Devices, Inc. Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan (the "Target Stock Option Plan") and all options
to purchase Target Common Stock then outstanding under the Target Stock Option
Plan shall be assumed by Acquiror in accordance with Section 5.12.
(d) Capital Stock of Merger Sub. At the Effective Time, each share
of Common Stock of Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or Target Capital Stock), reorganization, recapitalization
or other like change with respect to
3.
9
Acquiror Common Stock or Target Capital Stock occurring after the date hereof
and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Acquiror Common
Stock will be issued, but in lieu thereof each holder of shares of Target
Capital Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the Closing Price.
1.7 Surrender of Certificates.
(a) Acquiror to Provide Common Stock and Cash. Promptly after the
Effective Time, Acquiror shall make available to the Shareholders' Agent (as
defined in Section 8.8(a)) for exchange in accordance with this Article I,
through such reasonable procedures as Acquiror may adopt (including, without
limitation, Acquiror's obtaining a written receipt from the Shareholders' Agent
for all consideration paid by Acquiror), (i) the shares of Acquiror Common Stock
issuable pursuant to Section 1.6(a) in exchange for shares of Target Capital
Stock outstanding immediately prior to the Effective Time less the number of
shares of Acquiror Common Stock to be deposited into an escrow fund (the "Escrow
Fund") pursuant to the requirements of Article VIII and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares pursuant to
Section 1.6(f).
(b) Exchange Procedures. Promptly after the Effective Time, the
Acquiror shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Target Capital Stock, whose shares were
converted into the right to receive shares of Acquiror Common Stock (and cash in
lieu of fractional shares) pursuant to Section 1.6, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon receipt of the Certificates by the
Acquiror, and shall be in such form and have such other provisions as Acquiror
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of Acquiror
Common Stock (and cash in lieu of fractional shares). Upon surrender of a
Certificate for cancellation to the Shareholders' Agent or the indemnification
agreement referred to in Section 1.9 below, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and the Shareholders' Agent's compliance with Section
1.7(a) the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing the number of whole shares of Acquiror
Common Stock less the number of shares of Acquiror Common Stock to be deposited
in the Escrow Fund on such holder's behalf pursuant to Article VIII hereof
together with payment in lieu of fractional shares which such holder has the
right to receive pursuant to Section 1.6, and the Certificate so surrendered
shall forthwith be canceled. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Target Capital Stock
will be deemed from and after the Effective Time, for all
4.
10
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Acquiror Common Stock into which such
shares of Target Capital Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article VIII hereof,
Acquiror shall cause to be distributed to the Escrow Agent (as defined in
Article VIII hereof) a certificate or certificates representing shares of
Acquiror Common Stock which shall be registered in the name of the Escrow Agent
as nominee for the holders of Certificates cancelled pursuant to this Section
1.7. Such shares shall be beneficially owned by such holders and shall be held
in escrow and shall be available to compensate Acquiror for certain damages as
provided in Article VIII. To the extent not used for such purposes, such shares
shall be released, all as provided in Article VIII hereof.
(c) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions with respect to Acquiror Common Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate or indemnification agreement referred to in Section 1.9 below.
Subject to applicable law, following surrender of any such Certificate or
indemnification agreement referred to in Section 1.9 below, there shall be paid
to the record holder of the certificates representing whole shares of Acquiror
Common Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of any such dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this Section 1.7(d)) with respect to such shares of Acquiror Common Stock.
(d) Transfers of Ownership. If any certificate for shares of
Acquiror Common Stock is to be issued in a name other than the Escrow Agent or
the name in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Certificate
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to Acquiror
or any agent designated by it any transfer or other taxes required by reason of
the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or any agent designated by it that
such tax has been paid or is not payable.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, none of the Shareholders' Agent, the Surviving Corporation or any
party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.8 No Further Ownership Rights in Target Capital Stock. All shares of
Acquiror Common Stock issued upon the surrender for exchange of shares of Target
Capital
5.
11
Stock in accordance with the terms hereof (including any cash paid in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Target Capital Stock and there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of Target Capital Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Shareholders' Agent
shall request that the Acquiror issue (and the Acquiror hereby agrees to issue)
in exchange for such lost, stolen or destroyed Certificates, upon the making of
an affidavit of that fact by the holder thereof, such shares of Acquiror Common
Stock and cash in lieu of fractional shares as may be required pursuant to
Section 1.6; provided, however, that Acquiror may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver an indemnification agreement (in
form and substance satisfactory to the Surviving Corporation) against any claim
that may be made against Acquiror, the Surviving Corporation or the
Shareholders' Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Code section 368.
1.11 Exemption from Registration. The shares of Acquiror Common Stock
to be issued in connection with the Merger will be issued in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of Section 4(2) thereof.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
Except as disclosed in a document of even date herewith and delivered
by Target to Acquiror prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Target
Disclosure Schedule"), Target represents and warrants to Acquiror and Merger Sub
as follows:
6.
12
2.1 Organization, Standing and Power. Target is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Target. Target has delivered a true and
correct copy of the Articles of Incorporation and Bylaws or other charter
documents, as applicable, of Target, each as amended to date, to Acquiror.
Target is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents. Target does not
directly or indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar interest
in, any corporation, partnership, joint venture or other business association or
entity.
2.2 Capital Structure. The authorized capital stock of Target consists
of 5,000,000 shares of Common Stock and 487,500 shares of Preferred Stock, of
which there were issued and outstanding as of the close of business on September
30, 1996, 1,000,000 shares of Common Stock and 487,500 shares of Series A
Preferred Stock (the "Series A Preferred") that are convertible into 487,500
shares of Common Stock. There are no other outstanding shares of capital stock
or voting securities and no outstanding commitments to issue any shares of
capital stock or voting securities after September 30, 1996 other than pursuant
to the exercise of options outstanding as of such date under the Target Stock
Option Plan. All outstanding shares of Target Capital Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Articles of Incorporation or Bylaws of Target or
any agreement to which Target is a party or by which it is bound. As of the
close of business on September 30, 1996, Target has reserved (i) 1,000,000
shares of Common Stock for issuance to employees, officers, directors and
consultants pursuant to the Target Stock Option Plan, of which no shares have
been issued pursuant to option exercises or direct stock purchases, 95,000
shares are subject to outstanding, unexercised options, and no shares are
subject to outstanding stock purchase rights. Since September 30, 1996, Target
has not (i) issued or granted additional options under the Target Stock Option
Plan or (ii) granted additional warrants or options (other than Target's
options) to acquire Target Capital Stock. Except for (i) the rights created
pursuant to this Agreement, (ii) the rights of holders of outstanding options
granted pursuant to the Target Stock Option Plan to exercise all of their
options for fully vested shares of Target Common Stock by reason of the Merger
and (iii) options and warrants referred to in this Section 2.2, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Target is a party or by which it is bound obligating Target
to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of Target or
obligating Target to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no other contracts, commitments or agreements
relating to voting, purchase or sale of Target's capital stock (i) between or
among Target and any of its shareholders and (ii) to
7.
13
Target's knowledge, between or among any of Target's shareholders, except for
the shareholders delivering Irrevocable Proxies (as defined below). The terms of
the Target Stock Option Plan provide for the acceleration of the exercise
schedule and vesting provisions in effect for options and also permit the
assumption of such immediately exercisable options to purchase fully vested
shares of Target Common Stock or substitution of options to purchase Acquiror
Common Stock as provided in this Agreement, without the consent or approval of
the holders of such securities, or the Target shareholders, or otherwise. True
and complete copies of all agreements and instruments relating to or issued
under the Target Stock Option Plan shall be provided to Acquiror and such
agreements and instruments have not been amended, modified or supplemented, and
there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form made available to Acquiror. All
outstanding Target Capital Stock was issued in compliance with all applicable
federal and state securities laws.
2.3 Authority. Target has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Target, subject only to the approval of the
Merger by Target's shareholders as contemplated by Section 6.1(a). This
Agreement has been duly executed and delivered by Target and constitutes the
valid and binding obligation of Target enforceable against Target in accordance
with its terms, except that such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to creditors'
rights generally, and is subject to general principles of equity. The execution
and delivery of this Agreement by Target does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any material obligation or loss of any material benefit under (i) any provision
of the Articles of Incorporation or Bylaws of Target, as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Target in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country; and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Target and would not prevent,
or materially alter or delay any of the transactions contemplated by this
Agreement.
8.
14
2.4 Financial Statements. Target has delivered to Acquiror its
unaudited financial statements (balance sheet and statement of operations) on a
consolidated basis for the portion of the calendar year ended September 26, 1996
(collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles (except that the
unaudited financial statements do not have notes thereto) applied on a
consistent basis throughout the periods indicated and with each other. The
Financial Statements accurately set out and describe the financial condition and
operating results of Target as of the date, and for the period, indicated
therein, subject to normal year-end audit adjustments. Target maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
2.5 Absence of Certain Changes. Since September 26, 1996, (the "Target
Balance Sheet Date"), Target has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to Target;
(ii) any acquisition, sale or transfer of any material asset of Target other
than in the ordinary course of business and consistent with past practice; (iii)
any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Target or any revaluation by
Target of any of its assets; (iv) any declaration, setting aside, or payment of
a dividend or other distribution with respect to the shares of Target, or any
direct or indirect redemption, purchase or other acquisition by Target of any of
its shares of capital stock; (v) any material contract entered into by Target,
other than in the ordinary course of business and as provided to Acquiror, or
any material amendment or termination of, or default under, any material
contract to which Target is a party or by which it is bound; (vi) any amendment
or change to the Articles of Incorporation or Bylaws of Target; (vii) any
increase in or modification of the compensation or benefits payable or to become
payable by Target to any of its directors or employees or (viii) any negotiation
or agreement by Target to do any of the things described in the preceding
clauses (i) through (vii) (other than negotiations with Acquiror and its
representatives regarding the transactions contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet for the period ended September 26, 1996 (the "Target Balance
Sheet"), (ii) those incurred in the ordinary course of business and not required
to be set forth in the Target Balance Sheet under generally accepted accounting
principles, (iii) those incurred in the ordinary course of business since the
Target Balance Sheet Date and consistent with past practice, and (iv) those
incurred in connection with the execution of this Agreement and the consummation
of this transactions contemplated by this Agreement.
9.
15
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target, threatened
against Target or any of its properties or any of its officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Target. There is no
judgment, decree or order against Target, or, to the knowledge of Target, any of
its directors or officers (in their capacities as such), that could prevent,
enjoin, or materially alter or delay any of the transactions contemplated by
this Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target. All litigation to which Target is a party (or, to the
knowledge of Target, threatened to become a party) is disclosed in the Target
Disclosure Schedule.
2.8 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Target which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current or future business practice of Target, any acquisition of property
by Target or the conduct of business by Target as currently conducted or as
proposed to be conducted by Target.
2.9 Governmental Authorization. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Target's business or the holding of any such
interest ((i) and (ii) herein collectively called "Target Authorizations"), and
all of such Target Authorizations are in full force and effect, except where the
failure to obtain or have any such Target Authorizations could not reasonably be
expected to have a Material Adverse Effect on Target.
2.10 Title to Property. Target has good and marketable title to all of
its properties, interests in properties and assets, real and personal, reflected
in the Target Balance Sheet or acquired after the Target Balance Sheet Date
(except properties, interests in properties and assets sold or otherwise
disposed of since the Target Balance Sheet Date in the ordinary course of
business), or with respect to leased properties and assets, valid leasehold
interests in, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) the lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on the Target Balance Sheet. The plants, property and
equipment of Target that are used in the operations of their businesses are in
all material respects in good operating condition and repair. All properties
used in the operations of Target are reflected in the Target Balance Sheet to
the extent generally accepted accounting principles require the same to be
reflected. Schedule 2.10 identifies each parcel of real property owned or leased
by Target.
10.
16
2.11 Intellectual Property.
(a) Target owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
("Intellectual Property") that are used or currently proposed to be used in the
business of Target as currently conducted or as proposed to be conducted by
Target, except to the extent that the failure to have such rights have not had
and would not reasonably be expected to have a Material Adverse Effect on
Target.
(b) Schedule 2.11 lists (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks, included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements as to which Target is a party and
pursuant to which any person is authorized to use any Intellectual Property, and
(iii) all licenses, sublicenses and other agreements as to which Target is a
party and pursuant to which Target is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual Property
Rights") which are incorporated in, are, or form a part of any Target product
that is material to its business.
(c) There is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Target,
any trade secret material to Target, or any Intellectual Property right of any
third party to the extent licensed by or through Target, by any third party,
including any employee or former employee of Target. Target has not entered into
any agreement to indemnify any other person against any charge of infringement
of any Intellectual Property, other than indemnification provisions contained in
sales invoices arising in the ordinary course of business.
(d) Target is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights, the
breach of which would have a Material Adverse Effect on Target.
(e) All patents, registered trademarks, service marks and
copyrights held by Target are valid and subsisting. Target (i) has not been sued
in any suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; and
11.
17
(ii) has not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. The manufacturing, marketing,
licensing or sale of its product does not infringe any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party, where such infringement would have a Material Adverse Effect on Target.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does not
already own by operation of law, the absence of which would have a Material
Adverse Effect on Target.
(g) All use, disclosure or appropriation of Intellectual Property
not otherwise protected by patents, patent applications or copyright
("Confidential Information"), owned by Target by or to a third party has been
pursuant to the terms of a written agreement between Target and such third
party. All use, disclosure or appropriation of Confidential Information not
owned by Target has been pursuant to the terms of a written agreement between
Target and the owner of such Confidential Information, or is otherwise lawful.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders
that are intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws.
(iii) "Property" shall mean all real property leased or owned
by Target either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements
on the Property of Target.
12.
18
(b) Target represents and warrants as follows: (i) to Target's
knowledge, no methylene chloride or asbestos is contained in or has been used at
or released from the Facilities; (ii) to Target's knowledge, all Hazardous
Materials and wastes have been disposed of in accordance with all Environmental
and Safety Laws; and (iii) Target has received no notice (written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety laws; (iv) no notices, administrative actions or suits
are pending, or, to Target's knowledge, threatened relating to a violation of
any Environmental and Safety Laws; (v) to Target's knowledge, Target is not a
potentially responsible party under the federal Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), or state analog statute,
arising out of events occurring prior to the Closing Date; (vi) to Target's
knowledge, there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii) to
Target's knowledge, there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil xxxxx; (viii) Target has not deposited, stored, disposed of or located
polychlorinated biphenyls (PCB) on the Property or Facilities or any equipment
on the Property containing PCBs at levels in excess of 50 parts per million;
(ix) to Target's knowledge, there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea formaldehyde in the
Facilities; (x) to Target's knowledge, the Facilities and Target's uses and
activities therein have at all times complied with all Environmental and Safety
Laws; and (xi) Target has all the permits and licenses required to be issued and
are in full compliance with the terms and conditions of those permits.
2.13 Taxes. Target has timely filed all Tax Returns required to be
filed. All such Tax Returns were correct and complete in all respects. All Taxes
owed by Target (whether or not shown on any Tax Return) have been paid. Target
is not the beneficiary of any extension of time within which to file any Tax
Return. The Financial Statements (i) fully accrue all actual and contingent
liabilities for Taxes with respect to the period covered thereby and Target has
not and will not incur any Tax liability in excess of the amount reflected on
the Financial Statements with respect to such period, and (ii) properly accrue
in accordance with generally accepted accounting principles all liabilities for
Taxes payable after September 6, 1996 with respect to all transactions and
events occurring on or prior to such date. No material Tax liability since
September 6, 1996 has been incurred by Target other than in the ordinary course
of business and adequate provision has been made in the Financial Statements for
all Taxes since that date in accordance with generally accepted accounting
principles on at least a quarterly basis. Target has withheld and paid to the
applicable financial institution or Tax Authority all amounts required to be
withheld. No notice of deficiency or similar document of any Tax Authority has
been received by Target and there are no liabilities for Taxes with respect to
the issues that have been raised (and are currently pending) by any Tax
Authority that could, if determined adversely to Target, materially and
adversely affect the liability of Target for Taxes. Target does not expect any
Tax Authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is (i) no claim for Taxes that is a lien against
the property of Target other than
13.
19
liens for Taxes not yet due and payable, (ii) Target has received no
notification of any audit of any Tax Return of Target being conducted, pending
or threatened by a Tax authority, (iii) no extension or waiver of the statute of
limitations on the assessment of any Taxes granted by Target and currently in
effect, and (iv) no agreement, contract or arrangement to which Target is a
party that may result in the payment of any material amount that would not be
deductible by reason of Code sections 280G or 404. Target will not be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Code section 481 or 263A or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger. Target has not filed a consent
under Code section 341(f) concerning collapsible corporations. Target has not
been a United States real property holding corporation within the meaning of
Code section 897(c)(2) during the applicable period specified in Code section
897(c)(i)(A)(ii). Target is not a party to any tax sharing or tax allocation
agreement nor does Target owe any amount under any such agreement. For purposes
of this Agreement, the following terms have the following meanings: "Tax" (and,
with correlative meaning, "Taxes" and "Taxable") means (i) any net 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, custody 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 Entity (a "Tax Authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary 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. As used herein, "Tax Return" shall mean any return, statement, report or
form (including, without limitation,) estimated Tax returns and reports,
withholding Tax returns and reports and information reports and returns required
to be filed with respect to Taxes. Target is in full compliance with all terms
and conditions of any Tax exemptions or other Tax-sparing agreement or order of
a foreign government applicable to it and the consummation of the Merger shall
not have any adverse effect on the continued validity and effectiveness of any
such Tax exemptions or other Tax-sparing agreement or order.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to Target, and any trade or
business (whether or not incorporated) which is treated as a single employer
with Target (an "ERISA Affiliate") within the meaning of Code section 414(b),
(c), (m) or (o), (i) all material employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) each loan to a non-officer employee in excess of $10,000, loans
to officers and directors and any stock option, stock purchase, phantom stock,
stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Code section
14.
20
125) or dependent care (Code section 129), life insurance or accident insurance
plans, programs or arrangements, (iii) all bonus, pension, profit sharing,
savings, deferred compensation or incentive plans, programs or arrangements,
(iv) other fringe or employee benefit plans, programs or arrangements that apply
to senior management of Target and that do not generally apply to all employees,
and (v) any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
of greater than $10,000 remain for the benefit of, or relating to, any present
or former employee, consultant or director of Target (together, the "Target
Employee Plans").
(b) Target has furnished to Acquiror a copy of each of the Target
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and, to the extent still in its possession, any material
employee communications relating thereto) and has, with respect to each Target
Employee Plan which is subject to ERISA reporting requirements, provided copies
of the Form 5500 reports filed for the last three plan years. Any Target
Employee Plan intended to be qualified under Code section 401(a) has either
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
applied to the Internal Revenue Service for such a determination letter prior to
the expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination,
or has been established under a standardized prototype plan for which an
Internal Revenue Service opinion letter has been obtained by the plan sponsor
and is valid as to the adopting employer. Target has also furnished Acquiror
with the most recent Internal Revenue Service determination or opinion letter
issued with respect to each such Target Employee Plan, and nothing has occurred
since the issuance of each such letter which could reasonably be expected to
cause the loss of the tax-qualified status of any Target Employee Plan subject
to Code section 401(a).
(c) (i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Code section 4975, with respect to any Target Employee Plan, which
could reasonably be expected to have, in the aggregate, a Material Adverse
Effect; (iii) each Target Employee Plan has been administered in accordance with
its terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect, and Target and each ERISA
Affiliate have performed all material obligations required to be performed by
them under, are not in any material respect in default under or violation of,
and have no knowledge of any material default or violation by any other party
to, any of the Target Employee Plans; (iv) neither Target nor any ERISA
Affiliate is subject to any liability or penalty under Code sections 4976
through 4980 or Title I of ERISA with respect to any of the Target Employee
15.
21
Plans; (v) all material contributions required to be made by Target or any ERISA
Affiliate to any Target Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each Target
Employee Plan for the current plan years; (vi) with respect to each Target
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; and (vii) no
Target Employee Plan is covered by, and neither Target nor any ERISA Affiliate
has incurred or expects to incur any liability under Title IV of ERISA or Code
section 412. With respect to each Target Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA or
an employee welfare benefit plan within the meaning of Section 3(l) of ERISA,
Target has prepared in good faith and timely filed all requisite governmental
reports (which were true and correct as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports to employees
required to be filed, distributed or posted with respect to each such Target
Employee Plan. No suit, administrative proceeding, action or other litigation
has been brought, or to the knowledge of Target is threatened, against or with
respect to any such Target Employee Plan, including any audit or inquiry by the
IRS or United States Department of Labor. Neither Target nor any ERISA Affiliate
is a party to, or has made any contribution to or otherwise incurred any
obligation under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Target Employee Plan, Target has complied
with (i) the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except to the extent
that such failure to comply would not, in the aggregate, have a Material Adverse
Effect.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Target or any ERISA Affiliate to severance benefits or any other
payment (including, without limitation, unemployment compensation, golden
parachute or bonus), except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting of any such benefits, or increase the
amount of compensation due any such employee or service provider (other than the
acceleration of the exercise or vesting schedule applicable to options granted
under the Target Stock Option Plan and outstanding at the Effective Time).
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target or any ERISA Affiliate relating
to, or change in participation or coverage under, any Target Employee Plan which
would materially increase the expense of maintaining such Plan above the level
of expense incurred with respect to that Plan for the most recent fiscal year
included in Target's financial statements.
16.
22
2.15 Certain Agreements Affected by the Merger. Neither the execution
and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Target, (ii) materially
increase any benefits otherwise payable by Target or (iii) result in the
acceleration of the time of payment or vesting of any such benefits (other than
the acceleration of the exercise or vesting schedule applicable to options
granted under the Target Stock Option Plan and outstanding at the Effective
Time).
2.16 Employee Matters. To Target's knowledge, Target is in compliance
in all material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice. There are no
pending claims against Target under any workers compensation plan or policy or
for long term disability. Target has no material obligations under COBRA with
respect to any former employees or qualifying beneficiaries thereunder. There
are no proceedings pending or, to the knowledge of Target, threatened, between
Target and its employees, which proceedings have or could reasonably be expected
to have a Material Adverse Effect on Target. Target is not a party to any
collective bargaining agreement or other labor unions contract nor does Target
know of any activities or proceedings of any labor union or organize any such
employees. In addition, Target has provided all employees, with all relocation
benefits, stock options, bonuses and incentives, and all other compensation that
such employee has earned up through the date of this Agreement or that such
employee was otherwise promised in their employment agreements with Target.
2.17 Interested Party Transactions. Target is not indebted to any
director, officer, employee or agent of Target (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses), and no such
person is indebted to Target.
2.18 Insurance. Target has no insurance policies or bonds of the type
carried by persons conducting businesses or owning assets similar to those of
Target.
2.19 Compliance With Laws. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on Target.
2.20 Minute Books. The minute books of Target made available to
Acquiror contain a complete and accurate summary of all meetings of directors
and shareholders or actions by written consent since the time of incorporation
of Target through the date of this
17.
23
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
2.21 Complete Copies of Materials. Target has delivered or made
available true and complete copies of each document which has been requested by
Acquiror or its counsel in connection with their legal and accounting review of
Target. All the material contracts and agreements (as such terms are defined in
Regulation S-K promulgated under the Act) to which Target is a party are listed
in Schedule 2.21 hereto.
2.22 Brokers' and Finders' Fees. Target has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.23 Registration Statement; Proxy Statement/Prospectus on Form S-1.
The information supplied by Target for inclusion in any registration statement
on Form S-1 (or such other or successor form as shall be appropriate) pursuant
to which the shares of Acquiror Common Stock to be issued in the Merger will be
registered with the SEC (the "Registration Statement") shall not at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by Target for
inclusion in the Consent Solicitation to be sent to the shareholders of Target
shall not, on the date the Consent Solicitation is mailed to Target's
shareholders, and at the Effective Time, contain any statement which, at such
time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies which has become false or misleading. Notwithstanding the foregoing,
Target makes no representation, warranty or covenant with respect to any
information supplied by Acquiror or Merger Sub which is contained in any of the
foregoing documents.
2.24 Affiliate and Shareholder Agreement; Irrevocable Proxies. As of
the Closing Date, sixty-six and two-thirds percent (66 2/3%) of the persons
and/or entities deemed "Affiliates" of Target within the meaning of Rule 145
promulgated under the Securities Act and holders of all shares of Target Capital
Stock issued and outstanding, have agreed in writing to vote for approval of the
Merger pursuant to shareholder agreements attached hereto as Exhibit B
("Affiliate and Shareholder Agreements"), and pursuant to Irrevocable Proxies
attached hereto as Exhibit C ("Irrevocable Proxies").
18.
24
2.25 Vote Required. The affirmative vote of the holders of a majority
of the shares of Target's Common Stock and Preferred Stock voting as separate
classes outstanding is the only vote of the holders of any of Target's Capital
Stock necessary under California law to approve this Agreement and the
transactions contemplated hereby.
2.26 Board Approval. The Board of Directors of Target has unanimously
approved this Agreement and the Merger, (ii) determined that in its opinion the
Merger is in the best interests of the shareholders of Target and is on terms
that are fair to such shareholders and (iii) recommended that the shareholders
of Target approve this Agreement and the Merger.
2.27 Inventory. The inventories shown on the Financial Statements or
thereafter acquired by Target, consisted of items of a quantity and quality
usable or salable in the ordinary course of business. Since September 6, 1996,
Target has continued to consume inventories in a normal and customary manner
consistent with past practices. Target has not received notice that it will
experience in the foreseeable future any difficulty in obtaining, in the desired
quantity and quality and at a reasonable price and upon reasonable terms and
conditions, the raw materials, supplies or component products required for the
manufacture, assembly or production of its products. The values at which
inventories are carried reflect the inventory valuation policy of Target, which
is consistent with its past practice and in accordance with generally accepted
accounting principles applied on a consistent basis.
19.
25
2.28 Accounts Receivable. Subject to any reserves set forth in the
Financial Statements, the accounts receivable, if any, shown on the Financial
Statements represent and will represent bona fide claims against debtors for
sales and other charges, and are not subject to discount except for normal cash
and immaterial trade discounts. The amount carried for doubtful accounts and
allowances, if any, disclosed in the Financial Statements is sufficient to
provide for any losses which may be sustained on realization of any receivables.
2.29 Customers and Suppliers. As of the date hereof, Target has no
customers. No supplier of Target, has canceled or otherwise terminated, or made
any threat to Target to cancel or otherwise terminate its relationship with
Target, or has at any time on or after January 1, 1996 decreased materially its
services or supplies to Target. Target has not knowingly breached, so as to
provide a benefit to Target that was not intended by the parties, any agreement
with, or engaged in any fraudulent conduct with respect to, any supplier of
Target.
2.30 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule or Exhibit hereto, including
the Target Disclosure Schedule, or certificate furnished by Target pursuant to
this Agreement or any written statement furnished to Acquiror pursuant hereto or
in connection with the transactions contemplated hereby, when all such documents
are read together in their entirety, contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading; provided, however, that (a) for purposes of this
representation, any document attached hereto and any document specifically
referenced in the Target Disclosure Schedule as a "Superseding Document" (even
if not attached hereto) that provides information inconsistent with or in
addition to any other written statement furnished to Acquiror in connection with
the transaction contemplated hereby, shall be deemed to supersede any other
document or written statement furnished to Acquiror with respect to such
inconsistent or additional information, and (b) it is understood that the
financial projections delivered by Target represent only Target's best estimate
under the circumstances of what it reasonably believes (although it is not aware
of any fact or information that would lead it to believe that such projections
are misleading in any material respect) and are based upon assumptions set forth
in such projections that Target believes were reasonable as of the time such
projections were made. Target does not make any other representation or warranty
regarding such projections or Target's possible or anticipated operating
performance other than as set forth in this Section 2.30.
2.31 Liabilities Assumed. The financial liabilities of Target
(exclusive of those arising in connection with the agreements noted in the
following sentence) do not exceed $35,000 plus the amount of cash on hand at the
Closing Date. The only liabilities
20.
26
to be assumed by Merger Sub are the liabilities noted in the preceding sentence
and liabilities noted in Schedule 2.31.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Except as disclosed in a document of even date herewith and
delivered by Acquiror to Target prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
(the "Acquiror Disclosure Schedule"), Acquiror and Merger Sub represent and
warrant to Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror and Merger
Sub, is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. Each of Acquiror and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and as proposed to be conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which the failure to
be so qualified and in good standing would have a Material Adverse Effect on
Acquiror. Acquiror has delivered a true and correct copy of the Articles of
Incorporation and Bylaws or other charter documents, as applicable, of Acquiror
and Merger Sub, each as amended to date, to Target. Neither Acquiror nor Merger
Sub is in violation of any of the provisions of its Articles of Incorporation or
Bylaws or equivalent organizational documents. Acquiror is the owner of all
outstanding shares of capital stock of Merger Sub and all such shares are duly
authorized, validly issued, fully paid and nonassessable.
3.2 Capital Structure. The authorized capital stock of Acquiror
consists of 30,000,000 shares of Common Stock, $.001 par value, and 5,000,000
Shares of Preferred Stock, $.001 par value, of which there were issued and
outstanding as of the close of business on September 30, 1996, 9,400,000 shares
of Common Stock on a fully diluted basis and no shares of Preferred Stock. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
no par value, all of which are issued and outstanding and are held by Acquiror.
All outstanding shares of Acquiror and Merger Sub have been duly authorized,
validly issued, fully paid and are nonassessable and free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. The shares of Acquiror Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid, and
non-assessable.
3.3 Authority. Acquiror and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquiror and Merger
Sub. This Agreement
21.
27
has been duly executed and delivered by Acquiror and Merger Sub and constitutes
the valid and binding obligations of Acquiror and Merger Sub, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and is
subject to general principles of equity. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
a material benefit under (i) any provision of the Articles of Incorporation or
Bylaws of Acquiror or Merger Sub as amended, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Acquiror or Merger Sub or their properties or assets.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Acquiror
or Merger Sub in connection with the execution and delivery of this Agreement by
Acquiror and Merger Sub or the consummation by Acquiror and Merger Sub of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger, as provided in Section 1.2, (ii) the filing of a Form 8-K with the
Securities and Exchange Commission ("SEC") and National Association of
Securities Dealers ("NASD") within 15 days after the Closing Date if deemed
necessary by Acquiror, (iii) any filings as may be required under applicable
state securities laws and the securities laws of any foreign country, (iv) the
filing with the Nasdaq National Market of a Notification Form for Listing of
Additional Shares and the filing of registration forms on Forms S-1 and S-8 with
the SEC, as appropriate, with respect to the shares of Acquiror Common Stock
issuable upon conversion of the Target Capital Stock in the Merger and upon
exercise of the options under the Target Stock Option Plans assumed by Acquiror,
and (v) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Acquiror and would not prevent or delay any of the transactions
contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Acquiror has made available to
Target a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement, and other filing filed with the SEC
by Acquiror since June 20, 1996, and, prior to the Effective Time, Acquiror will
have furnished Target with true and complete copies of any additional documents
filed with the SEC by Acquiror prior to the Effective Time (collectively, the
"Acquiror SEC Documents"). In addition, Acquiror has made available to Target
all exhibits to the Acquiror SEC Documents filed prior to the date hereof, and
will promptly make available to Target all exhibits to any additional Acquiror
SEC Documents filed prior to the Effective Time. All documents required to be
filed as exhibits to the Target SEC Documents have been so filed, and all
material contracts so filed as exhibits are in full force and effect, except
those which have expired in accordance with their terms, and
22.
28
Acquiror is not in default thereunder. As of their respective filing dates, the
Acquiror SEC Documents complied in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act, and none of the Acquiror SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Acquiror SEC Document prior to the date
hereof. The financial statements of Acquiror, including the notes thereto,
included in the Acquiror SEC Documents (the "Acquiror Financial Statements")
were complete and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the SEC). The Acquiror Financial Statements fairly present the
consolidated financial condition and operating results of Acquiror at the dates
and during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments). There has been no change
in Acquiror accounting policies except as described in the notes to the Acquiror
Financial Statements.
3.5 Absence of Certain Changes. Since June 30, 1996 (the "Acquiror
Balance Sheet Date"), Acquiror has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
would reasonably be expected to result in, a Material Adverse Effect to
Acquiror; (ii) any acquisition, sale or transfer of any material asset of
Acquiror other than in the ordinary course of business and consistent with past
practice; (iii) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Acquiror or any
revaluation by Acquiror of any of its assets; (iv) any declaration, setting
aside, or payment of a dividend or other distribution with respect to the shares
of Acquiror, or any direct or indirect redemption, purchase or other acquisition
by Acquiror of any of its shares of capital stock; (v) any material contract
entered into by Acquiror, other than in the ordinary course of business and as
provided to Target, or any material amendment or termination of, or default
under, any material contract to which Acquiror is a party or by which it is
bound; (vi) any amendment or change to Acquiror's Articles of Incorporation or
Bylaws; or (vii) any negotiation or agreement by Acquiror to do any of the
things described in the preceding clauses (i) through (vi) (other than
negotiations with Target and its representatives regarding the transactions
contemplated by this Agreement).
23.
29
3.6 Absence of Undisclosed Liabilities. Acquiror has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in Acquiror's Quarterly Report on Form 10-Q for the
period ended June 30, 1996 (the "Acquiror Balance Sheet"), (ii) those incurred
in the ordinary course of business and not required to be set forth in the
Acquiror Balance Sheet under generally accepted accounting principles, and (iii)
those incurred in the ordinary course of business since the Acquiror Balance
Sheet Date and consistent with past practice.
3.7 Broker's and Finders' Fees. Acquiror has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.8 Registration Statement. The information supplied by
Acquiror and Merger Sub for inclusion in the Registration Statement shall not,
at the time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The information supplied by Acquiror for inclusion in the
general solicitation of written consents of Target's Shareholders to obtain
their votes in favor of the Merger (the "Consent Solicitation") shall not, on
the date the Consent Solicitation is first mailed to Target's shareholders, and
at the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which it is made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for Target's Shareholders which has
become false or misleading. Notwithstanding the foregoing, Acquiror and Merger
Sub make no representation, warranty or covenant with respect to any information
supplied by Target which is contained in any of the foregoing documents.
3.9 Representations Complete. None of the representations or
warranties made by Acquiror or Merger Sub herein or in any Schedule hereto,
including the Acquiror Disclosure Schedule, or certificate furnished by Acquiror
or Merger Sub pursuant to this Agreement, or the Acquiror SEC Documents, or any
written statement furnished to Target pursuant hereto or in connection with the
transactions contemplated hereby, when all such documents are read together in
their entirety, contains or will contain at the Effective Time any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading; provided, however, that for purposes of this representation, any
document attached hereto and any document specifically referenced in the
Acquiror
24.
30
Disclosure Schedule as a "Superseding Document" (even if not attached hereto)
that provides information inconsistent with or in addition to any other written
statement furnished to Target in connection with the transaction contemplated
hereby, shall be deemed to supersede any other document or written statement
furnished to Target with respect to such inconsistent or additional information.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Target and Acquiror. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, each of Target and Acquiror agrees
(except to the extent expressly contemplated by this Agreement or as consented
to in writing by the other), to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
debts and Taxes when due (subject (i) to good faith disputes over such debts or
Taxes and (ii) in the case of Taxes of Target, to Acquiror's consent to the form
of Tax Returns), to pay or perform other obligations when due, and to use all
reasonable efforts consistent with past practice and policies to preserve intact
its present business organization, keep available the services of its present
officers and key employees and preserve its relationships with suppliers,
licensors, licensees, and others having business dealings with it, to the end
that its goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Each of Target and Acquiror agrees to promptly notify the other of (x) any
event or occurrence not in the ordinary course of its business, and of any event
which could have a Material Adverse Effect and (y) any material change in its
capitalization as set forth in Sections 2.2 and 3.2, respectively. Without
limiting the foregoing, except as expressly contemplated by this Agreement or
the Target Disclosure Schedule or the Acquiror Disclosure Schedule, neither
Target nor Acquiror, respectively, shall do, cause or permit any of the
following, without the prior written consent of the other:
(a) Charter Documents. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Except as set forth in
the Acquiror Disclosure Schedule, declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it;
25.
31
(c) Stock Option Plans, Etc. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under its
stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans (other than to accelerate on account of
this Merger the exercise or vesting schedule applicable to all options granted
under the Target Stock Option Plan and outstanding as of the Effective Time).
(d) Other. Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) through (c) above, or any action which
would cause a material breach of its representations or warranties contained in
this Agreement or prevent it from materially performing or cause it not to
materially perform its covenants hereunder.
4.2 Conduct of Business of Target. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement or the Target Disclosure Schedule, Target shall not do, cause or
permit any of the following, without the prior written consent of Acquiror:
(a) Material Contracts. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its material contracts, other than in the ordinary course of business
consistent with past practice;
(b) Issuance of Securities. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement;
(c) Intellectual Property. Transfer to any person or entity any
rights to its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any agreements pursuant
to which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products or technology;
(e) Dispositions. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to its business, except in the ordinary course of business
consistent with past practice;
26.
32
(f) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(g) Leases. Enter into any operating lease in excess of $10,000;
(h) Payment of Obligations. Pay, discharge or satisfy in an amount
in excess of $10,000 in any one case or $20,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Target Financial Statements;
(i) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice;
(j) Insurance. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay Increases. Adopt or
amend any employee benefit or stock purchase or option plan, or hire any new
officer level employee, pay any special bonus or special remuneration to any
employee or director (except payments made pursuant to written agreements
outstanding on the date hereof), or increase the salaries or wage rates of its
employees except in the ordinary course of business in accordance with its
standard past practice;
(m) Severance Arrangements. Grant any severance or termination pay
(i) to any director or officer or (ii) to any other employee except (A) payments
made pursuant to written agreements outstanding on the date hereof or (B) grants
which are made in the ordinary course of business in accordance with its
standard past practice;
(n) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Acquiror prior to the
filing of such a suit, or (iii) for a breach of this Agreement;
(o) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other
27.
33
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to its
business;
(p) Taxes. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement, settle any material claim
or assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any material claim or assessment in respect of
Taxes;
(q) Notices. Target shall give all notices and other information
required to be given to the employees of Target, any collective bargaining unit
representing any group of employees of Target, and any applicable government
authority under the WARN Act, the National Labor Relations Act, the Internal
Revenue Code, the Consolidated Omnibus Budget Reconciliation Act, and other
applicable law in connection with the transactions provided for in this
Agreement;
(r) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(s) Other. Take or agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through (r) above, or any action which
would cause a material breach of its representations or warranties contained in
this Agreement or prevent it from materially performing or cause it not to
materially perform its covenants hereunder.
4.3 No Negotiation or Solicitation. Target and the officers,
directors, employees or other agents of Target will not, directly or indirectly,
(a) take any action to solicit, initiate or encourage any Takeover Proposal
(defined below) or (b) subject to the terms of the immediately following
sentence, engage in negotiations with, or disclose any nonpublic information
relating to Target to, or afford access to the properties, books or records of
Target to, any person that has advised Target that it may be considering making,
or that has made, a Takeover Proposal. Target will promptly notify Acquiror
after receipt of any Takeover Proposal or any notice that any person is
considering making a Takeover Proposal or any request for nonpublic information
relating to Target or for access to the properties, books or records of Target
by any person that has advised Target that it may be considering making, or that
has made, a Takeover Proposal and will keep Acquiror fully informed of the
status and details of any such Takeover Proposal notice or request. For purposes
of this Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
Target or the acquisition of any significant equity interest in, or a
28.
34
significant portion of the assets of, Target, other than the transactions
contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Consent Solicitation. As soon as practicable after the execution of
this Agreement, Target shall prepare, with the cooperation of Acquiror, the
Consent Solicitation for the shareholders of Target to approve this Agreement,
the Certificate of Merger and the transactions contemplated hereby and thereby.
The Consent Solicitation shall constitute a disclosure document for the offer
and issuance of the shares of Acquiror Common Stock to be received by the
holders of Target Capital Stock in the Merger. Target shall use reasonable
commercial efforts to cause the Consent Solicitation to comply with applicable
federal and state securities laws requirements. Each of Acquiror and Target
agrees to provide promptly to the other such information concerning its business
and financial statements and affairs as, in the reasonable judgment of the
providing party or its counsel, may be required or appropriate for inclusion in
the Consent Solicitation, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Consent Solicitation. Target will promptly
advise Acquiror, and Acquiror will promptly advise Target, in writing if at any
time prior to the Effective Time either Target or Acquiror shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Consent Solicitation in order to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable
law. The Consent Solicitation shall contain the recommendation of the Board of
Directors of Target that the Target shareholders approve the Merger and this
Agreement and the conclusion of the Board of Directors that the terms and
conditions of the Merger are fair and reasonable to the shareholders of Target;
provided that such recommendation may not be included or may be withdrawn if
previously included if Target's Board of Directors believes in good faith that a
superior proposal has been made and, upon written advice of its outside legal
counsel, shall determine that to include such recommendation or not withdraw
such recommendation if previously included would constitute a breach of the
Board's fiduciary duty under applicable law. Anything to the contrary contained
herein notwithstanding, Target shall not include in the Consent Solicitation any
information with respect to Acquiror or its affiliates or associates, the form
and content of which information shall not have been approved by Acquiror prior
to such inclusion.
5.2 Stockholders Consents/Proxies. Target shall use its best efforts,
promptly after the date hereof, to take all action necessary in accordance with
California law, its Articles of Incorporation and Bylaws and otherwise to obtain
the written consents of its Shareholders in favor of the Merger that are
distributed in the Consent Solicitation. Target shall use its best efforts to
solicit from shareholders of Target proxies in favor of the Merger and shall
take all other action necessary or advisable to secure the vote or consent of
shareholders required to effect the Merger.
29.
35
5.3 Access to Information.
(a) Target shall afford Acquiror and its accountants, counsel and
other representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of Target's properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of Target as Acquiror may reasonably
request. Target agrees to provide to Acquiror and its accountants, counsel and
other representatives copies of internal financial statements promptly upon
request. Acquiror shall afford Target and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of Acquiror's properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of Acquiror as Target may reasonably
request. Acquiror agrees to provide to Target and its accountants, counsel and
other representatives copies of internal financial statements promptly upon
request.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Acquiror and Target shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(c) Each party hereto agrees to notify the other parties hereto in
writing prior to the Closing if it has information or knowledge prior to the
Closing of any breach of any representation or warranty of the other parties.
Any breach of any representation or warranty by a party under this Agreement
which is actually known by the other party prior to the Closing shall
automatically be deemed to have been waived for all purposes by the party with
such knowledge if such party elects to proceed with the Closing; provided, that,
each party retains all of its legal rights absent such election to proceed with
the Closing.
5.4 Confidentiality. The parties acknowledge that Acquiror and Target
have previously executed a non-disclosure agreement dated as of September 30,
1996 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD.
30.
36
5.6 Consents; Cooperation. Each of Acquiror and Target shall promptly
apply for or otherwise seek, and use reasonable best efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
Merger and shall use reasonable best efforts to obtain all necessary consents,
waivers and approvals under any of its material contracts in connection with the
Merger for the assignment thereof or otherwise.
5.7 Affiliate and Shareholder Agreements. Schedule 5.7 sets forth
those persons who are, in Target's reasonable judgment, "Affiliates" of Target
within the meaning of Rule 145 promulgated under the Securities Act ("Rule
145"). Target shall provide Acquiror such information and documents as Acquiror
shall reasonably request for purposes of reviewing such list. Target shall use
its best efforts to deliver or cause to be delivered to Acquiror, on or before
the Effective Time) from each of the Affiliates of Target, an executed Affiliate
and Shareholder Agreement in the form attached hereto as Exhibit B. Acquiror and
Merger Sub shall be entitled to place appropriate legends on the certificates
evidencing any Acquiror Common Stock to be received by such affiliates of Target
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for Acquiror Common Stock, consistent with
the terms of such Affiliate and Shareholder Agreement.
5.8 Irrevocable Proxies. Target shall use its best efforts, on behalf
of Acquiror and pursuant to the request of Acquiror, to cause holders of all
shares of Target Capital Stock issued and outstanding to execute and deliver to
Acquiror an Irrevocable Proxy substantially in the form of Exhibit C attached
hereto concurrently with the execution and delivery of written consents that are
obtained pursuant to the Consent Solicitation.
5.9 FIRPTA. Target shall, prior to the Closing Date, provide Acquiror
with a properly executed Foreign Investment and Real Property Tax Act of 1980
("FIRPTA") Notification Letter, substantially in the form of Exhibit D attached
hereto, which states that shares of capital stock of Target do not constitute
"United States real property interests" under Code section 897(c), for purposes
of satisfying Acquiror's obligations under Treasury Regulation section
1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification
Letter, Target shall have provided to Acquiror, as agent for Target, a form of
notice to the Internal Revenue Service in accordance with the requirements of
Treasury Regulation section 1.897-2(h)(2) and substantially in the form of
Exhibit D attached hereto along with written authorization for Acquiror to
deliver such notice form to the Internal Revenue Service on behalf of Target
upon the Closing of the Merger.
5.10 Legal Requirements. Each of Acquiror, Merger Sub and Target will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement and will promptly cooperate with
and furnish information to any party hereto necessary in connection with any
such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and
31.
37
will take all reasonable actions necessary to obtain (and will cooperate with
the other parties hereto in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.11 Blue Sky Laws. Acquiror shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Acquiror Common Stock in connection with the
Merger. Target shall use its best efforts to assist Acquiror as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.
5.12 Employee Benefit Plans. At the Effective Time, the Target Stock
Option Plan and each outstanding option to purchase shares of Target Common
Stock under the Target Stock Option Plan, whether vested or unvested, will be
assumed by Acquiror. Schedule 5.12 hereto sets forth a true and complete list as
of the date hereof of all holders of outstanding options under the Target Stock
Option Plan including the number of shares of Target Common Stock subject to
each such option, the exercise or vesting schedule (which schedule will
accelerate by reason of the Merger), the exercise price per share and the term
of each such option. On the Closing Date, Target shall deliver to Acquiror an
updated Schedule 5.12 hereto current as of such date. Each such option so
assumed by Acquiror under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Target Stock Option Plan
immediately prior to the Effective Time, except that (i) such option will be
exercisable for that number of whole shares of Acquiror Common Stock equal to
the product of the number of shares of Target Common Stock that were issuable
upon exercise of such option immediately prior to the Effective Time multiplied
by the Exchange Ratio and rounded down to the nearest whole number of shares of
Acquiror Common Stock, and (ii) the per share exercise price for the shares of
Acquiror Common Stock issuable upon exercise of such assumed option will be
equal to the quotient determined by dividing the exercise price per share of
Target Common Stock at which such option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
Consistent with the terms of the Target Stock Option Plan and the documents
governing the outstanding options under such Plans, the Merger will not
terminate any of the outstanding options under the Target Stock Option Plan but
will accelerate the exercise or vesting schedule applicable to such options. It
is the intention of the parties that the options so assumed by Acquiror qualify
following the Effective Time as incentive stock options as defined in Code
section 422 to the extent such options qualified as incentive stock options
prior to the Effective Time. Within 10 business days after the Effective Time,
Acquiror will issue to each person who, immediately prior to the Effective Time
was a holder of an outstanding option under the Target Stock Option Plan a
document in form and substance satisfactory to Target evidencing the foregoing
assumption of such option by Acquiror.
32.
38
5.13 Escrow Agreement. On or before the Effective Time, the Escrow
Agent and the Shareholders' Agent (as defined in Article VIII hereto) will
execute the Escrow Agreement contemplated by Article VIII in the form attached
hereto as Exhibit E ("Escrow Agreement").
5.14 Registration Rights. Subject to the provisions of the Declaration
of Registration Rights in substantially the form attached hereto as Exhibit F,
Acquiror agrees to file with the SEC, no later than 45 days after the Closing, a
registration statement or statements on such Form or Forms as it deems
appropriate covering the shares of Acquiror Common Stock issuable pursuant to
this Agreement (including for shares issued upon the exercise of outstanding
options under the Target Stock Option Plan assumed by Acquiror). Target shall
cooperate with and assist Acquiror in the preparation of any such registration
statements.
5.15 Shareholder Agreements. Target will use its best efforts to cause
all Target shareholders to execute and deliver to Acquiror an Affiliate and
Shareholder Agreement attached as Exhibit B.
5.16 Listing of Additional Shares. Prior to the Effective Time,
Acquiror shall file with the Nasdaq National Market a Notification Form for
Listing of Additional Shares with respect to the shares of Acquiror Common Stock
issuable upon conversion of the Target Common Stock in the Merger and upon
exercise of the options under the Target Stock Option plan assumed by Acquiror.
5.17 Employee. Acquiror will make an offer to Xxxxxx X. XxXxxxxx to
enter into an Employment and Non-Competition Agreement substantially in the form
attached hereto as Exhibit I. Target shall cooperate with Acquiror to assist
Acquiror in employing Xxxxxx X. XxXxxxxx.
5.18 Reorganization. Acquiror and Target shall each use its best
efforts to cause the business combination to be effected by the Merger to be
qualified as a "reorganization" described in Code section 368(a).
5.19 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the Certificate of Merger
and the transactions contemplated hereby and thereby shall be paid by the party
incurring such expense; provided, however, that any out-of-pocket fees or
expenses incurred by Target, to the extent that they exceed the amount
specified in Section 2.31, shall be an obligation of Target's shareholders and
be paid from the Escrow Fund.
5.20 Intentionally Omitted.
5.21 Reasonable Commercial Efforts and Further Assurances. Each of the
parties to this Agreement shall use reasonable commercial efforts to effectuate
the transactions
33.
39
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby. In addition, Target shall use its best efforts to effect
the transfer of its technology to Surviving Corporation as soon as possible
following the Closing.
5.22 Purchase Price Adjustment. In the event that the Adjustment Date
Value (as defined below) for shares of Acquiror Common Stock is less than the
Adjustment Threshold Price (as defined below), Acquiror shall issue additional
shares of Acquiror Common Stock to Target's shareholders. The number of shares
to be issued pursuant to this Section 5.22 (the "Additional Shares") shall be
determined in accordance with the following formula: A = ((B - C) divided by
C) x D, where A equals the Additional Shares, B equals the Adjustment
Threshold Price, C equals the Adjustment Date Value and D equals the total
number of shares issuable pursuant to Section 1.6(a); provided, however, that
in no event shall the number of Additional Shares exceed the number of shares
of Acquiror Common Stock issued pursuant to Section 1.6(a). Additional Shares
shall be issued to Target's shareholders in the same proportion (i.e., pro rata
based on the percentage of Target Capital Stock owned by each such shareholder
relative to all issued and outstanding shares of Target Capital Stock) that
Target's shareholders are entitled to receive shares of Acquiror Common Stock
pursuant to Section 1.6(a) and shall be delivered to Target's shareholders
promptly after the earlier to occur of (i) the third anniversary of the
Effective Time or (ii) the date 5 business days after a new registration
statement for such shares (on a form to be determined by Acquiror) is declared
effective by the SEC (which registration statement shall be filed by Acquiror
with the SEC no later than 30 days after a determination has been made that
Additional Shares are to be issued). The Shareholders' Agent shall notify
Target's shareholders if Additional Shares are to be issued pursuant to this
Section 5.22 and of the details of such issuance. The Adjustment Date Value is
the closing price of Acquiror Common Stock, as reported by the National
Association of Securities Dealers through the Nasdaq National Market System on
the Trading Day immediately preceding the Adjustment Date (as defined below).
The Adjustment Threshold Price is an amount equal to 80 percent of the Closing
Price per share. The Adjustment Date is the earlier to occur of (i) the third
anniversary of the Effective Time or (ii) the date 5 business days after the
date the initial registration statement filed on Form S-1 by Acquiror with
respect to the Acquiror Common Stock issuable pursuant to Section 1.6(a) is
declared effective by the SEC.
34.
40
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the holders of not less than sixty-six and
two-thirds percent (66 2/3%) of all of the outstanding shares of Target Common
Stock and Target Preferred Stock.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be and remain in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, which would have a Material
Adverse Effect on such party. Nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal. In
the event an injunction or other order shall have been issued, each party agrees
to use its reasonable diligent efforts to have such injunction or other order
lifted.
(c) Governmental Approval. Acquiror, Target and Merger Sub shall
have timely obtained from each Governmental Entity all approvals, waivers and
consents, if any, necessary for consummation of or in connection with the Merger
and the several transactions contemplated hereby, including such approvals,
waivers and consents as may be required under the Securities Act and under state
Blue Sky laws, and other than filings and approvals relating to the Merger or
affecting Acquiror's ownership of Target or any of its properties if failure to
obtain such approval, waiver or consent would not have a Material Adverse Effect
to either party.
(d) Escrow Agreement. Acquiror, Target, Escrow Agent and the
Shareholder's Agent (as defined in Article VIII hereto) shall have entered into
an Escrow Agreement substantially in the form attached hereto as Exhibit E.
6.2 Tax Opinion. Target shall have received a written opinion from its
counsel to the effect that the Merger will constitute a reorganization within
the meaning of Code section 368(a), which opinion shall be in form and substance
reasonably satisfactory to
35.
41
Target. In rendering such opinion, Target's counsel shall be entitled to rely
upon representations of Acquiror, Merger Sub and Target and certain shareholders
of Target.
6.3 Additional Conditions to Obligations of Target. The obligations of
Target to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing, by
Target:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Acquiror and Merger Sub in this Agreement
shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality which representations and warranties as so qualified shall be
true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (ii)
Acquiror and Merger Sub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective Time.
(b) Certificate of Acquiror. Target shall have been provided with a
certificate executed on behalf of Acquiror by its President and its Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Acquiror and
Merger Sub under this Agreement are true and complete in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality which representations and warranties as so
qualified shall be true in all respects); and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Acquiror and Merger Sub on or before such date have
been so performed in all material respects.
(c) Corporate Legal Opinion. Target shall have received a legal
opinion from Acquiror's legal counsel substantially in the form of Exhibit G
hereto.
6.4 Additional Conditions to the Obligations of Acquiror and Merger
Sub. The obligations of Acquiror and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. (i) Except as
disclosed in Schedule 6.4(a), the representations and warranties of Target in
this Agreement shall be true and correct in all material respects (except for
such representations and
36.
42
warranties that are qualified by their terms by a reference to materiality which
representations and warranties as so qualified shall be true in all respects) on
and as of the Effective Time as though such representations and warranties were
made on and as of such time and (ii) Target shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Effective
Time.
(b) Certificate of Target. Acquiror shall have been provided with a
certificate executed on behalf of Target by its President and Chief Financial
Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Target under
this Agreement are true and complete in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality which representations and warranties as so qualified shall be
true in all respects); and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Target on or before such date have been so
performed in all material respects.
(c) Third Party Consents. Acquiror shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under the
contracts of Target set forth on Schedule 6.4(c) hereto.
(d) Injunctions or Restraints on Conduct of Business. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting Acquiror's conduct or operation of the
business of Target, following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(e) Corporate Legal Opinion. Acquiror shall have received a legal
opinion from Target's legal counsel, in substantially the form of Exhibit H.
(f) No Material Adverse Changes. There shall not have occurred any
material adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, business, operations or results of
operations of Target, taken as a whole.
(g) Affiliate and Shareholder Agreements. Acquiror shall have
received from each of the Affiliates of Target an executed Affiliate and
Shareholder Agreement in substantially the form attached hereto as Exhibit B.
37.
43
(h) FIRPTA Certificate. Target shall, prior to the Closing Date,
provide Acquiror with a properly executed FIRPTA Notification Letter,
substantially in the form of Exhibit D attached hereto, which states that shares
of capital stock of Target do not constitute "United States real property
interests" under Code section 897(c), for purposes of satisfying Acquiror's
obligations under Treasury Regulation section 1.1445-2(c)(3). In addition,
simultaneously with delivery of such Notification Letter, Target shall have
provided to Acquiror, as agent for Target, a form of notice to the Internal
Revenue Service in accordance with the requirements of Treasury Regulation
section 1.897-2(h)(2) and substantially in the form of Exhibit D attached hereto
along with written authorization for Acquiror to deliver such notice form to the
Internal Revenue Service on behalf of Target upon the Closing of the Merger.
(i) Resignation of Directors. The directors of Target in office
immediately prior to the Effective Time shall have resigned as directors of the
Surviving Corporation effective as of the Effective Time.
(j) Employment and Non-Competition Agreement. Xxxxxx X. XxXxxxxx
shall have accepted employment with Acquiror and shall have entered into an
Employment and Non-Competition Agreement substantially in the form attached
hereto as Exhibit I.
(k) Expense Statement. Acquiror shall have received from Target a
statement of all out-of-pocket expenses incurred by Target which are subject to
the limitation described in Section 5.19 hereto.
(i) Transfer of Intellectual Property. Target shall have delivered
to Acquiror evidence satisfactory to Acquiror that all patents applications
noted in Schedule 6.4(a) have been assigned to Target.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of Target, this Agreement may be terminated:
(a) by mutual consent of the Board of Directors of Acquiror and
Target;
(b) by either Acquiror or Target, if, without fault of the
terminating party, the Closing shall not have occurred on or before October 16,
1996 (or such later date as may be agreed upon in writing by the parties
hereto);
38.
44
(c) by Acquiror (provided Acquiror is not otherwise in breach), if
(i) Target shall materially breach any of its representations, warranties or
obligations hereunder and such breach shall not have been cured within ten
business days of receipt by Target of written notice of such breach, (ii) the
Board of Directors of Target shall have withdrawn or modified its recommendation
of this Agreement or the Merger in a manner adverse to Acquiror or shall have
resolved to do any of the foregoing, or (iii) at least 66 2/3% of holders of
Target Capital Stock have not voted in favor of the Merger by October 16, 1996;
provided, however, that if such vote shall not have occurred by such date
because either of the conditions set forth in Sections 6.1(c) (other than the
consent to be obtained by Acquiror from Xxxxx, Xxxxx & Company) shall not have
been met, such date shall be extended to October 31, 1996;
(d) by Target (provided Target is not otherwise in breach), if
Acquiror shall materially breach any of its representations, warranties or
obligations hereunder and such breach shall not have been cured within ten days
following receipt by Acquiror of written notice of such breach; or
(e) by either Acquiror or Target if (i) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable or (ii) if any required
approval of the shareholders of Target shall not have been obtained by reason of
the failure to obtain the required vote upon a vote held at a duly held meeting
of shareholders or at any adjournment thereof or by written consent.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, Merger
Sub or Target or their respective officers, directors, shareholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses and Termination Fees) and this Section
7.2 shall remain in full force and effect and survive any termination of this
Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c) and (d) of this Section 7.3,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense.
(b) In the event that (i) Acquiror shall terminate this Agreement
pursuant to Section 7.1(c) or (ii) Acquiror shall terminate this Agreement
pursuant to Section
39.
45
7.1(e)(ii), Target shall promptly reimburse Acquiror for all of the
out-of-pocket costs and expenses incurred by Acquiror in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel); provided, that Target's liability hereunder shall not exceed $20,000.
(c) In the event that Target shall terminate this Agreement
pursuant to Section 7.1(d) Acquiror shall promptly reimburse Target for all of
the out-of-pocket costs and expenses incurred by Target in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the shareholders of
Target or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Target Capital Stock, (ii)
alter or change any term of the Articles of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
materially adversely affect the holders of Target Common Stock or Merger Sub
Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Except as provided in Section 5.3(c), any agreement
on the part of a 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.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 Escrow Fund. As soon as practicable after the Effective Time,
shares of Acquiror Common Stock with an aggregate value of $100,000 as of the
Closing Date (based on the Closing Price) together with 7.14% of the total
number of shares of Acquiror Common Stock issued to Target's Shareholders
pursuant to Sections 5.22 (the "Escrow Shares") shall be registered in the name
of, and be deposited with, U.S. Trust Company of California, N.A. (or other
institution selected by Acquiror and reasonably acceptable to the Shareholders'
Agent) as escrow agent (the "Escrow Agent"), such deposit to constitute the
Escrow Fund and to be governed by the terms set forth herein and in the Escrow
Agreement attached hereto
40.
46
Exhibit E. The Escrow Fund shall be available to compensate Acquiror pursuant to
the indemnification obligations of the shareholders of Target.
8.2 Indemnification.
(a) Subject to the limitations set forth in this Article VIII and
the occurrence of the Closing, the shareholders of Target severally, but not
jointly and severally, will indemnify and hold harmless Acquiror and the
Surviving Corporation and their respective officers, directors, agents and
employees, and each person, if any, who controls or may control Acquiror or the
Surviving Corporation within the meaning of the Securities Act (hereinafter
referred to individually as an "Acquiror Related Indemnified Person" and
collectively as "Acquiror Related Indemnified Persons") from and against such
shareholder's proportionate share of any and all losses, costs, damages,
liabilities, Taxes and expenses arising from claims, demands, actions, causes of
action, including, without limitation, reasonable legal fees, net of any
recoveries under existing insurance policies, tax benefit received by Acquiror
or its affiliates as a result of such damages, indemnities from third parties or
in the case of third party claims, by any amount actually recovered by Acquiror
or its affiliates pursuant to counterclaims made by any of them directly
relating to the facts giving rise to such third party claims (collectively,
"Acquiror Related Damages"), arising out of (i) any misrepresentation or breach
of or default in connection with any of the representations, warranties,
covenants and agreements given or made by Target in this Agreement, the Target
Disclosure Schedules or any exhibit or schedule to this Agreement and (ii) any
claim by any person that the Merger does not qualify as a reorganization under
the provisions of Sections 368(a)(2)(A) and 368(a)(2)(D). Acquiror and its
affiliates shall act in good faith and in a commercially reasonable manner to
mitigate any Acquiror Related Damages they may suffer.
(b) Nothing in this Agreement shall limit the liability (i) of
Target for any breach of any representation, warranty or covenant if the Merger
does not close, or (ii) of any Target shareholder in connection with any breach
by such shareholder of the Affiliate and Shareholder Agreement, Irrevocable
Proxy or continuity of interest certificate(s) delivered in connection with the
tax opinion to be rendered pursuant to Section 6.2(g). Resort to the Escrow Fund
shall be the exclusive remedy of each Acquiror Related Person for any such
breaches and misrepresentations noted in Section 8.2(a)(i) following the
Effective Time of the Merger. The Escrow Fund may be used for Acquiror Related
Damages that result pursuant to Section 8.2(a)(ii) but shall not be the
exclusive remedy of each Acquiror Related Person.
(c) Subject to the occurrence of the Closing, Acquiror will
indemnify and hold harmless Target's shareholders (hereinafter referred to
individually as a "Target Related Indemnified Person" and collectively as
"Target Related Indemnified Persons") from and against any and all losses,
costs, damages, liabilities and expenses arising from claims, demands, actions,
causes of action, including, without limitation, reasonable legal
41.
47
fees, net of any recoveries under existing insurance policies, tax benefit
received by any Target Related Indemnified Person or their affiliates as a
result of such damages, indemnities from third parties or in the case of third
party claims, by any amount actually recovered by any Target Related Indemnified
Person or their affiliates pursuant to counterclaims made by any of them
directly relating to the facts giving rise to such third party claims
(collectively, "Target Related Damages") arising out of any misrepresentation or
breach of or default in connection with any of the representations, warranties,
covenants and agreements given or made by Acquiror or Merger Sub in this
Agreement, the Acquiror Disclosure Schedules or any exhibit or schedule to this
Agreement. Target Related Indemnified Persons and their affiliates shall act in
good faith and in a commercially reasonable manner to mitigate any Target
Related Damages they may suffer. Notwithstanding anything to the contrary in
this Agreement, none of the Target Related Indemnified Persons shall be entitled
to any reimbursement for Target Related Damages to the extent any such Target
Related Damages exceed in the aggregate the value of the Acquiror's Common Stock
in the Escrow Fund (as such value is determined pursuant to Section 8.5(b)). All
claims made hereunder shall be made by the Shareholders' Agent on behalf of the
Target Related Indemnified Persons and any payments to such Target Related
Persons shall be made to the Shareholders' Agent provided that no
indemnification payments shall be due unless the aggregate amount of Target
Related Damages exceeds $5,000 and, in each instance, unless the Shareholders'
Agent delivers to Acquiror a certificate to such effect that also provides
reasonable detail of the individual items of Target Related Damages included in
the claim being made.
8.3 Damage Threshold. Notwithstanding Section 8.2, Acquiror may not
receive any shares from the Escrow Fund with respect to the indemnification
obligations of the shareholders of Target set forth in Section 8.2(a) unless and
until an Officer's Certificate or Certificates (as defined in Section 8.5 below)
satisfying the requirements of Section 8.5(a)(ii) and identifying Acquiror
Related Damages has been delivered to the Escrow Agent as provided in Section
8.5 below and such amount is determined pursuant to this Article VIII to be
payable, in which case Acquiror shall receive shares equal in value to the full
amount of the Acquiror Related Damages (such shares to be valued at the price
set forth in Section 8.5(b)). Acquiror shall not make a request for
reimbursement from any shares from the Escrow Fund, nor shall Acquiror be
entitled to indemnification with respect to the foregoing indemnification
obligations, until the amount of Acquiror Related Damages incurred exceeds
$5,000, as determined by Acquiror.
8.4 Escrow Period. The Escrow Period shall terminate with respect to
all of the Escrow Shares upon the expiration of six months from the Effective
Time; provided, however, that a portion of the Escrow Shares, which, in the
reasonable judgment of Acquiror, subject to the objection of the Shareholders'
Agent and the subsequent arbitration of the matter in the manner provided in
Section 8.7 hereof, are necessary to satisfy any unsatisfied claims specified in
any Officer's Certificate theretofore delivered to the Escrow Agent prior to
termination of the Escrow Period with respect to facts and circumstances
existing prior to
42.
48
expiration of the Escrow Period, shall remain in the Escrow Fund until such
claims have been resolved.
8.5 Claims upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the last day of
the Escrow Period of a certificate signed by any officer of Acquiror (an
"Officer's Certificate"):
(i) stating that, with respect to the indemnification
obligations of the shareholders of Target set forth in Section
8.2(a), Acquiror Related Damages exist, and
(ii) specifying in reasonable detail the individual
items of such Acquiror Related Damages included in the amount
so stated, the date each such item was paid, or properly
accrued or arose, the nature of the misrepresentation, breach
of warranty or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of this Article VIII, deliver
to Acquiror out of the Escrow Fund, as promptly as practicable, Acquiror Common
Stock or other assets held in the Escrow Fund having a value equal to such
Acquiror Related Damages.
(b) For the purpose of compensating Acquiror for its Acquiror
Related Damages pursuant to this Agreement, the Acquiror Common Stock in the
Escrow Fund shall be valued at the lower of the Closing Price or the Adjustment
Date Value.
8.6 Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to the Shareholders' Agent (defined in Section 8.8 below) and
for a period of forty-five (45) days after such delivery, the Escrow Agent shall
make no delivery of Acquiror Common Stock or other property pursuant to Section
8.5 hereof unless the Escrow Agent shall have received written authorization
from the Shareholders' Agent to make such delivery. After the expiration of such
forty-five (45) day period, the Escrow Agent shall make delivery of the Acquiror
Common Stock or other property in the Escrow Fund in accordance with Section 8.5
hereof, provided that no such payment or delivery may be made if the
Shareholders' Agent shall object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent and to Acquiror prior to the expiration of such forty-five (45) day
period.
43.
49
8.7 Resolution of Conflicts; Arbitration.
(a) In case the Shareholders' Agent shall so object in writing to
any claim or claims by Acquiror made in any Officer's Certificate, Acquiror
shall have thirty (30) days to respond in a written statement to the objection
of the Shareholders' Agent. If after such thirty (30) day period there remains a
dispute as to any claims, the Shareholders' Agent and Acquiror shall attempt in
good faith for sixty (60) days to agree upon the rights of the respective
parties with respect to each of such claims. If the Shareholders' Agent and
Acquiror should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute the Acquiror Common Stock or other property from the Escrow Fund in
accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Shareholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators. Within fifteen (15) days
after such written notice is sent, Acquiror and the Shareholders' Agent shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of the arbitrators as to the validity and amount
of any claim in such Officer's Certificate shall be binding and conclusive upon
the parties to this Agreement, and notwithstanding anything in Section 8.6
hereof, the Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund in accordance
therewith.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Orange County, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.7(c), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Acquiror shall be deemed to be the
Non-Prevailing Party unless the arbitrators award Acquiror more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise, the
Target shareholders for whom shares of Target Common Stock otherwise issuable to
them have been deposited in the Escrow Fund shall be deemed to be the
Non-Prevailing Party. The Non- Prevailing Party to an arbitration shall pay its
own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including without
limitation, attorneys' fees and costs, reasonably incurred by the other party to
the arbitration.
44.
50
8.8 Shareholders' Agent.
(a) Xxxxxx X. XxXxxxxx shall be constituted and appointed as agent
("Shareholders' Agent") for and on behalf of the Target shareholders to (i) give
and receive notices and communications, to authorize delivery to Acquiror of the
Acquiror Common Stock or other property from the Escrow Fund in satisfaction of
claims by Acquiror, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the Shareholders'
Agent for the accomplishment of the foregoing and (ii) give and receive notice
and take all other actions necessary or desirable to receive and distribute
shares of Acquiror Common Stock for the benefit of Target's Shareholders as set
forth in, or pursuant to, this Agreement. Such agency may be changed by the
holders of a majority in interest of the Escrow Fund from time to time upon not
less than 10 days prior written notice to Acquiror. No bond shall be required of
the Shareholders' Agent, and the Shareholders' Agent shall receive no
compensation for services rendered. Notices or communications to or from the
Shareholders' Agent shall constitute notice to or from each of the Target
shareholders.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholders' Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith. The Target
shareholders shall severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholders' Agent and arising out
of or in connection with the acceptance or administration of his duties
hereunder.
(c) The Shareholders' Agent shall have reasonable access to
information about Target and the reasonable assistance of Target's officers and
employees for purposes of performing its duties and exercising its rights
hereunder, provided that the Shareholders' Agent shall treat confidentially and
not disclose any nonpublic information from or about Target to anyone (except
on a need to know basis to individuals who agree to treat such information
confidentially).
8.9 Actions of the Shareholders' Agent. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of all Target
shareholders for whom shares of Acquiror Common Stock otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each such Target shareholder, and the Escrow Agent and Acquiror may rely upon
any decision, act, consent or instruction of the Shareholders' Agent as being
the decision, act, consent or instruction of each and every such Target
shareholder. The Escrow Agent and Acquiror are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders' Agent.
45.
51
8.10 Third-Party Claims. In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall notify the Shareholders' Agent of such claim, and
the Shareholders' Agent shall be entitled, at such Shareholders' Agent's
expense, to control the defense of any such claim provided that such
Shareholders' Agent defends such claim with counsel reasonably satisfactory to
Acquiror. Shareholders' Agent shall have the right to settle any such claim;
provided, however, that Shareholders' Agent may not affect the settlement of any
such claim without the consent of Acquiror, which consent shall not be
unreasonably withheld. In the event that the Shareholders' Agent has consented
to any such settlement, the Shareholders' Agent shall have no power or authority
to object under Section 8.6 or any other provision of this Article VIII to the
amount of any claim by Acquiror against the Escrow Fund for indemnity with
respect to such settlement to the extent that it exceeds the $5,000 "basket"
referred to in Section 8.3.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival at Effective Time. The representations, warranties and
agreements set forth in this Agreement shall terminate at the Effective Time,
except that the agreements set forth in Article I, Section 5.4
(Confidentiality), 5.7 (Affiliate and Shareholder Agreement), 5.9 (FIRPTA), 5.12
(Employee Benefit Plans), 5.14 (Form S-8), 5.15 (Shareholder Agreements), 5.18
(Reorganization), 5.21 (Reasonable Commercial Efforts and Further Assurances),
5.22 (Purchase Price Adjustment), 7.3 (Expenses and Termination Fees), 7.4
(Amendment), Article VIII and this Article IX shall survive the Effective Time.
Notwithstanding the foregoing, Acquiror's obligations under Section 8.2(c) shall
only survive six months after the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiror or Merger Sub, to:
CardioVascular Dynamics, Inc.
00000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
46.
52
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
(b) if to Target, to:
Intraluminal Devices, Inc.
00 Xxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx XxXxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy to:
Higham, XxXxxxxxx & Xxxxxxx
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxx XxXxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
9.3 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to October 2, 1996. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the financial
condition, properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that is materially adverse to the
47.
53
financial condition, properties, assets, liabilities, business, operations or
results of operations of such entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after due and diligent inquiry of officers, directors
and other employees of such party reasonably believed to have knowledge of such
matters.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Target Disclosure Schedule and the Acquiror Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(d) and (f), 1.7-1.9, 5.12, 5.14 and 5.22 and Articles VII and VIII; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
9.6 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of California that might otherwise govern under
applicable principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located within
Orange County, State of California, in connection with
48.
54
any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of California for such persons and waives
and covenants not to assert or plead any objection which they might otherwise
have to such jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
9.10 Attorneys' Fees. Except as set forth in this Agreement,
or the other documents executed in connection therewith, in the event of any
litigation between the parties hereto, the prevailing party or parties shall be
entitled to payment of their fees and expenses of its or their attorneys.
49.
55
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have
caused this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
INTRALUMINAL DEVICES, INC.
By: /s/ Xxxxxx X. XxXxxxxx
-----------------------------------
CARDIOVASCULAR DYNAMICS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
IDI ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
50.
56
SCHEDULE 2.10
INTRALUMINAL DEVICES, INC.
REAL PROPERTY
1. Intraluminal Devices, Inc. has no real property.
57
SCHEDULE 2.11
INTRALUMINAL DEVICES, INC.
INTELLECTUAL PROPERTY
1. Ultrasonic U.S. Patent No. 5,306,294 "Stent Construction and Placement
Methods"
2. Ultrasonic U.S. Patent No. 5,366,473 "Method and Apparatus for Applying
Vascular Grafts"
3. Ultrasonic U.S. Patent No. 5,411,551 "Stent Assembly with Sensor"
4. Ultrasonic U.S. Patent Application No. 128345 "Vascular Graft Bypass
Apparatus"
5. Ultrasonic U.S. Patent Application No. 305060 "Expandable Graft
Assembly and Method of Use"
6. IDI Patent Application Docket No. 9410.01 "Bifurcated Intraluminal
Graft for Repair of Aneurysm"
7. IDI Patent Application Docket No. 9410.02 "Expandable Intraluminal
Stent with Overlapping Layers and Porous Slot Pattern" (in process -
not filed)
8. License Agreement dated June 16, 1995 between Intraluminal Devices,
Inc. and Ultrasonic Sensing and Monitoring Systems.
9. Sub-license Agreement dated July 1995 between Intraluminal Devices,
Inc. and MicroTherapeutics, Inc.
58
SCHEDULE 2.14
INTRALUMINAL DEVICES, INC.
EMPLOYEE BENEFIT PLANS
1. Intraluminal Devices, Inc. 1995 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan,
under which options to purchase an aggregate of 95,000 shares
of common stock are outstanding.
59
SCHEDULE 2.21
INTRALUMINAL DEVICES, INC.
MATERIAL CONTRACTS AND AGREEMENTS
1. Confidentiality agreements in favor of Intraluminal Devices, Inc. have
been signed by the following individuals or entities. These agreements
have varying expiration dates.
- CardioVascular Dynamics - Xxxxxxx Xxxxxxx
- Bio-Vascular, Inc. - Xxxxxx Xxxxxxxxxx
- Interventional Products Corp. - Novel Biomedical
- Xxxxxx Xxxxx International - Xxxx Xxxxx
- M.H.D. Technologies - Xxxxxx Xxxxxx
- Brentwood Associates - Xxxx Xxxxxxx
- Crosspoint Ventures - Xxxxxxx Xxxxx, M.D.
- Xxxxx Xxxxxxxx, M.D. - Xxxxx Xxxxxx, M.D.
- Xxx Xxxxxx, Ph.D. - Xxx Xxxxxxxxx, Ph.D.
- Xxxxxxxx Fund - Xxxxxxx Xxxxxxxx, Ph.D.
- Tech-Etch, Inc. - Xxxx Xxxxxxx, Ph.D.
- Xxxx Xxxxxxxx, M.D. - Xxxxxx Xxxxxxxxx
- Xxxxxx Xxxx, M.D. - Xxxxxx XxXxxxxx
- Xxxxxx Booty
2. IDI has a signed license agreement with Ultrasonic Sensing and
Monitoring Systems for rights to certain patents referenced in Schedule
2.11.
3. IDI has a signed sub-license agreement with MicroTherapeutics, Inc. for
rights associates with certain Ultrasonic Sensing and Monitoring System
patents referenced in Schedule 2.11.
4. IDI has a signed agreement with the Law firm Higham, XxXxxxxxx &
Xxxxxxx.
5. IDI has a signed agreement with the Law firm of Xxxxxxxxx, Xxxxx
Xxxxxxx and Xxxxx.
6. IDI has a signed agreement with the Patent Attorney firm of Xxxxxx
Xxxxxxxxx.
7. IDI has a signed agreement with the Patent Attorney firm of Knobbe,
Martens, Xxxxx and Bear.
8. IDI has a technology development agreement signed by Xxxxxx Xxxxxxxxxx.
60
9. IDI has a technology development agreement signed by Xxxxxx Xxxxxxxxx.
10. IDI has a "Finders" agreement with Xxxxxx Xxxxx Agency.
11. IDI has a Medical Advisory Board Agreement with Xxxxxx Xxxx, M.D.
12. IDI has a Medical Advisory Board Agreement with Xxxxxx Xxxxxxx, M.D.
13. Nonqualified Stock Option Agreements between IDI and each of Xxxxxx
Xxxxxxx, M.D. and Xxxx Xxxxx.
14. Incentive Stock Option Agreement between IDI and Xxxxxx X. XxXxxxxx.
15. Shareholders Agreement among IDI and its founders.
16. Letter agreements between IDI and each of its "Seed" investors executed
at the time of funding the "Seed" investment.
17. Letter agreements between IDI and each of its "Seed" investors
concerning the conversion of the "Seed" investment into Series A
Preferred Stock.
61
SCHEDULE 2.31
INTRALUMINAL DEVICES, INC.
ASSUMED LIABILITIES
1. Xxxxxx Xxxxxxxxxx claims that he has some residual expenses associated
with the period of time he was consulting with IDI which will not
exceed $3,000 in aggregate. To date, he has not submitted any claim for
these expenses.
62
SCHEDULE 5.7
INTRALUMINAL DEVICES, INC.
AFFILIATES
1. IDI's officers, directors and principal shareholders may be deemed to
be affiliates of IDI.
63
SCHEDULE 5.12
INTRALUMINAL DEVICES, INC.
HOLDERS OF OUTSTANDING OPTIONS
NAME OPTION SHARES ORIGINAL VESTING SCHEDULE GRANT DATE TERM
(EXERCISE PRICE
PER SHARE)
Xxxxxx XxXxxxxx ISO 75,000 50,000 Shares on August 9th, 1996, 8/9/96 Six years
thereafter 12,500 Shares on each of minus one day
August 31, 1996 and September 30, from date of
1996 ($0.05) grant.
Xxxx Xxxxx NQSO 10,000 1250 Shares on May 2, 1996, thereafter 11/02/95 Six years
208.33 Shares per month commencing minus one day
June 2, 1966, until fully vested as of from date of
November 2, 2000 when 222 Shares ($0.05) grant.
Vest
Xxxxxx Xxxxxxx, MD NQSO 10,000 1,666 Shares on March 11, 1997 and 9/11/96 Six years
thereafter 277.8 Shares per month minus one day
commencing April 11, 1997 and from date of
continuing until fully vested as of ($0.10) grant.
September 11, 2000
64
SCHEDULE 6.4(a)
INTRALUMINAL DEVICES, INC.
DISCLOSURE SCHEDULE
DISCLOSURE ITEMS ARE NOTED BELOW WITH RESPECT TO A PARTICULAR SECTION OF THE
AGREEMENT AND PLAN OF REORGANIZATION FOR CONVENIENCE ONLY, AND MAY BE APPLICABLE
TO OTHER SECTIONS AS WELL; PROVIDED HOWEVER THAT THE FOLLOWING SHALL NOT BE
DEEMED TO MODIFY THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 2.31
NOTWITHSTANDING THE OPERATION OF SECTION 5.3(c).
1. SECTION 2.11(c) (INTELLECTUAL PROPERTY)
a. IDI has indemnification obligations under the
Sub-license Agreement dated July 1995 between IDI and
MicroTherapeutics, Inc.
2. SECTION 2.11(f) (INTELLECTUAL PROPERTY)
x. XxXxxxxx patent application (bifurcation application)
has not yet been assigned
x. XxXxxxxx/Xxxxxxxxxx patent application (microporous
application) has not been filed and has not yet been
assigned
3. SECTION 2.13 (TAXES)
a. IDI has filed timely tax returns with the exception
of one late annual State Corporation tax payment
which has been paid with penalty and one late monthly
withholding payment which has been sent in but no
penalty statement has been received.
4. SECTION 2.17 (INTERESTED PARTY TRANSACTIONS)
a. Xxxxx Xxxxxxxx is Secretary of the Corporation and a
business attorney for Xxxxxxxxx Xxxxx Xxxxxxx and
Xxxxx. IDI owes money to Xxxxxxxxx Xxxxx Xxxxxxx and
Xxxxx for services rendered.
5. SECTION 2.2 (CAPITAL STRUCTURE)
a. IDI's outstanding Stock Option Agreements and Stock
Option Plan are unclear as to the effect of the
merger on outstanding stock options. The consummation
of the merger may result in acceleration of the
vesting of outstanding stock options.
6. SECTION 2.22 (BROKERS' AND FINDERS' FEES)
a. IDI has a signed "finders" agreement with Xxxxxx
Xxxxx agency. Xxxxxx Xxxxx Agency stated in one or
two phone calls to IDI that it was representing the
interest of a Xxxx Xxxxxx (no company name was given)
with regard to interest in a stent company.
7. SECTION 2.4 (FINANCIAL STATEMENTS)
a. IDI's accounting system consists solely of
Quick-Books. Financial statements may or may not
comply with generally
65
accepted accounting principles.
8. SECTION 2.5 (ABSENCE OF CERTAIN CHANGES)
a. On September 21, 1996, IDI's Articles of
Incorporation were amended and restated.
9. SECTION 2.6 (ABSENCE OF UNDISCLOSED LIABILITIES)
a. IDI owes money to Stradling, Yocca, Xxxxxxx & Xxxxx
for services rendered
b. Xxxxxx Xxxxxxxxxx may have claims to un-reimbursed
expenses
c. IDI has an ongoing relationship with Xxx Xxxxxxxxx
(patent attorney) and incurs expenses on an ongoing
basis. Xxxxxxxxx is paid through 9/24/96
d. IDI has an ongoing relationship with Xxxxxx Xxxxxxx
Xxxxx & Bear and incurs expenses on an ongoing basis.
KMOB is paid through 9/17/96
10. SECTION 2.8 (RESTRICTIONS ON BUSINESS ACTIVITIES)
a. IDI has issued an exclusive sub-license to Micro
Therapeutics, Inc. for certain purposes, for all of
the Ultrasonic Patents represented by the License
Agreement between IDI and Ultrasonic Sensing and
Monitoring Corp.
66
EXHIBIT A
CERTIFICATE OF MERGER
MERGING
INTRALUMINAL DEVICES, INC.
WITH AND INTO
IDI ACQUISITION CORPORATION
-------------------------------
Pursuant to Section 252 of the General Corporation Law of
the State of Delaware
-----------------------------
IDI ACQUISITION CORPORATION, a Delaware corporation ("Merger Sub"), and
INTRALUMINAL DEVICES, INC., a California corporation ("Target"), DO HEREBY
CERTIFY AS FOLLOWS:
FIRST: That Merger Sub was incorporated in Delaware on September 20,
1996, pursuant to the Delaware General Corporation Law (the "Delaware Law"), and
that Target was incorporated in California on February 8, 1995, pursuant to the
California General Corporation Law (the "California Law").
SECOND: That an Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated as of September 30, 1996, among
CardioVascular Dynamics, Inc., a Delaware corporation ("Acquiror"), Merger Sub
and Target, setting forth the terms and conditions of the merger of Target with
and into Merger Sub (the "Merger"), has been approved, adopted, certified,
executed and acknowledged by each of Acquiror, Merger Sub and Target in
accordance with Section 252 of the Delaware Law.
THIRD: That the name of the surviving corporation (the "Surviving
Corporation") shall be M(3) Corp.
FOURTH: That pursuant to the Reorganization Agreement, the Certificate
of Incorporation of the Surviving Corporation shall be the Certificate of
Incorporation of IDI Acquisition Corporation.
67
FIFTH: That an executed copy of the Reorganization Agreement is on file
at the principal place of business of the Surviving Corporation at the following
address:
M(3) Corp.
00 Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
SIXTH: That a copy of the Reorganization Agreement will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
Merger Sub or Target.
SEVENTH: That the authorized capital stock of Target is five million
four hundred eighty-seven thousand five hundred (5,487,500) shares, which
consists of five million (5,000,000) shares of Common Stock and four hundred
eighty-seven thousand five hundred (487,500) shares of Preferred Stock.
EIGHTH: That the Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, each of Merger Sub and Target has caused this
Certificate of Merger to be executed in its corporate name this ___ day of
October 1996.
IDI ACQUISITION CORPORATION
By:______________________________________
President and Chief Executive Officer
ATTEST:
__________________________________
Secretary
INTRALUMINAL DEVICES, INC.
By:______________________________________
President and Chief Executive Officer
ATTEST:
__________________________________
Secretary
2.
68
EXHIBIT B
AFFILIATE AND SHAREHOLDER AGREEMENT
THIS AFFILIATE AND SHAREHOLDER AGREEMENT (the "Affiliate and
Shareholder Agreement") is entered into as of the ___ day of _____________, 1996
between CARDIOVASCULAR DYNAMICS, INC., a Delaware corporation ("Acquiror"), and
the undersigned shareholder (the "Shareholder") of INTRALUMINAL DEVICES, INC., a
California corporation ("Target").
RECITALS
A. Target, Acquiror and IDI Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"), have
entered into an Agreement and Plan of Reorganization, dated as of October 2,
1996 (the "Reorganization Agreement"), pursuant to which Target will be merged
with and into Merger Sub (the "Merger"), and Target will become a wholly-owned
subsidiary of Acquiror.
B. Upon the consummation of the Merger and in connection therewith, the
undersigned Shareholder will become the owner of shares of Common Stock of
Acquiror (the "Acquiror Common Stock").
C. The parties to the Reorganization Agreement intend to adopt a plan
of reorganization that will qualify as a "reorganization" under the provisions
of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants set forth in the Reorganization Agreement
and in this Affiliate and Shareholder Agreement, it is hereby agreed as follows:
1. The undersigned Shareholder hereby agrees that:
(a) The undersigned Shareholder has, and as of the Effective Time
of the Merger will have, no present plan or intent (a "Plan") to engage in a
sale, exchange, transfer, pledge, disposition or any other transaction
(including a distribution by a partnership to its partners or by a corporation
to its shareholders) that results in a reduction in the risk of ownership
(collectively, a "Sale") of the shares of Acquiror Common Stock to be acquired
by the undersigned Shareholder upon consummation of the Merger such that the
aggregate fair market value, as of the Effective Time of the Merger, of the
shares subject to such Sales would exceed fifty percent (50%) of the
69
aggregate fair market value of the shares of outstanding Target Common Stock
owned by the Shareholder immediately prior to the Merger. A sale of Acquiror
Common Stock shall be considered to have occurred pursuant to a Plan if such
Sale occurs in a transaction that is in contemplation of, or related or pursuant
to, the Reorganization Agreement (a "Related Transaction"). In addition, shares
of Target Capital Stock (as defined below) (i) exchanged for cash in lieu of
fractional shares of Acquiror Common Stock and (ii) with respect to which a Sale
occurred in a Related Transaction prior to the Merger shall be considered to
have been shares of outstanding Target Common Stock that were exchanged for
Acquiror Common Stock in the Merger and then disposed of pursuant to a Plan. If
any of the undersigned Shareholder's representations in this subsection (b)
ceases to be true at any time prior to the Effective Time of the Merger, the
undersigned Shareholder shall deliver to each of Target and Acquiror, prior to
the Effective Time of the Merger, a written statement to that effect. Except as
otherwise set forth in Appendix A, the undersigned Shareholder has not engaged
in a sale of any shares of Target Common Stock since July 1, 1996.
The undersigned Shareholder is currently the owner of that number
of shares of, or options to purchase, Target Common and Preferred Stock (the
"Target Capital Stock") set forth on the signature page hereto and, except as
otherwise set forth on the signature page hereto, (i) has held such Target
Capital Stock at all times since ____________, and (ii) did not acquire any
shares of Target Capital Stock in contemplation of the Merger. These securities
constitute the undersigned's entire interest in the outstanding capital stock of
Target. No other person or entity not a signatory to this Agreement has a
beneficial interest in or a right to acquire such shares of Target Capital Stock
or any portion of such shares of Target Capital Stock (except, with respect to
shareholders which are partnerships, partners of such shareholders). The
Undersigned's principal residence or place of business is set forth on the
signature page hereto.
The undersigned Shareholder shall pay its own expenses, if any,
incurred in connection with the Merger. The undersigned Shareholder understands
and acknowledges that Target, Acquiror and their respective shareholders, as
well as legal counsel to Target and Acquiror, are entitled to rely on (i) the
truth and accuracy of the undersigned Shareholder's representations contained
herein and (ii) the undersigned Shareholder's performance of the obligations set
forth herein.
(b) Subject to paragraph (a) of this Section 1, the undersigned
Shareholder agrees not to offer, sell, exchange, transfer, pledge or otherwise
dispose of any of the Acquiror Shares unless at that time either:
(i) such transaction is permitted pursuant to the provisions
of Rule 145(d) under the Securities Act;
2.
70
(ii) counsel representing the undersigned Shareholder,
satisfactory to Acquiror, shall have advised Acquiror in a written opinion
letter satisfactory to Acquiror and Acquiror's counsel, and upon which Acquiror
and its counsel may rely, that no registration under the Securities Act is
required in connection with the proposed sale, transfer or other disposition;
(iii) a registration statement under the Securities Act covering
the Acquiror Shares proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, is filed with the SEC and made
effective under the Securities Act; or
(iv) an authorized representative of the SEC shall have rendered
written advice to the undersigned Shareholder (sought by the undersigned
Shareholder or counsel to the undersigned Shareholder, with a copy thereof and
of all other related communications delivered to Acquiror) to the effect that
the SEC will take no action, or that the staff of the SEC will not recommend
that the SEC take action, with respect to the proposed offer, sale, exchange,
transfer, pledge or other disposition if consummated.
(c) All certificates representing Acquiror Shares deliverable to a
Shareholder (provided such Shareholder is deemed to be an Affiliate of Target
at the time the Merger was submitted for vote or consent) pursuant to the
Reorganization Agreement and in connection with the Merger and any certificates
subsequently issued with respect thereto or in substitution therefor shall bear
a legend that such shares of Acquiror Common Stock may only be sold or disposed
of in accordance with (i) the provisions of Rule 145 under the Securities Act,
(ii) pursuant to a Registration Statement effective under the Securities Act or
(iii) pursuant to an exemption provided by the Securities Act, and the
conditions specified in this Shareholder and Affiliate Agreement. Acquiror, at
its discretion, may cause stop transfer orders to be placed with its transfer
agent with respect to the certificates for such Acquiror Shares but not as to
the certificates for any part of the Acquiror Shares as to which said legend is
no longer appropriate.
(d) The undersigned Shareholder will observe and comply with the
Securities Act and the General Rules and Regulations thereunder, as now in
effect and as from time to time amended and including those hereafter enacted or
promulgated, in connection with any offer, sale, exchange, transfer, pledge or
other disposition of the Acquiror Shares or any part thereof.
(e) The undersigned Shareholder undertakes and agrees to indemnify
and hold harmless Acquiror, Surviving Corporation, and each of their respective
current and future officers and directors and each person, if any, who now or
hereafter controls or may control Acquiror or Surviving Corporation within the
meaning of the Securities Act (an "Indemnified Person") from and against any and
all claims, demands, actions, causes of action, losses, costs, damages,
liabilities and expenses ("Claims") based upon,
3.
71
arising out of or resulting from any material breach or material nonfulfillment
of any undertaking, covenant or agreement made by the undersigned Shareholder in
subsection (a) or (b) of this Section 1, or caused by or attributable to the
undersigned Shareholder, or the undersigned Shareholder's agents or employees,
or representatives, brokers, dealers and/or underwriters insofar as they are
acting on behalf of and in accordance with the instruction of or with the
knowledge of the undersigned Shareholder, in connection with or relating to any
offer, sale, pledge, transfer or other disposition of any of the Acquiror Shares
by or on behalf of the undersigned Shareholder, which claim or claims result
from any material breach or material nonfulfillment as set forth above. The
indemnification set forth herein shall be in addition to any liability that the
undersigned Shareholder may otherwise have to the Indemnified Persons. After the
date of declared effectiveness by the SEC of the applicable registration
statement relating to all of the shares subject to this Agreement the indemnity
provisions of the Shareholder hereunder shall be superseded by those in the
registration rights agreement relating to the publicly traded shares.
(f) Promptly after receiving definitive notice of any Claim in respect
of which an Indemnified Person may seek indemnification under this Affiliate and
Shareholder Agreement, such Indemnified Person shall submit notice thereof to
the undersigned Shareholder. The omission by the Indemnified Person so to notify
the undersigned Shareholder of any such Claim shall not relieve the undersigned
Shareholder from any liability the undersigned Shareholder may have hereunder
except to the extent that (i) such liability was caused or increased by such
omission, or (ii) the ability of the undersigned Shareholder to reduce or defend
against such liability was adversely affected by such omission. The omission of
the Indemnified Person so to notify the undersigned Shareholder of any such
Claim shall not relieve the undersigned Shareholder from any liability the
undersigned Shareholder may have otherwise than hereunder. The Indemnified
Persons and the undersigned Shareholder shall cooperate with and assist one
another in the defense of any Claim and any action, suit or proceeding arising
in connection therewith. In addition, the Shareholders' Agent shall, at his
election, have the authority to control the defense of any Claim provided that
such Shareholders' Agent does so with counsel acceptable to Acquiror and does
not settle any such Claims without the prior written consent of Acquiror, which
consent shall not be unreasonably withheld.
2. The undersigned Shareholder agrees to maintain in strictest
confidence information about the Reorganization Agreement and the Merger,
including information about the existence of this agreement and such Merger, and
not to disclose any such information without prior written approval of the
Target and Acquiror.
3. The undersigned Shareholder will not, directly or indirectly, (i)
take any action to solicit, initiate or encourage any Takeover Proposal (defined
below) or (ii) subject to the terms of the immediately following sentence,
engage in negotiations with, or disclose any nonpublic information relating to
Target or any of it subsidiaries to, or
4.
72
afford access to the properties, books or records of Target or any of its
subsidiaries to, any person that has advised Target that it may be considering
making, or that has made, a Takeover Proposal. The undersigned Shareholder will
promptly notify Acquiror after receipt of any Takeover Proposal or any notice
that any person is considering making a Takeover Proposal or any request for
nonpublic information relating to Target or any of its subsidiaries or for
access to the properties, books or records of Target or any of its subsidiaries
by any person that has advised the undersigned Shareholder that it may be
considering making, or that has made, a Takeover Proposal and will keep Acquiror
fully informed of the status and details of any such Takeover Proposal notice or
request. For purposes of this Agreement, "Takeover Proposal" means any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving Target or any of its subsidiaries or the acquisition of
any significant equity interest in, or a significant portion of the assets of,
Target or any of its subsidiaries, other than the transactions contemplated by
this Agreement.
4. From and after the Effective Time of the Merger and for so long as
necessary in order to permit the undersigned Shareholder to sell the Acquiror
Common Stock pursuant to Rule 145 and, to the extent applicable, Rule 144 under
the Securities Act, Acquiror will file on a timely basis all reports required to
be filed by it pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, referred to in paragraph (c)(1) of Rule 144 under the Securities Act (or,
if applicable, Acquiror will make publicly available the information regarding
itself referred to in paragraph (c)(2) of Rule 144), in order to permit the
undersigned Shareholder to sell, pursuant to the terms and conditions of Rule
145 and the applicable provisions of Rule 144, the Acquiror Common Stock.
5. No waiver by any party hereto of any condition or of any breach of
any provision of this Affiliate and Shareholder Agreement shall be effective
unless in writing.
6. All notices, requests, demands or other communications that are
required or may be given pursuant to the terms of this Affiliate and Shareholder
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by registered or certified mail, postage prepaid, as
follows:
(a) If to the Shareholder, at the address set forth below the
Shareholder's signature at the end hereof.
(b) If to Acquiror, Target or the other Indemnified Persons:
CardioVascular Dynamics, Inc.
00000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
5.
73
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
and
Intraluminal Devices, Inc.
00 Xxxxxxxxx
Xxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy (which shall not constitute notice) to:
Higham, XxXxxxxxx & Xxxxxxx
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxx XxXxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
or to such other address as any party hereto or any Indemnified Person may
designate for itself by notice given as herein provided.
7. For the convenience of the parties hereto, this Affiliate and
Shareholder Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same document.
8. This Affiliate and Shareholder Agreement shall be enforceable by,
and shall inure to the benefit of and be binding upon, the parties hereto and
their respective successors and assigns. Moreover, this Affiliate and
Shareholder Agreement shall be enforceable by, and shall inure to the benefit
of, the Indemnified Persons and their respective successors and assigns. As used
herein, the term "successors and assigns"
6.
74
shall mean, where the context so permits, heirs, executors, administrators,
trustees and successor trustees, and personal and other representatives.
9. This Affiliate and Shareholder Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
California.
10. If a court of competent jurisdiction determines that any provision
of this Affiliate and Shareholder Agreement is unenforceable or enforceable only
if limited in time and/or scope, this Affiliate and Shareholder Agreement shall
continue in full force and effect with such provision stricken or so limited.
11. All capitalized terms used herein shall have the meaning defined in
the Reorganization Agreement, unless otherwise defined herein.
7.
75
IN WITNESS WHEREOF, the parties have caused this Affiliate and
Shareholder Agreement to be executed as of the date first above written.
CARDIOVASCULAR DYNAMICS, INC. Shareholder
By:
(Signature)
Name:
Title:
(Print Name)
(Print Address)
(Print Address)
(Print Telephone Number)
Total Number of Shares and Options to Purchase Target Capital Stock owned on the
date hereof:
Common Stock:
Preferred Stock:
Options to Purchase
Common Stock:
State of Residence:
[SIGNATURE PAGE TO AFFILIATE AND SHAREHOLDER AGREEMENT]
8.
76
EXHIBIT C
IRREVOCABLE PROXY
TO VOTE STOCK OF
INTRALUMINAL DEVICES, INC.
The undersigned shareholder of Intraluminal Devices, Inc., a California
corporation ("Target"), hereby irrevocably (to the fullest extent permitted by
the California General Corporation Law) appoints the members of the Board of
Directors of CARDIOVASCULAR DYNAMICS, INC., a Delaware corporation ("Acquiror"),
and each of them, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, at any time
prior to the Expiration Date (as defined below) to vote and exercise all voting
and related voting rights (to the fullest voting extent that the undersigned is
entitled to do so) with respect to all of the shares of capital stock of Target
that now are or hereafter may be beneficially owned or owned of record by the
undersigned, and any and all other shares or securities of Target issued or
issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Proxy. The Shares beneficially
owned by the undersigned shareholder of Target as of the date of this Proxy are
listed on the final page of this Proxy. Upon the undersigned's execution of this
Proxy, any and all prior proxies given by the undersigned with respect to any
Shares are hereby revoked and the undersigned agrees not to grant any subsequent
proxies with respect to the Shares until after the Expiration Date (as defined
below).
This Proxy is irrevocable until the Expiration Date (to the extent
provided under the California General Corporation Law), is granted in
consideration of Acquiror entering into that certain Agreement and Plan of
Reorganization, dated as of October 2, 1996, by and among Target, Acquiror and
IDI Acquisition Corporation, a Delaware corporation ("Merger Sub"), a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Acquiror (the
"Reorganization Agreement"). The Reorganization Agreement provides for the
merger of Target with and into Merger Sub (the "Merger"). As used herein, the
term "Expiration Date" shall mean the earlier to occur of (i) such date and time
as the Merger shall become effective in accordance with the terms and provisions
of the Reorganization Agreement or (ii) the date of termination of the
Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other related voting rights of the undersigned with
respect to the Shares (including, without limitation, the power to execute and
deliver written consents and waivers,
77
including but not limited to waiver of the notice required by Section 8(a) of
Article II of the Target's Bylaws, pursuant to the California General
Corporation Law), at every annual, special or adjourned meeting of the
shareholders of Target and in every written consent in lieu of such meeting (i)
in favor of approval of the Merger and the Reorganization Agreement and any
related corporate actions and (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination (other
than the Merger) between Target and any person or entity other than Acquiror or
any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Target under
the Reorganization Agreement or which could result in any of the conditions to
Target's obligations under the Reorganization Agreement not being fulfilled. The
attorneys and proxies named above may not exercise this Proxy on any other
matter except as provided above. The undersigned shareholder may vote the Shares
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy shall be governed by, and construed in accordance with, the
laws of the State of California and is irrevocable.
Dated: ___________, 1996
______________________________
(Signature of Shareholder)
______________________________
(Print Name of Shareholder)
Shares beneficially owned:
_________ shares of Target Common Stock
_________ shares of Target Preferred Stock
[SIGNATURE PAGE TO PROXY]
78
EXHIBIT D
NOTICE OF NON U.S. REAL PROPERTY HOLDING CORPORATION STATUS
PURSUANT TO TREASURY REGULATION SECTION 1.897-2(h) AND
CERTIFICATION OF NON-FOREIGN STATUS
Pursuant to an Agreement and Plan of Reorganization among
CARDIOVASCULAR DYNAMICS, INC. ("Acquiror"), its wholly-owned subsidiary, IDI
ACQUISITION CORPORATION ("Merger Sub"), and INTRALUMINAL DEVICES, INC.
("Target"), dated as of October 2, 1996, Target shall be merged with and into
Merger Sub, and Target will become a wholly-owned subsidiary of Acquiror. In
completing such merger, Acquiror and/or Merger Sub shall receive shares of
Target common stock ("Common Stock") in exchange for the merger consideration
provided for in such Agreement and Plan of Reorganization.
Section 1445 of the Internal Revenue Code of 1986, as amended (the
"Code"), provides that a transferee of a U.S. Real Property Interest must
withhold tax if the transferor is not a U.S. person. In order to confirm that
neither Acquiror nor Merger Sub, as transferees, are required to withhold tax
upon the receipt of Target Common Stock in exchange for the merger
consideration, the undersigned, in his capacity as President of Target, hereby
certifies as follows:
1. The Common Stock of Target to be received by Acquiror and/or Merger
Sub pursuant to the merger does not constitute a U.S Real Property Interest as
that term is defined in Section 897(c)(1)(A)(ii) of the Code;
2. The determination in Paragraph 1, above, is based on a determination
by Target that Target is not and has not been a U.S. Real Property Holding
Corporation as that term is defined in Section 897(c)(2) of the Code during the
five-year period preceding the date of this Notice, as indicated below;
3. Target is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Code and the Income
Tax Regulations);
4. Target's U.S. employer identification number is TARGET EMPLOYER ID
NUMBER;
5. Target's office address is 00 Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000;
and
79
6. Target shall authorize Acquiror to file this notice in its behalf
with the Internal Revenue Service within thirty (30) days of the date this
notice is delivered to Acquiror and Merger Sub.
This Notice is made in accordance with the requirements of Treasury
Regulation section 1.897-2(h). Target understands that any false statement
contained herein could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this Notice
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of
Target.
INTRALUMINAL DEVICES, INC.
Dated: By:
Title:
[SIGNATURE PAGE TO FIRPTA CERTIFICATE]
80
NOTICE TO THE INTERNAL REVENUE SERVICE
This Notice is being provided by INTRALUMINAL DEVICES, INC. ("Target")
pursuant to the requirements of Treasury Regulation section 1.897-2(h)(2).
Target is located at 00 Xxxxxxxxx, Xxxxxx, Xxxxxxxxxx 00000. Target's
Taxpayer Identification Number is TARGET EMPLOYER ID NUMBER.
The attached Certificate of Non-U.S. Real Property Holding Corporation
Status was not requested by a foreign interest holder. Such Certificate was
requested by CARDIOVASCULAR DYNAMICS, INC. ("Acquiror") and IDI ACQUISITION
CORPORATION ("Merger Sub"), the transferees of the stock of Target. Acquiror and
Merger Sub, are located at 00000 Xxxxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000. Acquiror's Taxpayer Identification Number is _____________.
The interests in question, shares of Target common stock to be received
by Acquiror and Merger Sub, pursuant to an Agreement and Plan of Reorganization,
are not U.S. Real Property Interests.
Under penalties of perjury I declare that I have examined this Notice
and the attachment hereto and to the best of my knowledge and belief they are
true, correct and complete, and I further declare that I have authority to sign
this document on behalf of Target.
INTRALUMINAL DEVICES, INC.
Dated: By:
Title:
81
EXHIBIT E
ESCROW AGREEMENT
This Escrow Agreement is made as of this 16th day of October
1996, by and among U.S. Trust Company of California, N.A. ("Escrow Agent"),
CardioVascular Dynamics, Inc., a Delaware corporation ("Acquiror"), and Xxxxxx
X. XxXxxxxx as agent ("Shareholders' Agent") of the former shareholders of
Intraluminal Devices, Inc., a California corporation ("Target"). Terms not
otherwise defined herein shall have the meaning set forth in the Reorganization
Agreement (as defined below).
WITNESSETH
WHEREAS, Acquiror, IDI Acquisition Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Acquiror and Target
have entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated as of October 2, 1996, providing for the merger of Target
with and into Merger Sub (the "Merger"); and
WHEREAS, pursuant to Article VIII of the Reorganization
Agreement, a copy of which is attached hereto as Appendix A ("Article VIII"), an
escrow fund (the "Escrow Fund") will be established to compensate Acquiror for
certain Damages (as defined in Article VIII) arising out of any
misrepresentation or breach or default in connection with any of the
representations, warranties, covenants and agreements given or made by Target in
the Reorganization Agreement, the Target Disclosure Schedule or any exhibit or
schedule to the Reorganization Agreement; and
WHEREAS, the Shareholders' Agent has been constituted as agent
for and on behalf of the former shareholders of Target (individually a
"Shareholder" and collectively the "Shareholders") to undertake certain
obligations specified in Article VIII; and
WHEREAS, Article VIII provides for an Escrow Fund of a number
of shares of Acquiror Common Stock with an aggregate value of $100,000 as of the
Closing Date (based on the Closing Price) together with seven and fourteen
hundredths percent (7.14%) of all shares of Acquiror Common Stock issued
pursuant to Section 5.22 of the Reorganization Agreement upon the Merger, such
escrow to be held by the Escrow Agent; and
WHEREAS, the parties hereto desire to set forth further terms
and conditions in addition to those set forth in the Reorganization Agreement
relating to the operation of the Escrow Fund.
82
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants contained herein, and intending to be legally bound, hereby
agree as follows:
1. Escrow and Escrow Shares. Pursuant to the Reorganization
Agreement, Acquiror shall deposit in escrow with the Escrow Agent, as escrow
agent, as soon as practicable after the Effective Time (as defined in the
Reorganization Agreement) and in any event within five (5) business days of the
Effective Time (as defined in the Reorganization Agreement) of the Merger, a
stock certificate or certificates representing 6,169 shares of Acquiror Common
Stock (the "Escrow Shares") which shall be registered in the name of the Escrow
Agent, or its nominee, as nominee for the beneficial owners of such shares. The
Escrow Shares shall be held and distributed by the Escrow Agent in accordance
with the terms and conditions of the Reorganization Agreement and this
Agreement. The number of Escrow Shares beneficially owned by each Shareholder is
set forth in Appendix B attached hereto.
2. Rights and Obligations of the Parties. The Escrow Agent
shall be entitled to such rights and shall perform such duties of the escrow
agent as set forth herein and in Article VIII (collectively, the "Duties"), in
accordance with the terms and conditions of this Agreement and Article VIII.
Acquiror, Target and the Shareholders' Agent shall be entitled to their
respective rights and shall perform their respective duties and obligations as
set forth herein and in Article VIII, in accordance with the terms hereof and
thereof. In the event that the terms of this Agreement conflict in any way with
the provisions of Article VIII, Article VIII shall control.
3. Escrow Period. The Escrow Period shall terminate with
respect to the Escrow Shares upon the expiration of six (6) months from the
Effective Time; provided, however, that a portion of the Escrow Shares, which,
in the reasonable judgment of Acquiror, subject to the objection of the
Shareholders' Agent and the subsequent arbitration of the matter in the manner
provided in Section 8.7 of the Reorganization Agreement, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate
theretofore delivered to the Escrow Agent prior to termination of the Escrow
Period with respect to facts and circumstances existing prior to expiration of
the Escrow Period, shall remain in the Escrow Fund until such claims have been
resolved.
4. Duties of Escrow Agent. In addition to the Duties set
forth in Article VIII, the Duties of the Escrow Agent shall include the
following:
(a) The Escrow Agent shall hold and safeguard the Escrow
Shares during the Escrow Period, shall treat such Escrow Fund in accordance with
the terms of this Agreement and Article VIII and not as the property of
Acquiror, and shall hold and dispose of the Escrow Shares only in accordance
with the terms hereof.
2.
83
(b) The Escrow Shares shall be voted by the Escrow Agent in
accordance with the instructions received by the Escrow Agent from the
beneficial owners of such Escrow Shares. If no instructions are received from
the beneficial owners, such shares shall not be voted by the Escrow Agent.
(c) Promptly following termination of the Escrow Period as
set forth in Section 3 hereof, the Escrow Agent shall requisition from the stock
transfer agent, if necessary, and deliver to the Shareholders the proper number
of Escrow Shares and other property in the Escrow Fund in excess of any amount
of such Escrow Shares or other property sufficient, in the reasonable judgment
of Acquiror, subject to the objection of the Shareholders' Agent and the
subsequent arbitration of the matter in the manner provided in Section 8.7 of
the Reorganization Agreement, to satisfy any unsatisfied claims specified in any
Officer's Certificate theretofore delivered to the Escrow Agent prior to
termination of the Escrow Period with respect to facts and circumstances
existing prior to expiration of the Escrow Period, and to pay expenses as
provided in Section 11(b) hereof. As soon as all such claims have been resolved,
the Escrow Agent shall requisition from the transfer agent, if necessary, and
deliver to such Shareholders all of the Escrow Shares and other property
remaining in the Escrow Fund and not required to satisfy such claims and
expenses. Each Shareholder shall receive that number of Escrow Shares which
bears the same relationship to the total number of Escrow Shares in the Escrow
Fund and available for distribution as the number of Escrow Shares set forth
opposite the name of each such Shareholder on Appendix B hereto.
(d) To the extent directed to do so by the Shareholders'
Agent and Acquiror, the Escrow Agent shall sell up to 1% of the shares of
Acquiror Common Stock held in the Escrow Fund and shall apply the proceeds of
such sale to pay expenses incurred by the Shareholders' Agent on behalf of the
Shareholders as provided in Section 11(b) hereof provided that Acquiror must
consent to the payment of such expenses (such consent not to be unreasonably
withheld).
5. Distributions; Tax Allocations. Any cash dividends,
dividends payable in securities or other distributions of any kind (but
excluding any shares of Acquiror capital stock received upon a stock split)
shall be promptly distributed by the Escrow Agent to, and for tax reporting
purposes shall be allocable to, the beneficial holder of the Escrow Shares to
which such distribution relates. Any shares of Acquiror Common Stock received by
the Escrow Agent upon a stock split made in respect of any securities in the
Escrow Fund shall be added to the Escrow Fund and become a part thereof. Any
provision hereof or of Article VIII shall be adjusted to appropriately reflect
any stock split or reverse stock split. For tax reporting purposes, all other
income received by the Escrow Agent and attributable to the Escrow Fund shall be
allocable to Acquiror.
3.
84
6. Exculpatory Provisions.
(a) The Escrow Agent shall be obligated only for the
performance of such Duties as are specifically set forth herein and in Article
VIII of the Reorganization Agreement and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for forgeries or false personations. The Escrow
Agent shall not be liable for any act done or omitted hereunder by it in good
faith as escrow agent except for any liability arising from its (i) own gross
negligence, bad faith, or willful misconduct or (ii) failure to comply with the
terms of this Agreement and Article VIII. The Escrow Agent shall, in no case or
event be liable for any representations or warranties of Target, Acquiror or
Merger Sub. Any act done or omitted pursuant to the advice or opinion of counsel
shall be conclusive evidence of the good faith of the Escrow Agent.
(b) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law or arbitrations
as provided in Section 8.7 of the Reorganization Agreement, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court or rulings of any arbitrators. In case the Escrow Agent obeys or complies
with any such order, judgment or decree of any court or such ruling of any
arbitrator, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person by reason of such compliance, notwithstanding any such
order, judgment, decree or arbitrators' ruling being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver the Agreement or any documents or
papers deposited or called for thereunder.
(d) The Escrow Agent shall not be liable for the outlawing
of any rights under any statute of limitations with respect to the Agreement or
any documents deposited with the Escrow Agent.
7. Alteration of Duties. The Duties may be altered, amended,
modified or revoked only by a writing signed by all of the parties hereto.
8. Resignation and Removal of the Escrow Agent. The Escrow
Agent or any Successor may resign as Escrow Agent at any time with or without
cause by giving at least thirty (30) days' prior written notice to each of
Acquiror and the Shareholders' Agent, such resignation to be effective thirty
(30) days following the date such notice is given. In addition, Acquiror and the
Shareholders' Agent may jointly remove the Escrow Agent as escrow agent at any
time with or without cause, by an instrument (which may
4.
85
be executed in counterparts) given to the Escrow Agent, which instrument shall
designate the effective date of such removal. In the event of any such
resignation or removal, a successor escrow agent which shall be a bank or trust
company organized under the laws of the United States of America or any state
thereof having a combined capital and surplus of not less than $100,000,000,
shall be appointed by the Shareholders' Agent with the approval of Acquiror,
which approval shall not be unreasonably withheld. Any such successor escrow
agent shall deliver to Acquiror and the Shareholders' Agent a written instrument
accepting such appointment, and thereupon it shall succeed to all the rights and
duties of the escrow agent hereunder and shall be entitled to receive the Escrow
Fund. In the event no successor escrow agent is appointed by the effective date
of such resignation or removal, the Escrow Agent, the Shareholders' Agent or the
Acquiror may apply to a court of competent jurisdiction (in which action the
other parties shall be afforded a reasonable opportunity to participate) for
such appointment.
9. Further Instruments. If the Escrow Agent reasonably requires other
or further instruments in connection with performance of the Duties, the
necessary parties hereto shall join in furnishing such instruments.
10. Disputes. It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
securities held by the Escrow Agent hereunder, the Escrow Agent is authorized
and directed to act in accordance with, and in reliance upon, the terms hereof
and of Article VIII.
11. Escrow Fees and Expenses.
(a) Acquiror shall pay the Escrow Agent such fees as are
established by the Fee Schedule attached hereto as Appendix C.
(b) Any out-of-pocket fees and expenses incurred by the
Shareholders' Agent shall be paid out of the Escrow Fund in preference to other
distributions from such Escrow Fund; provided that the aggregate amount of such
payments will not exceed the amount in Section 4(d) and provided, further, that
under no circumstances, will the Shareholders' Agent have personal liability for
any such fees and expenses.
12. Indemnification. In consideration of the Escrow Agent's acceptance
of this appointment, Acquiror and the shareholders of Target, agree to indemnify
and hold the Escrow Agent harmless as to any liability incurred by it to any
person, firm or corporation by reason of its having accepted such appointment or
in carrying out the terms hereof and Article VIII of the Reorganization
Agreement, and to reimburse the Escrow Agent for all its costs and expenses,
including, among other things, counsel fees and expenses, reasonably incurred by
reason of any matter as to which an indemnity is paid; provided, however, that
no indemnity need be paid in case of the Escrow Agent's gross negligence, bad
faith, willful misconduct or breach of this Agreement; and provided
5.
86
further, however, that the liability of each of the shareholders of Target under
this Section shall be limited to the shareholder's proportionate share, based on
the ratio which the shareholder's interest in the Escrow Fund bears to the
interests of all such shareholders. In no event shall the Escrow Agent be liable
for indirect, punitive, special or consequential damages.
13. General.
(a) Any notice given hereunder shall be in writing and shall be
deemed effective upon the earlier of personal delivery or the third day after
mailing by certified or registered mail, postage prepaid as follows:
To Acquiror:
CardioVascular Dynamics, Inc.
00000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
With a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
To Shareholders' Agent:
Intraluminal Devices, Inc.
00 Xxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
6.
87
With a copy to:
Higham, XxXxxxxxx & Xxxxxxx
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxx XxXxxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
To the Escrow Agent:
U.S. Trust Company of California, N.A.
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, XX
Attention: Corporate Trust Department
Fax: (000) 000-0000
Tel: (000) 000-0000
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above.
(b) The Officer's Certificate as defined in Article VIII may be
signed by the President, Vice President or Chief Financial Officer of Acquiror.
(c) The captions in this Escrow Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Escrow Agreement.
(d) This Escrow Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
(e) No party may, without the prior express written consent of each
other party, assign this Escrow Agreement in whole or in part. This Escrow
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto.
(f) This Escrow Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts made
and to be performed entirely within the State of California. The parties to this
Escrow Agreement hereby agree to submit to personal jurisdiction in the State of
California.
7.
88
(g) Any term of this Escrow Agreement may be amended or modified
only with the consent of all parties hereto. Any amendment or modification
effected in accordance with this paragraph shall be binding upon each party
hereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as Escrow Agent
By
Name:
Title:
CARDIOVASCULAR DYNAMICS, INC.
By
Name:
Title:
SHAREHOLDERS' AGENT
[SIGNATURE PAGE TO ESCROW AGREEMENT]
8.
89
APPENDIX A
ARTICLE VIII OF THE REORGANIZATION AGREEMENT
00
XXXXXXXX X
LISTS OF SHAREHOLDERS AND THEIR RESPECTIVE ESCROW AMOUNTS
91
APPENDIX C
FEE SCHEDULE
92
EXHIBIT F
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of
October 16, 1996, by CardioVascular Dynamics, Inc., a Delaware corporation
("CVD"), for the benefit of certain shareholders of Intraluminal Devices, Inc.,
a California corporation ("IDI") acquiring shares of the Common Stock of CVD,
pursuant to that Agreement and Plan of Reorganization by and among CVD, IDI and
IDI Acquisition Corporation, dated as of October 2, 1996, (the "Merger
Agreement"), and in consideration of IDI entering into the Merger Agreement and
the transactions contemplated thereby.
1. Definitions. As used in this Declaration:
a. "1934 Act" means the Securities Act of 1934, as amended.
b. "Act" means the Securities Act of 1933, as amended.
c. "Holder" means: (i) a shareholder of IDI to whom shares of
Common of CVD are issued pursuant to the Merger Agreement, (ii) the Escrow Agent
(as defined in the Merger Agreement), or (iii) a transferee of a Holder to whom
registration rights granted under this Declaration are granted pursuant to
Section 10 of this Declaration.
d. "Registrable Securities" means for each Holder the number of
shares of CVD Common Stock issued to such Holder pursuant to the Merger
Agreement (including shares issued to the Escrow Agent pursuant to Article VIII
thereof and all Additional Shares, if any, issued pursuant to Section 5.22 of
the Agreement), in each case rounded to the nearest integral amount, and for all
Holders the sum of the Registrable Securities held by them, together with all
securities which may hereafter be issued with respect thereto as the result of
stock split, stock dividend or otherwise.
e. "SEC" means the Securities and Exchange Commission.
Terms not otherwise defined herein have the meanings given to them in
the Merger Agreement.
2. Registration. CVD shall use its best efforts to cause the
Registrable Securities held by each Holder to be registered under the Act so as
to permit the sale thereof, and in connection therewith shall prepare and file
with the SEC within forty-five (45) days following the Effective Time of the
Merger a registration statement in such
93
form as is then available under the Act covering the Registrable Securities (it
being understood that the timing of any registration of shares pursuant to
Section 5.22 of the Merger Agreement shall be determined solely as set forth in
the Merger Agreement); provided, however, that each Holder shall provide all
such information and materials by each Holder and take all such action as may be
required in order to permit CVD to comply with all applicable requirements of
the SEC and to obtain any desired acceleration of the effective date of such
registration statement, such provision of information and materials by each
Holder to be a condition precedent to the obligations of CVD pursuant to this
Declaration with respect to such Holder. CVD shall not be required to effect
more than two registrations under this Declaration (unless no rights to
Additional Shares vest in any Holder pursuant to Section 5.22 of the Merger
Agreement, in which case only one registration shall be required). The offerings
made pursuant to such registrations shall not be underwritten, unless
specifically requested in writing by the holders of at least ninety percent
(90%) of the Registrable Securities that are unregistered at the time of the
registration and agreed to be CVD.
3. Postponement of Registration. Notwithstanding Section 2 above, CVD
shall be entitled to postpone the declaration of effectiveness of the
registration statement prepared and filed pursuant to Section 2 for a reasonable
period of time, but not in excess of forty-five (45) calendar days, if the Board
of Directors of CVD, acting in good faith, determines that there exists material
non-public information about CVD.
4. Obligations of CVD. CVD shall (i) prepare and file with the SEC the
registration statement in accordance with Section (2) hereof with respect to the
shares of Registrable Securities and shall use its best efforts to cause such
registration statement to become effective as promptly as practicable after
filing and to keep such registration statement continuously effective until the
earlier to occur of two (2) years after the date the SEC has declared a
registration statement effective with respect to the initial issuance of shares
under Section 1.6 of the Merger Agreement and one year after the date the SEC
has declared a registration statement effective with respect to the initial
issuance of shares under Section 1.6 of the Merger Agreement in the event that
the Rule 144 holding period is shortened to one year (ii) prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary and to comply with
the provisions of the Act with respect to the sale or other disposition of all
securities proposed to be registered in such registration statement until the
earlier to occur of two (2) years after the date the SEC has declared a
registration statement effective with respect to the initial issuance of shares
under Section 1.6 of the Merger Agreement and one year after the date the SEC
has declared a registration statement effective with respect to the initial
issuance of shares under Section 1.6 of the Merger Agreement in the event that
the Rule 144 holding period is shortened to one year; (iii) furnish to each
Holder such number of copies of any prospectus (including any preliminary
prospectus and any amended or supplemented prospectus) in conformity with the
requirements of the Act, and such other documents, as each Holder may reasonably
request in order to effect the
2.
94
offering and sale of the shares of the Registrable Securities to be offered and
sold, but only while CVD shall be required under the provisions hereof to cause
the registration statement to remain current; (iv) use its commercially
reasonable efforts to register or qualify the shares of the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Holder shall reasonably request (provided
that CVD shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such jurisdiction where it has not been qualified), and do any and all other
acts or things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition of such stock in such
jurisdictions; (v) notify each Holder upon the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; (vi) so long
as the registration statement remains effective, promptly prepare, file and
furnish to each Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an 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
not misleading in light of the circumstances then existing; (vii) notify each
Holder, promptly after it shall receive notice thereof, of the date and time the
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed; (viii) notify each Holder promptly of any request by
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information; and (ix) advise each Holder, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the SEC suspending the effectiveness of the registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued. If requested by
the holders of at least ninety percent (90%) of the Registrable Securities that
are unregistered at the time of the registration, and provided that the
underwriter or underwriters selected by such holders are reasonably satisfactory
to CVD, CVD shall enter into and perform its obligations under an underwriting
agreement with a nationally recognized investment banking firm or firms
containing representations, warranties, indemnities and agreements then
customarily included by an issuer in underwriting agreements with respect to
secondary distributions; provided, however, that each Holder with shares of
Registrable Securities included in the offering shall also enter into and
perform its obligations under such an agreement. In connection with any offering
of shares of Registrable Securities registered pursuant to this Declaration, CVD
shall (x) furnish each Holder, at CVD's expense, with unlegended certificates
representing ownership of the shares of Registrable Securities being sold in
such denominations as each Holder shall request and (y) instruct the transfer
agent and
3.
95
registrar of the Registrable Securities to release any stop transfer orders with
respect to the shares of Registrable Securities being sold.
5. Expenses. CVD shall pay all of the out-of-pocket expenses incurred,
other than underwriting discounts and commissions, in connection with any
registration of Registrable Securities pursuant to this Declaration, including,
without limitation, all SEC, NYSE and blue sky registration and filing fees,
printing expenses, transfer agents' and registrars' fees, and the reasonable
fees and disbursements of CVD's outside counsel and independent accountants and
a single counsel for all of the Holders.
6. Indemnification. In the event of any offering registered pursuant to
this Declaration:
a. CVD will indemnify each Holder, each of its officers, directors
and partners and such Holder's legal counsel and independent accountants, and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they are made, not misleading, or any violation by CVD of any rule or regulation
promulgated under the Securities Act, or state securities laws, or common law,
applicable to CVD in connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of its officers, directors
and partners and such Holder's legal counsel and independent accountants, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that CVD will not be liable
in any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to CVD in an instrument duly executed by such
Holder or underwriter and stated to be specifically for use therein.
b. Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify CVD, each of its directors and officers
and its
4.
96
legal counsel and independent accountants, each underwriter, if any, of CVD's
securities covered by such a registration statement, each person who controls
CVD or such underwriter within the meaning of Section 15 of the Securities Act,
and each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse CVD,
such Holders, such directors, officers, legal counsel, independent accountants,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to CVD by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holder hereunder shall be limited to an amount equal to the gross proceeds
before expenses and commissions to such Holder of Registrable Securities sold as
contemplated herein.
c. Each party entitled to indemnification under this Section 12
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has written notice of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation (unless the
Indemnified Party determines that a**, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Agreement, except to the extent, but only to the extent, that the Indemnifying
Party's ability to defend against such claim or litigation is impaired as a
result of such failure to give notice. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
d. If the indemnification provided for in this Section 6 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party due
to operation of law with respect to any loss, liability, claim, damage, or
expense referred to
5.
97
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact of the
omission to sate a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
e. The obligations of CVD and each Holder under this Section 8
shall survive the completion of any offering of stock in a registration
statement under this Declaration and otherwise.
7. Reports Under Securities Merger Act of 1934. CVD agrees to:
a. use its commercially reasonable efforts to file with the SEC in
a timely manner all reports and other documents required of CVD under the Act
and the 1934 Act; and
b. furnish to each Holder, forthwith upon request (i) a written
statement by CVD that it has complied with the reporting requirements of the Act
and the 1934 Act, or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of CVD and (iii) such other
information as may be reasonably requested in availing each Holder of any rule
or regulation of the SEC which permits the selling of any such securities
pursuant to SEC Rule 144 and/or Rule 145.
8. Assignment of Registration Rights. The rights to cause CVD to
register Registrable Securities pursuant to this Declaration may be assigned by
a Holder to a transferee of Registrable Securities only if CVD is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee and the Registrable Securities with respect to
which such registration rights are being assigned and a copy of a duly executed
written instrument in form reasonably satisfactory to CVD by which such
transferee assumes all of the obligations and liabilities of its transferor
hereunder and agrees itself to be bound hereby.
9. Amendment of Registration Rights. Holders of a majority of the
Registrable Securities may, with the consent of CVD, amend the registration
rights granted hereunder.
6.
98
10. Termination. The registration rights set forth in this Declaration
shall terminate with respect to a Holder at such time as all of the Registrable
Securities then held by such Holder can be sold by such Holder in a 3-month
period in accordance with Rule 144 under the Act.
11. Third Party Beneficiaries. It is intended that the shareholders of
IDI be third party beneficiaries to this Declaration of Registration Rights.
CARDIOVASCULAR DYNAMICS, INC.
By:
Title:
7.
99
EXHIBIT G
October 16, 1996
Intraluminal Devices, Inc.
00 Xxxxxxxxx
Xxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel for CardioVascular Dynamics, Inc., a
Delaware corporation ("Acquiror"), and IDI Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"), in
connection with the merger (the "Merger") of Intraluminal Devices, Inc., a
California corporation ("Target") with and into Merger Sub, pursuant to the
Agreement and Plan of Reorganization by and among Acquiror, Target and Merger
Sub, dated as of October 2, 1996 (the "Reorganization Agreement"), and the
Certificate of Merger between Target and Merger Sub, dated as of October 16,
1996 (the "Merger Agreement"). This opinion is rendered to you pursuant to
Section 6.3(c) of the Reorganization Agreement. Capitalized terms used herein
and not otherwise defined shall have the same meaning given to such terms in the
Reorganization Agreement.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates, including certificates of public
officials and other instruments as we have deemed necessary or advisable for
purposes of this opinion, including the Certificate of Incorporation, as
amended, and the Amended and Restated Bylaws of Acquiror, the Certificate of
Incorporation and the Bylaws of Merger Sub and the records of the respective
Boards of Directors of Acquiror and Merger Sub relating to the Merger. In
addition, in connection with the Merger, we have reviewed the Reorganization
Agreement, the Merger Agreement, the Escrow Agreement, the Affiliate and
Shareholder Agreements, and the Registration Rights Agreement.
In such examination and review we have assumed the genuineness
of all signatures, the legal capacity of natural persons, the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies; and that there are no extrinsic
agreements or understandings among the
100
Intraluminal Devices, Inc. October 16, 1996
Page 2
parties to the Reorganization Agreement and the Merger Agreement that would
modify or interpret the terms of the Reorganization Agreement and the Merger
Agreement or the respective rights or obligations of the parties thereunder. As
to any facts material to the opinions hereinafter expressed which we did not
independently establish or verify, we have relied without investigation upon
certificates, statements and representations of representatives of Acquiror.
During the course of our discussion with such officers and representatives and
our review of the documents described above in connection with the preparation
of these opinions, no facts were disclosed to us that caused us to conclude that
any such certificate, statement or representation is untrue. In making our
examination of the documents executed by entities other than Acquiror and Merger
Sub, we have assumed that each such other entity had the power to enter into and
perform all its obligations thereunder and the due authorization, execution and
delivery of such documents by each such entity.
The opinions hereinafter expressed are qualified to the extent that (a)
the validity or enforceability of any of the agreements, documents or
obligations referred to herein may be subject to or affected by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally, and (b) the
enforceability of such agreements, documents or obligations may be limited by
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, and public policy,
whether applied by a court of law or equity. We do not express any opinion
herein as to the availability of any equitable or other specific remedy upon
breach of any of the agreements, documents or obligations referred to herein. We
render or imply no opinion with respect to compliance with applicable anti-fraud
statutes, rules or regulations of applicable state or federal law.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications and exceptions set forth herein, we are
of the opinion that:
1. Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has the corporate power
and authority to own, operate and lease its properties and carry on its business
as now conducted;
101
Intraluminal Devices, Inc. October 16, 1996
Page 3
2. The authorized capital stock of Acquiror consists of 30,000,000
shares of Common Stock, $.001 par value, and 5,000,000 shares of Preferred
Stock, $.001 par value. At the close of business on October 9, 1996, no shares
of Preferred Stock were issued and outstanding. At the close of business on
October 15, 1996, 8,776,000 shares of Common Stock were issued and outstanding,
all of which have been duly authorized and are validly issued, fully paid and
nonassessable. On the close of business on October 9, 1996, 1,006,000 shares of
Common Stock were subject to issuance upon exercise of outstanding options;
3. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; all of the outstanding
shares of capital stock of Merger Sub are validly issued, fully paid and
nonassessable and registered in the name of Acquiror;
4. The Reorganization Agreement and the Merger Agreement have been
approved and adopted by the sole stockholder of Merger Sub; each of Acquiror and
Merger Sub has full corporate power and authority to execute, deliver, and
perform its obligations under the Reorganization Agreement, the Merger
Agreement, the Escrow Agreement and the Registration Rights Agreement (in each
case to the extent Acquiror or Merger Sub is a party to each such document);
each of Acquiror and Merger Sub has taken all requisite corporate action to
approve and adopt the Reorganization Agreement, the Merger Agreement, the Escrow
Agreement and the Registration Rights Agreement and to approve and to authorize
the carrying out of the transactions contemplated thereunder (in each case to
the extent Acquiror or Merger Sub is a party to each such document); and the
Reorganization Agreement, Merger Agreement, the Escrow Agreement and the
Registration Rights Agreement have been duly executed and delivered by each of
Acquiror and Merger Sub and constitute legal, valid and binding obligations of
each of Acquiror and Merger Sub enforceable in accordance with their terms (in
each case to the extent Acquiror or Merger Sub is a party to each such
document); provided, that enforceability of the indemnity obligations contained
in such agreements may be limited by public policy;
5. The approval of the stockholders of Acquiror is not required for the
consummation of the transactions contemplated by the Reorganization Agreement
and the Merger Agreement; the shares of Acquiror Common Stock to be delivered in
exchange for shares of Target Common Stock will, when issued as contemplated by
the Reorganization Agreement and the Merger Agreement, be validly issued, fully
paid and nonassessable; and a sufficient number of shares of Acquiror Common
Stock have been duly and validly reserved for issuance upon exercise of options
to acquire Target Common Stock being assumed by Acquiror pursuant to the
Reorganization Agreement
102
Intraluminal Devices, Inc. October 16, 1996
Page 4
and such reserved shares, when issued in accordance with the terms of such
options, will be validly issued, fully paid and nonassessable;
6. The execution, delivery and performance of the Reorganization
Agreement, the Escrow Agreement and the Registration Rights Agreement (in each
case to the extent Acquiror or Merger Sub is a party to each such document) by
Acquiror and Merger Sub, and the carrying out of the transactions contemplated
thereby to be carried out by Acquiror and Merger Sub did not and will not
conflict with or constitute a violation under the charter documents of Acquiror
or Merger Sub;
7. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Acquiror or Merger Sub or any of their assets or properties
is a party which seeks to prohibit, restrain or enjoin the transactions
contemplated by the Reorganization Agreement or the Merger Agreement;
8. There is no consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or
other governmental body (either foreign or domestic) required by Acquiror or
Merger Sub or with respect to its assets or properties or otherwise for the
consummation of the transactions contemplated by the Reorganization Agreement,
the Merger Agreement, the Escrow Agreement and the Registration Rights Agreement
(in each case to the extent Acquiror or Merger Sub is a party to each such
document) that has not been obtained, except for (i) such consents, approvals,
authorizations, registration or qualifications as may be required under state
securities or Blue Sky laws in connection with the offer and sale of Acquiror
Common Stock pursuant to the Merger, (ii) acceptance for filing of the Merger
Agreement together with any appropriate tax clearance certificate by the
California Secretary of State. Our opinion herein, however, is subject to the
timely and proper completion of all filings and other actions contemplated above
in this paragraph 8, where such filings and actions are to be undertaken on or
after the date hereof, (iii) acceptance for filing of the Merger Agreement with
the Delaware Secretary of State and (iv) the consents and filings noted in the
Reorganization Agreement and related documents.
9. Based in part upon the representations made in the Affiliate and
Shareholder Agreements, the shares of Acquiror Common Stock to be issued and
delivered in exchange for shares of Target Common Stock pursuant to the
Reorganization Agreement and the Merger Agreement will, when issued, be exempt
from registration under Section 5 of the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 4(2) of the Act.
103
Intraluminal Devices, Inc. October 16, 1996
Page 5
Whenever our opinion herein with respect to the existence or
absence of facts is indicated to be based upon our knowledge, such expression
means that in the course of our representation of Acquiror in connection with
the Merger nothing has come to our attention that would give us actual knowledge
of the existence or absence of such facts. We have undertaken no independent
factual investigation to determine the existence or absence of such facts.
With respect to the opinions set forth in the second, third
and fourth sentences of paragraph (2) as to the number of issued and outstanding
shares of Preferred Stock and Common Stock and that such shares have been
validly issued and are fully paid and nonassessable, and as to the number of
shares of Common Stock subject to outstanding options, we have: (i) relied,
without independent verification, on a certificate of the transfer agent and
registrar of Acquiror ("Transfer Agent") dated as of October 15, 1996 as to the
matters set forth therein, (ii) relied, without independent verification, on a
certificate of an officer of Acquiror, dated as of October 15, 1996 with respect
to certain of the factual matters set forth therein and (iii) reviewed
procedures used by Acquiror and the Transfer Agent when issuing or authorizing
the issuance of shares. We note, however, that we have not (x) reviewed
Acquiror's stock records, (y) verified procedures used by or obtained records
from Acquiror's Transfer Agent or (z) independently verified that each issued
and outstanding share of Common Stock has been fully paid.
This opinion relates solely to the laws of the State of
California and applicable federal laws of the United States, and we express no
opinion with respect to the effect or applicability of the laws of other
jurisdictions.
The opinions expressed herein are solely for your benefit in
connection with the above transactions and may not be relied upon in any manner
or for any purpose by any other person.
Very truly yours,
XXXXXXX, XXXXXXX & XXXXXXXX LLP
104
Intraluminal Devices, Inc. October 16, 1996
Page 6
Xxxxxxx, Phleger & Xxxxxxxx LLP Opinion
Doc. #0191699.02
Review Partner:
105
EXHIBIT H
TARGET'S LEGAL OPINION
_____________, 1996
CardioVascular Dynamics, Inc.
00000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel for Intraluminal Devices, Inc., a California
corporation ("Target"), in connection with the merger (the"Merger") of Target
with and into IDI Acquisition Corporation, a Delaware corporation ("Merger Sub")
and wholly-owned subsidiary of CardioVascular Dynamics, Inc., a Delaware
corporation ("Acquiror"), pursuant to the Agreement and Plan of Reorganization
by and among Acquiror, Target and Merger Sub, dated as of October 2, 1996 (the
"Reorganization Agreement"), and the Agreement of Merger between Acquiror,
Target and Merger Sub, dated as of ____________, 1996 (the "Merger Agreement").
This opinion is rendered to you pursuant to Section 6.4(e) of the Reorganization
Agreement. Capitalized terms used herein and not otherwise defined shall have
the same meaning given to such terms in the Reorganization Agreement.
We are of the opinion that:
1. Target is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, has the corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted, is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which it owns or leases real property
or in which the conduct of its business makes such qualification necessary and
in which the failure to so qualify would have a material adverse effect upon the
business, condition or properties of the Company;
2. The authorized capital stock of Target consists of ______________
shares of Common Stock, ___ par value, and _____________ shares of Preferred
Stock. At the close of business on __________ __, 1996, ___________ shares of
Common Stock were
106
CardioVascular Dynamics, Inc. ____________, 1996
Page 2
issued and outstanding, all of which have been duly authorized and are validly
issued, fully paid and nonassessable. On the close of business on ________ __,
1996, __________ shares of Common Stock were subject to issuance upon exercise
of outstanding options;
3. The Reorganization Agreement and the Merger Agreement have been
approved and adopted by the shareholders of Target; Target has full corporate
power and authority to execute, deliver, and perform its obligations under the
Reorganization Agreement and the Merger Agreement; Target has taken all
requisite corporate action to approve and adopt the Reorganization Agreement and
the Merger Agreement and to approve and to authorize the carrying out of the
transactions contemplated thereunder; and the Reorganization Agreement and the
Merger Agreement have been duly executed and delivered by Target and constitute
legal, valid and binding obligations of Target enforceable in accordance with
their terms; provided that enforceability of the indemnity obligations contained
in such agreements may be limited by public policy;
4. The execution, delivery and performance of the Reorganization
Agreement by Target, the execution and delivery of the Merger Agreement by
Target and the carrying out of the transactions contemplated by the
Reorganization Agreement and by the Merger Agreement to be carried out by Target
did not and will not conflict with or constitute a violation under the charter
documents of Target;
5. To our knowledge, no suit, action or legal, administrative,
arbitration or other proceeding or governmental investigation is pending or
threatened to which Target or any of its assets or properties is a party which
seeks to prohibit, restrain or enjoin the transactions contemplated by the
Reorganization Agreement or the Merger Agreement; and
6. There is no consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or
other governmental body (either foreign or domestic) required by Target or with
respect to its assets or properties or otherwise for the consummation of the
transactions contemplated by the Reorganization Agreement and the Merger
Agreement that has not been obtained, except for (i) such consents, approvals,
authorizations, registration or qualifications as may be required under state
securities or Blue Sky laws in connection with the offer and sale of Acquiror
Common Stock pursuant to the Merger, (ii) acceptance for filing of the Merger
Agreement together with any appropriate tax clearance certificate by the
California Secretary of State, (iii) acceptance for filing of the Merger
Agreement with the Delaware Secretary of State and (iv) the consents and filings
noted in the Reorganization Agreement and related documents.
107
CardioVascular Dynamics, Inc. ____________, 1996
Page 3
This opinion relates solely to the laws of the State of
California and applicable Federal laws of the United States, and we express no
opinion with respect to the effect or applicability of the laws of other
jurisdictions.
The opinions expressed herein are solely for your benefit in
connection with the above transactions and may not be relied upon in any manner
or for any purpose by any other person.
Sincerely,
HIGHAM, XXXXXXXXX & XXXXXXX
108
EXHIBIT I
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Agreement dated as of October 16, 1996 is entered into by and
between CardioVascular Dynamics, Inc. ("CVD") and Intraluminal Devices, Inc.
("IDI") (collectively referred to as the "Employer"), on the one hand, and
Xxxxxx XxXxxxxx ("Employee"), on the other hand.
ARTICLE I
Employment
1.1 Period. The Employer shall employ Employee and Employee shall
perform services for and continue in the employment of the Employer for the
period commencing on the date of the closing (the "Closing Date") of the merger
of CVD and IDI as defined in Section 1.2 of the Agreement and Plan of
Reorganization by and among CVD, IDI and IDI Acquisition Corporation, dated as
of October 2, 1996 and ending one (1) year after the Closing Date (the
"Employment Period") subject, however, to prior termination of employment by
Employer as set forth in Article III herein.
If the Closing Date of the acquisition by CVD of the stock of IDI does
not occur by on or before October 30, 1996, then this Agreement will be rendered
null and void.
1.2 Services.
(a) During such Employment Period, Employee shall serve as (i)
Project Consultant or (ii) in such other reasonable position as designated by
Employer. Employee shall perform all reasonable duties assigned by the Employer
relating to the commercialization of IDI's products (provided, that Employee
shall not be required to relocate his residence to perform such duties).
(b) Employee shall devote his entire attention and energies and his
best efforts, on a full-time basis, to the business and affairs of the Employer
and to the discharge of his duties, functions and responsibilities hereunder,
and will use his best efforts to promote the interests of the Employer.
(c) Nothing in this Section 1.2 shall be construed as preventing
Employee from investing his assets in such form or manner as is not prohibited
by Section 2.1 of this Agreement and as will not require: (1) any participation
on
109
Employee's part in the operation or the affairs of the enterprise or enterprises
in which such investments are made (other than serving as a non-employee
director) or (2) the rendering of any services by Employee to any such
enterprise (other than serving as a non-employee director). Employee shall
comply with all of the Employer's rules and regulations applicable to the
employees of the Employer and with all of the Employer's policies established by
its management and Board of Directors.
1.3 Compensation. During such Employment Period, the Employer will pay
to Employee a salary at the rate of $10,000.00 per month ("Base Pay"). The
Employer shall also provide to Employee such employee benefits provided to the
Employer's other employees.
ARTICLE II
Non-Competition
2.1 Non-Competition.
(a) The parties understand and agree that this Agreement is entered
into in connection with the acquisition by CVD of all of the outstanding stock
interest of IDI. The parties further understand and agree that Employee was a
substantial shareholder of IDI; a key and significant member of the management
of that Company; and that CVD paid Employee substantial consideration in order
to purchase Employee's stock interest in IDI. In addition, the parties agree
that prior to acquisition by CVD of the stock of IDI, that IDI was engaged in
its business in each of the fifty states of the United States. (This shall
hereafter be referred to as the "Geographic Scope of IDI's business.") The
parties further agree that CVD and IDI following the acquisition by CVD of the
stock of IDI will continue conducting such business in all parts of the
Geographic Scope of IDI's Business. As a result of the foregoing, the parties
expressly understand and agree that the non-competition provisions contained in
this Agreement are permissible and enforceable pursuant to the provisions of
California Business and Professions Code Section 16601.
(b) Employee agrees that during the term of his/her employment
pursuant to this Agreement, Employee will not engage in any other employment,
business, or activity unless Employee receives the Employer's prior written
approval to hold such outside employment or engage in such business or activity;
provided, however such written approval will not be required if such outside
employment, business, or activity would not in any way be competitive with the
business or proposed business of the Employer or otherwise conflict with or
adversely effect in any way Employee's performance of his or her employment
obligation to the Employer.
2.
110
(c) Commencing on the Closing Date and continuing until three years
after the Closing Date, Employee will not, as a principal or corporate officer
of any corporation, partnership or other entity:
(i) participate or engage in the business of developing
vascular and/or non-vascular stents or stent-graft devices (the
"Business") in the United States;
(ii) induce or attempt to induce any person who at the time of
such inducement is an employee of CVD to perform work or services
for any other person or entity other than Employer;
(iii) permit the name of Employee to be used in connection with
a competitive business as reasonably determined by CVD.
Notwithstanding the foregoing, Employee may own, directly or
indirectly, solely as an investment, up to one percent (1%) of any class of
"publicly traded securities" of any person or entity which owns a competitive
Business. For the purposes of this Section 2.1, the term "publicly traded
securities" shall mean securities that are traded on a national securities
exchange or listed on the National Association of Securities Dealers Automated
Quotation System.
2.2 Savings Clause. If any restriction set forth in Section 2.1 above
is held to be unreasonable, then Employee agrees, and hereby submits, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
ARTICLE III
Termination of Employment
3.1 Death. In the event of Employee's death during the term of this
Agreement, the Employer shall pay to Employee's estate any salary accrued but
unpaid as of the date of death. Upon payment of the aforementioned sum, the
Employer's obligations to make further salary payments or provide further
employee benefits shall terminate. This provision shall not be construed to
negate any rights Employee may have to death benefits under any employee benefit
or welfare plan of the Employer in which Employee may from time to time be a
participant or under any other written agreement with the Employer which
specifically provides for such death benefits.
3.2 Other Termination. Employee's employment hereunder may be
terminated by Employer at any time for any reason, with or without cause or
advance notice by delivering to Employee written notice of such termination. If
such written notice is given within one year of the Closing Date and is a
termination without "Cause",
3.
111
as that term is defined below, then the notice must be signed and approved by
Xxxxxxx X. Xxxxxx, or his successor. Any notice of termination in any other
circumstances need only be signed by CVD's Vice President of Human Resources or
any other company Vice President.
(a) If Employer terminates Employee's employment without Cause within
one year of the Closing Date, then Employer will continue to pay Employee's Base
Salary, less all applicable deductions, on a monthly basis until twelve (12)
months following the Closing Date and; (ii) continue medical insurance coverage
pursuant to COBRA for such period of time. Except as provided herein, all other
benefits, including vesting of stock, will terminate with the effective date of
termination of Employee's employment.
(b) The Employer's obligation to pay salary, benefits, and other
compensation to Employee shall terminate on the effective date of any
termination of Employee's employment for Cause. For the purposes of this
Agreement, "Cause" shall mean (i) the Employee's failure to perform his duties
within 30 days after receipt of a written warning; (ii) the Employee's engaging
in misconduct; (iii) the Employee's being convicted of a felony; (iv) the
Employee's committing an act of fraud against, or the misappropriation of
property belonging to, the Employer; or (v) the Employee's breach of this
Employment Agreement or any confidentiality or proprietary information agreement
between the Employee and the Employer. In such circumstances, Employer will not
be obligated to pay any severance.
(c) Except as provided in Section 3.2(a), the Employer's obligation to
pay salary, benefits, and other compensation to Employee shall terminate on the
termination of the Employment Period. In such circumstances, Employer will not
be obligated to pay any severance.
(d) Employee acknowledges that the services that he will provide to
Employer under this Agreement are unique and that irreparable harm will be
suffered by the Employer in the event of the breach by Employee of any of his or
her obligations under this Paragraph and Paragraph 2.1, and that the Employer
will be entitled, in addition to its other rights, to enforce by an injunction
or decree of specific performance the obligations set forth in said Paragraphs.
Any claims asserted by Employee against the Employer shall not constitute a
defense in any injunction action brought by the Employer to obtain specific
enforcement of said Paragraphs. In lieu of any other claims for damages that may
be asserted by Employer hereunder with respect to Employee's resignation prior
to the one year period noted in Section 1.1, Employee agrees to pay $20,000 as
liquidated damages to Employer if he resigns within 120 days of the date the
Employment Period commences (it being understood by the parties hereto that such
resignation would deprive Employer of the benefit of its bargain and would cause
it irreparable harm). After the 120 day period noted in the preceding sentence,
Employee may resign without reimbursing CVD for any damages incurred with
respect to
4.
112
Employee's resignation prior to the one year period noted in Section 1.1,
provided, that, upon the effective date of such resignation, Employee shall be
entitled to no further salary or benefits from CVD irrespective of whether
payment of such benefits may otherwise be required pursuant to applicable law
and Employee waives all claims to such further salary or benefits and will
execute such documents as are reasonably required by CVD to effectuate such
waiver.
ARTICLE IV
Miscellaneous
4.1 Successors, Assigns, Merger. This Agreement shall be binding upon
and shall inure to the benefit of the Employer and its successors and assigns.
This Agreement shall be binding upon Employee and shall inure to his benefit and
to the benefit of his heirs, executors, administrators and legal
representatives, but shall not be assignable by Employee.
4.2 Entire Agreement. This Agreement constitutes the entire agreement
between the Employer and Employee relating to his employment and the additional
matters herein provided for. This Agreement supersedes and replaces any prior
verbal or written agreements between the parties except for provided herein.
This Agreement may be amended or altered only in a writing signed by the
President of CVD and Employee.
4.3 Applicable Law; Severability. This Agreement is executed by both
parties in the State of California and shall be construed and interpreted in
accordance with the laws of that state. Each provision of this Agreement is
severable from the others, and if any provision hereof shall be to any extent
unenforceable it and the other provisions hereof shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this Agreement.
4.4 Survival. In the event of termination of Employee's employment
hereunder for Cause, the obligations contained in Article II of this Agreement
shall survive the termination of Employee's employment under this Agreement as
contemplated herein.
4.5 Arbitration. Employee agrees that any and all disputes that
Employee has with the Employer or any of its employees, which arise out of
Employee's employment, the termination of employment, or otherwise under the
terms of this Agreement, (except for any claim arising out of or relating to
Paragraph 2.1 of this Agreement or the breach of that Paragraph for which the
Employer may pursue injunctive relief in state or federal court located in
Orange County), shall be resolved through final and binding arbitration. This
shall include, without limitation, disputes
5.
113
relating to this Agreement, any disputes regarding Employee's employment by the
Employer or the termination thereof, claims for breach of contract or breach of
the covenant of good faith and fair dealing, and any claims of discrimination or
other claims under any federal, state or local law or regulation now in
existence or hereinafter enacted and as amended from time to time concerning in
any way the subject of Employee's employment with the Employer or its
termination. The only claims not covered by this Section 4.5 are claims for
benefits under the workers' compensation laws or unemployment insurance laws or
claims under paragraph 2.1 of this Agreement. Binding arbitration will be
conducted in Orange County, California in accordance with the rules and
regulations of the American Arbitration Association. Each party will split the
cost of the arbitration filing and hearing fees, and the cost of the arbitrator;
each side will bear its own attorneys' fees, unless otherwise decided by the
arbitrator. Employee understands and agrees that the arbitration shall be
instead of any civil litigation, that he or she will not be entitled to a jury
trial in any such providing, and that the arbitrator's decision shall be final
and binding to the fullest extent permitted by law and enforceable by any court
having jurisdiction thereof.
Dated: ________ __, 1996. CARDIOVASCULAR DYNAMICS, INC.
By:
Its:
Dated: ________ __, 1996. INTRALUMINAL DEVICES, INC.
By:
Its:
Dated: ________ __, 1996. EMPLOYEE
6.
