AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is entered into
as of December 31, 2001 by and among SPECTRX, INC., a Delaware corporation
("Parent"), SM MERGER SUB, INC., a Delaware corporation ("Sub"), STERLING
MEDIVATIONS, INC., a Delaware corporation (the "Company"), and, to the extent
provided expressly herein, certain stockholders of the Company whose names
appear on the signature pages of this Agreement , (the "Major Stockholders").
Parent, Sub, Company and Major Stockholders are referred to collectively as the
"Parties." Sub and the Company are sometimes collectively referred to as the
"Constituent Corporations."
W I T N E S S E T H:
WHEREAS, Sub is a wholly-owned subsidiary of Parent; and
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved this Agreement and deem it advisable and in the best interests of each
corporation and its respective stockholders to enter into this Agreement and the
other agreements contemplated herein and consummate the transactions
contemplated hereby and thereby;
WHEREAS, the holders of the Company Stock (the "Stockholders") have
approved the transactions contemplated by this Agreement; and
WHEREAS, the Company has appointed Xxxx Xxxxxxx and Xxxx Xxxxxxx (the
"Stockholder Representatives") to represent the Stockholders relative to an
Escrow Agreement and certain other matters, as further described herein;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the terms set forth in this Article 1 shall have the
meanings set forth therein unless the context otherwise requires and such terms
shall be equally applicable to the singular and plural terms defined.
"Accounting Firm" has the meaning set forth in Section 2.5(b) hereof.
"Accredited Investor" has the meaning and qualifications set forth in
Regulation D promulgated under the Securities Act.
"Additional Amount" means the excess of the Preliminary Current Items
over the Preliminary Unpaid Deal Expenses, but in no event shall exceed
$615,365.
"Adverse Proposal" has the meaning set forth in Section 6.13(a) hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Aggregate Common Stockholders Percentage Interest" has the meaning set
forth in Section 2.2(c)(i) hereof.
"Aggregate Optionees Percentage Interest" has the meaning set forth in
Section 2.2(c)(ii) hereof.
"Aggregate Preferred Stockholders Percentage Interest" has the meaning
set forth in Section 2.2(c)(i) hereof.
"Aggregate Stockholders Percentage Interest" has the meaning set forth
in Section 2.8(b) hereof.
"Agreement" has the meaning set forth in the preface above.
"Associate" used to indicate a relationship with any Person means: (i)
any corporation, partnership, joint venture or other entity of which such Person
is an officer or partner or is, directly or indirectly, through one or more
intermediaries, the beneficial owner of thirty percent (30%) or more of: (1) any
class or type of equity securities or other profits interest; or (2) the
combined voting power of interests ordinarily entitled to vote for management or
otherwise; and (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity.
"Assumed Option" has the meaning set forth in Section 2.2(c)(ii)
hereof.
"Audited Financial Statements" has the meaning set forth in Section 3.4
hereof.
"Benefit Arrangement" shall mean any employment, severance or similar
contract, or any other contract, plan, policy or arrangement (whether or not
written) providing for compensation, bonus, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including without limitation self-insured
arrangement), health or medical benefits, disability benefits, severance
benefits and post-employment or retirement benefits (including without
limitation compensation, pension, health, medical or life insurance benefits),
other than the Employee Benefit Plans, that is maintained, administered or
contributed to by the employer and covers any employee or former employee of the
employer.
"Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under federal law or on which banks are generally
closed in Atlanta, Georgia.
"Cash Budget" has the meaning set forth in Section 6.10(a) hereof.
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"Cash Flow" for any period is defined as the aggregate of cash flows
provided by/used in operations activities and cash flows provided by/used in
investing activities, as taken directly from the statement of cash flows for the
Product Line, subject to an adjustment to limit the amount of cash flows
provided by/used in accounts receivable to a maximum of 30 days' sales, prepared
on a stand-alone basis in accordance with GAAP consistently applied.
"Certificate of Merger" has the meaning set forth in Section 2.1(c)(ii)
hereof.
"Claims" shall mean any and all claims, demands, complaints, suits,
proceedings, actions or causes of action of any kind or character whatsoever,
known or unknown, fixed or contingent, suspected or unsuspected, direct or
indirect, however arising, whether at law or in equity, or pursuant to
administrative rule or regulation or otherwise.
"Closing" has the meaning set forth in Section 2.1(c)(i) hereof.
"Closing Date" has the meaning set forth in Section 2.1(c) (i) hereof.
"Closing Date Balance Sheet" has the meaning set forth in Section
2.5(a) hereof.
"Closing Date Deadline" has the meaning set forth in Section 9.1(b)
hereof.
"Closing Date Current Items" has the meaning set forth in Section
2.5(a) hereof.
"Closing Date Unpaid Deal Expenses" has the meaning set forth in
Section 2.5(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Agreement" has the meaning set forth in Section 3.14 hereof.
"Company Common Stock" means the $0.001 par value authorized shares of
common stock of the Company.
"Company Financial Statements" has the meaning set forth in Section 3.5
hereof.
"Company Preferred Stock" means the $0.001 par value authorized shares
of series A convertible preferred stock of the Company.
"Company Stock" means the Company Common Stock and the Company
Preferred Stock.
"Confidential Information" means all information concerning a given
Party obtained by another Party in connection with the transactions contemplated
by this Agreement, including, without limitation, ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, business and
marketing plans and proposals, information relating to sales records, profit and
performance reports, sales and training manuals, selling and pricing procedures,
financing methods, the special demands of
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particular customers, the current and anticipated demands of particular
customers, specifications of any new products or services under development, and
any other such information treated by the Party providing the Confidential
Information as being confidential or labeled "Confidential," as well as all
physical embodiments of any of the foregoing, except information (i)
ascertainable or obtained from public information; (ii) received from a third
party not employed by or otherwise affiliated with the Party providing such
Confidential Information; or (iii) which is or becomes known to the public other
than through a breach by the receiving Party any of the receiving Party's
representatives of this Agreement.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any Person, including but not limited to any Governmental Authority.
"Consideration" has the meaning set forth in Section 2.2(c) hereof and
consists of the Entire Stockholder Consideration and the Option Shares.
"Constituent Corporations" has the meaning set forth in the preface
above.
"Controlled Group of Corporations" has the meaning set forth in Code
ss.1563.
"Cumulative Cash Funding" has the meaning set forth in Section 6.12(d).
"Deal Expenses" has the meaning set forth in Section 12.1 hereof.
"Delivery Market Value" with respect to shares of Parent Common Stock,
means the average closing price for the fifteen (15) days prior to Parent's
delivery of the Earnout Shares on which Parent Common Stock is traded on the
Nasdaq National Market.
"Earnout Shares" has the meaning set forth in Section 2.2(c)(i) hereof.
"Effective Time" has the meaning set forth in Section 2.1(c)(ii)
hereof.
"Employee Benefit Plan" means any plan or arrangement as defined in
Section 3(3) of ERISA, that (a) is subject to any provision of ERISA, (b) is
maintained, administered or contributed to by the employer and (c) covers any
employee or former employee of the employer.
"Employee Covenants Agreement" has the meaning set forth in Section 7.8
hereof.
"Employment Agreement" has the meaning set forth in Section 7.7 hereof.
"Employment and Labor Agreement" has the meaning set forth in Section
3.15 hereof.
"Entire Stockholder Consideration" has the meaning set forth in Section
2.3(a) hereof.
"Environmental, Health and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all
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judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" has the meaning set forth in Section 2.3(a)hereof.
"Escrow Shares" has the meaning set forth in Section 2.3(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" has the meaning set forth in the Escrow Agreement
as in effect on the Closing Date.
"FDA" means the United States Food and Drug Administration.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Final Addition" has the meaning set forth in Section 2.6(b) hereof.
"Final Deficiency" has the meaning set forth in Section 2.6(a) hereof.
"Final Determination" has the meaning set forth in Section 2.5(c)
hereof.
"Final Excess" has the meaning set forth in Section 2.6(b) hereof.
"Final Reduction" has the meaning set forth in Section 2.6(a) hereof.
"GAAP" means accounting principles generally accepted in the United
States as in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative function of or pertaining to
government, including without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof, and any tribunal or
arbitrator of competent jurisdiction and any self-regulatory organization.
"Governmental Approval" means any Consent of, with or to any
Governmental Authority.
"Gross Shares" shall mean the total number of shares of Parent Common
Stock other than Earnout Shares into which the Company Preferred Stock and the
Company Common Stock
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are converted into the right to receive pursuant to Section 2.2(c)(i) hereof,
which number shall be adjusted if between the date hereof and the Effective
Time, the outstanding shares of Parent Common Stock shall have been changed into
a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock combination,
exchange of shares, readjustment or otherwise.
"Hazardous Substance" means, without limitation, oil and other
petroleum products, explosives, radioactive materials and related and similar
materials, and any other substance or material defined as a hazardous, toxic or
polluting substance or material by any federal, state or local law, ordinance,
rule or regulation, including asbestos and asbestos-containing materials.
"Improvements" has the meaning set forth in Section 3.8(a) hereof.
"Individual Optionee's Percentage Interest" has the meaning set forth
in Section 2.2(c)(ii)(x) hereof.
"Individual Stockholder's Percentage Interest" has the meaning set
forth in Section 2.2(c)(i).
"Initial Products" means the Company's currently anticipated initial
product line consisting of soft and QD catheters.
"Insider" shall mean the Stockholders, any director or officer of the
Company, and any Affiliate, Associate or Relative of any of the foregoing
persons.
"Intellectual Property Rights" means all rights used by the Company in
any of the following: all domestic and foreign trademarks, logotypes, service
marks, certification marks, trade names, assumed names, and all other
indications of origin and the goodwill associated with the foregoing, together
with all applications and registrations for any of the foregoing: all copyrights
and registrations and applications therefor; all patents and patent
applications, including any extension, modification, renewal, reissue, division,
continuation or continuation in part thereof; all inventions, discoveries and
ideas, whether patentable or not; all Internet domain names; all customer lists,
supplier lists, technical expertise, applications, production methods, know-how,
formulas, processes, designs, proprietary information, trade secrets,
confidential information and other similar intangible assets.
"IRS" shall mean the Internal Revenue Service.
"Judgment" has the meaning set forth in Section 3.7 hereof.
"Leased Real Property" has the meaning set forth in Section 3.8(b)
hereof.
"Legal Requirements" means all laws, ordinances, codes, rules,
regulations, standards, judgments and other requirements of all governmental,
administrative or judicial entities.
"Licenses" shall mean all franchises and any amendments thereto, new or
renewal franchise applications, authorizations ordinances, permits, licenses,
certificates, variances,
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exemptions, sublicenses, consents, orders, approvals (including approvals of
tariffs and rate schedules), applications and agreements and similar documents
from Governmental Authorities .
"Liens" shall mean any mortgages, pledges, title defects or objections,
liens, claims, security interests, conditions and installment sale agreements,
encumbrances or charges of any kind.
"Liquidation Preference Shares" shall mean that number of shares of
Parent Common Stock equal to a fraction, the numerator of which is the number of
all outstanding shares of Company Preferred Stock multiplied by one dollar
($1.00) and the denominator of which is $7.29.
"Losses" has the meaning set forth in Section 10.1(b) hereof.
"Market Value" with respect to shares of Parent Common Stock, means the
average closing price for the fifteen (15) days prior to Closing on which Parent
Common Stock is traded on the Nasdaq National Market.
"Material Adverse Effect" means any change or effect that is materially
adverse to the business, assets, results of operations or financial condition of
the Company, taken as a whole.
"Major Stockholders" has the meaning set forth in the preface hereto.
"Major Stockholders Shares" has the meaning set forth in Section
6.13(a) hereof.
"Merger" has the meaning set forth in Section 2.1(a) hereof.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"NLRB" has the meaning set forth in Section 3.15(c) hereof.
"Option Earnout Shares" has the meaning set forth in Section 2.8(b)
hereof.
"Option Shares" has the meaning set forth in Section 2.2(c)(ii) hereof.
"Optionee" means a holder of a Stock Option.
"Optionee's Percentage Interest" has the meaning set forth in Section
2.2(c)(ii)(x) hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including quantity and frequency).
"Parent" has the meaning set forth in the preface above.
"Parent Common Stock" has the meaning set forth in Section 2.2(c)(i)
hereof.
"Parent Preferred Stock" has the meaning set forth in Section 5.5(a).
"Party" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations.
"Permitted Liens" means: (a) Liens reserved against in the Company's
2000 Balance Sheet, to the extent so reserved; (b) Liens for Taxes not yet due
and payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
Company's books in accordance with GAAP; or (c) Liens arising as a matter of law
in the Ordinary Course of Business, that, individually and in the aggregate, do
not and would not materially detract from the value of any of the property or
assets of the Company or materially interfere with the use thereof as currently
used or contemplated to be used.
"Person" means and includes any individual, corporation, limited
liability company, partnership, joint venture, association, trust, any other
incorporated or unincorporated organization or entity and any Governmental
Authority or any department or agency thereto.
"Preliminary Closing Date Balance Sheet" has the meaning set forth in
Section 2.4 hereof.
"Preliminary Current Items" has the meaning set forth in Section 2.4
hereof.
"Preliminary Unpaid Deal Expenses" has the meaning set forth in Section
2.4 hereof.
"Product Line" means the Company's diabetes products developed,
currently under development and all derivations thereto for insulin treatment
and glucose monitoring.
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Purchaser Representative" has the meaning and qualifications set forth
in Regulation D promulgated under the Securities Act.
"Reconciled Amount" means the excess of the Closing Date Current Items
over the Closing Date Unpaid Deal Expenses, as each item is specified in the
Final Determination.
"Reconciliation Statement" has the meaning set forth in Section 2.5(a)
hereof.
"Relative" of a Person means such Person's spouse, parents, sisters,
brothers, children and the spouses of the foregoing, and any member of the
immediate household of such Person.
"Remaining Consideration" shall mean the total number of Gross Shares,
less the number of Liquidation Preference Shares.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"SEC" means the United States Securities and Exchange Commission.
"SEC Reports" means each registration statement, schedule, report,
proxy statement or information statement Parent has filed with the SEC since
December 31, 2000, including without
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limitation, Parent's Quarterly Reports on Form 10-Q for the quarters ended March
31, 2001, June 30, 2001 and September 30, 2001, Parent's Annual Report on Form
10-K for the year ended December 31, 2000, the definitive proxy statement for
Parent's 2001 annual meeting of stockholders, the definitive proxy statement for
Parent's special meeting held on August 30, 2001 and any Current Reports on Form
8-K (as such documents have since the time of their filing been amended or
supplemented).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller's Covenants Not to Compete" has the meaning set forth in
Section 7.8 hereof.
"Scheduled Claims" has the meaning set forth in Section 3.8 hereof.
"Stock Agreement" means any and all stock restriction agreements,
buy/sell agreements, stockholder agreements, registration rights agreements or
other similar agreements of or pertaining to the Company's capital stock or
corporate governance, including, without limitation the following agreements:
Stock Restriction Agreement between Sterling Medivations, Inc. and Xxxx Xxxxxxx
dated June 28, 2000; Stock Restriction Agreement between Sterling Medivations,
Inc. and Xxxxx Xxxxxxx dated June 28, 2000, as amended June 28, 2001; Stock
Restriction Agreement between Sterling Medivations, Inc. and Xxxxxx Xxxx dated
June 28, 2000; Sterling Medivations, Inc. Purchase Agreement for Shares of
Series A Convertible Preferred Stock between Sterling Medivations, Inc. and the
Purchasers listed on Schedule I thereto, dated July 7, 2000.
"Stock Option" has the meaning set forth in Section 2.2(c)(ii) hereof.
"Stockholder Earnout Shares" has the meaning set forth in Section
2.8(b) hereof.
"Stockholder Minimum Aggregate Liability Amount" has the meaning set
forth in Section 10.3 hereof.
"Stockholder Representatives" has the meaning set forth in the preface
above.
"Stockholders" has the meaning set forth in the preface above.
"Sub" has the meaning set forth in the preface above.
"Subsidiary" means any Person with respect to which a specified Person
(or a Subsidiary) owns a majority of the common stock or other voting ownership
interests sufficient to elect a majority of the directors or other governing
body. "Subsidiaries" shall mean more than one Subsidiary.
"Surviving Corporation" has the meaning set forth in Section 2.1(a)
hereof.
"Termination Agreements" has the meaning set forth in Section 6.8
hereof.
"Trademarks" has the meaning set forth in Section 3.21(a) hereof.
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"Transaction Documents" means this Agreement and the Escrow Agreement.
"Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property (including
property taxes paid by the Company pursuant to any lease), personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"2000 Balance Sheet" has the meaning set forth in Section 3.5 hereof.
"Unaudited Financial Statements" has the meaning set forth in Section
3.5 hereof.
ARTICLE 2
MERGER; ADJUSTMENTS
2.1 The Merger.
(a) Merger of the Sub Into Company. Upon the terms and conditions set
forth in this Agreement, at the Effective Time, Sub shall be merged with and
into the Company, and the separate existence of Sub shall cease (the "Merger").
The Company shall continue as the surviving corporation of said Merger (the
"Surviving Corporation").
(b) Effect of Merger. The Merger shall have the effect set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law.
(c) Closing; Effective Time.
(i) Subject to the conditions set forth in this Agreement, the
consummation of the Merger and the other transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Xxxxx, Day, Xxxxxx & Xxxxx, 3500 SunTrust Plaza, 000 Xxxxxxxxx Xxxxxx,
X.X., Xxxxxxx, Xxxxxxx 00000, on the later to occur of (i) the first
Business Day succeeding the date that approval of the Stockholders is
obtained in compliance with Section 6.14 hereof, or (ii) the seventh
(7th) day (or the following Business Day if the seventh day is not a
Business Day) succeeding the distribution to Stockholders (by overnight
courier) of the information referred to in Section 6.12(b) hereof, or
on such later date upon which all conditions to Closing have been
satisfied (or waived to the extent not satisfied) if any such
conditions are not satisfied on such date specified (the "Closing
Date"). By way of example, if the information referred to in Section
6.12(b) is sent by overnight courier on December 14, 2001 for delivery
on December 15, 2001, then the Closing shall take place on December 21,
2001 so
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long as all conditions to Closing have been satisfied (or waived to the
extent not satisfied) if any such conditions are not satisfied on such
date.
(ii) Subject to the provisions of this Agreement, a
certificate of merger (the "Certificate of Merger") shall be duly
prepared and executed in accordance with the Delaware General
Corporation Law and delivered on the Closing Date to the Delaware
Secretary of State for filing. The Merger shall become effective upon
the date and time of the filing of the Certificate of Merger with the
Delaware Secretary of State, or such other date and time as Parent and
the Company shall agree and specify in such Certificate of Merger (the
"Effective Time").
(d) Certificate of Incorporation and Bylaws; Directors and Officers.
Upon the Effective Time:
(i) the Certificate of Incorporation of the Surviving
Corporation shall be amended to be substantially identical to the
Certificate of Incorporation of Sub, except the name of the Surviving
Corporation shall continue to be "Sterling Medivations, Inc.";
(ii) the Bylaws of the Surviving Corporation shall be amended
to be substantially identical to the Bylaws of Sub; and
(iii) the directors of Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall
be the officers of the Surviving Corporation (unless otherwise
designated by the Board of Directors of Sub prior to the Effective
Time), each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and
qualified.
2.2 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the Constituent Corporations or
the holder of any shares of capital stock of the Constituent Corporations:
(a) Capital Stock of Sub. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully
paid and nonassessable share of common stock, par value $0.001, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Stock that are owned by the Company as treasury stock
and any shares of Company Stock owned by Parent, Sub or any other
wholly owned subsidiary of Parent shall be canceled and retired and
shall cease to exist, and no stock of Parent or other consideration
shall be delivered in exchange therefor.
(c) Determination of Consideration. Parent shall initially pay
to the Stockholders and allocate for issuance to Optionees as provided
herein an aggregate of 566,296 shares of common stock, par value $0.001
per share, of Parent ("Parent Common Stock"), plus that number of
shares of Parent Common Stock obtained by dividing the Additional
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Amount by $7.29, rounded to the closest whole share (the
"Consideration"), which shall constitute the initial Consideration.
Such Consideration shall be paid or allocated as follows:
(i) All outstanding shares of Company Preferred Stock
shall be converted into the right to receive that number of
shares of Parent Common Stock equal to (x) the Liquidation
Preference Shares plus (y) the product of (a) the Remaining
Consideration multiplied by (b) that portion of the aggregate
Stockholders' percentage interest in the Remaining
Consideration and any Earnout Shares (as defined below)
allocated to holders of Company Preferred Stock (the
"Aggregate Preferred Stockholders Percentage Interest") as set
forth in Exhibit A, plus (z) the right to receive additional
shares of Parent Common Stock (the "Earnout Shares") upon the
terms and conditions specified in Section 2.8 hereof. All
outstanding shares of Company Common Stock shall be converted
into the right to receive that number of shares of Parent
Common Stock equal to (x) the product of (a) the Remaining
Consideration multiplied by (b) that portion of the aggregate
Stockholders' percentage interest in the Remaining
Consideration and any Earnout Shares (the "Aggregate Common
Stockholders Percentage Interest") that is allocated to
Company Common Stockholders as set forth in Exhibit A, plus
(y) the right to receive Earnout Shares as set forth in
Section 2.8 hereof. Subject to Sections 2.3, 2.6, 2.7 and 2.8
and Article 10, each holder of Company Preferred Stock shall
be entitled to that number of shares of Parent Common Stock
issued as Gross Shares represented by such holder's percentage
interest in the Liquidation Preference Shares as specified on
Exhibit A, in addition to any shares of Parent Common Stock
allocated to such holder pursuant to the next succeeding
sentence. Subject to Sections 2.3, 2.6, 2.7 and 2.8 and
Article 10, and after the allocation of the Liquidation
Preference Shares to the holders of Company Preferred Stock,
each Stockholder shall be entitled to that number of shares of
Parent Common Stock issued as Gross Shares represented by such
Stockholder's percentage interest in the Remaining
Consideration and any Earnout Shares as set forth on Exhibit A
(the "Individual Stockholder's Percentage Interest") and such
Individual Stockholder's Percentage Interest in the
Stockholder Earnout Shares.
(ii) Parent shall assume, effective at the Effective
Time, the Sterling Medivations, Inc. 2000 Stock Incentive Plan
and each unexercised option to purchase shares of Company
Common Stock (each, a "Stock Option") outstanding thereunder
which is listed on Exhibit A, and shall substitute that number
of shares of Parent Common Stock (the "Option Shares") equal
to the product of the Remaining Consideration and the
aggregate Optionees' interest in the Remaining Consideration
as specified on Exhibit A (the "Aggregate Optionees Percentage
Interest"), as well as the right to receive Earnout Shares
upon the terms and conditions specified in Section 2.8, for
the shares of the Company Common Stock purchasable under each
such assumed option (each, an "Assumed Option") as specified
in clauses (x), (y) and (z) below:
(x) The assumption and substitution shall be effected
as follows:
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(A) the Assumed Option shall not give the
Optionee additional benefits which such Optionee did
not have under the Stock Option before such
assumption and shall be assumed on the same terms and
conditions as the Stock Option being assumed, subject
to subclauses (B) and (C) below;
(B) subject to Sections 2.3, 2.6 and 2.8,
the number of shares of Parent Common Stock
purchasable as Option Shares under each Assumed
Option shall be equal to the number of shares of
Parent Common Stock represented by such Optionee's
percentage interest in the Option Shares as specified
on Exhibit A (the "Individual Optionee's Percentage
Interest") and such Optionee's Individual Optionee's
Percentage Interest in the Option Earnout Shares; and
(C) the aggregate exercise price of each
such Assumed Option shall remain unchanged but shall
be payable upon exercise thereof to Parent.
(y) It is the intention of the parties that, to the
extent that any such Stock Option constituted an "incentive
stock option" (within the meaning of Section 422 of the Code)
immediately prior to the Effective Time, such Assumed Option
shall continue to qualify as an incentive stock option to the
maximum extent permitted by Section 422 of the Code, and that
the assumption of the Stock Options provided by this Section
2.2(c)(ii) satisfy the conditions of Section 424(a) of the
Code.
(z) The number of Option Shares initially allocated
for Assumed Options shall be adjusted if between the date
hereof and the Effective Time, the outstanding shares of
Parent Common Stock shall have been changed into a different
number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend,
stock combination, exchange of shares, readjustment or
otherwise.
2.3 Deliveries at Closing.
(a) Delivery of Certificates. At the Closing, Parent shall
deposit certificates for all of the Gross Shares (subject to reduction
pursuant to Section 2.3(d) hereof) (the "Escrow Shares") with SunTrust
Bank, N.A., or with another escrow agent reasonably satisfactory to the
Stockholder Representatives, to be held and disbursed by that escrow
agent in accordance with the escrow agreement attached as Exhibit B
(the "Escrow Agreement") (the consideration above is defined as the
"Entire Stockholder Consideration"). The amount of cash and number of
Escrow Shares to be issued to each former holder of Company Common
Stock following the release of such Escrow Shares from escrow will be
determined by the Stockholder Representatives in accordance with the
Individual Stockholder's Percentage Interest for such Stockholder.
Parent shall deliver cash in an amount sufficient for payments in lieu
of fractional shares, as contemplated by Section 2.3(d) hereof, to each
Stockholder entitled thereto.
13
(b) Other Deliveries. At the Closing, the Company shall
deliver, or cause to be delivered, to the Parent the following:
(i) a certificate by an officer of the Company
stating that the execution, delivery and performance of this
Agreement and the Transaction Documents to which it is a party
and the consummation of the transactions contemplated hereby
and thereby have been fully authorized by all necessary
corporate action, including action of the stockholders and of
the board of directors of the Company, to which certificate
are attached copies of resolutions constituting such required
corporation action, and a certificate of incumbency for the
officers of the Company;
(ii) the certificate of an officer of the Company
referenced in Section 7.1 hereof;
(iii) the corporate minute book, stock ledger and all
other original and duplicate corporate records of the Company;
(iv) a copy of the certificate of incorporation of
the Company, including all amendments thereto, certified by
the Delaware Secretary of State, and a copy of the bylaws of
the Company, including all amendments, certified by an officer
of the Company;
(v) certificates of good standing with respect to the
Company, provided by each of the Delaware, Minnesota and
California Secretaries of State; and
(vi) an opinion of Xxxxxx & Xxxxxxx, counsel to the
Company, in the form attached hereto as Exhibit D.
(c) No Further Ownership Rights in Company Stock. At the
Effective Time, certificates which formerly represented shares of
Company Stock shall represent only the right to receive pursuant to the
Escrow Agreement a distribution of the Entire Stockholder
Consideration, or the proceeds thereof, in accordance with and subject
to the terms and conditions thereof, and the right to receive Earnout
Shares pursuant to the terms of Section 2.8 hereof. There shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Stock that were
outstanding immediately prior to the Effective Time.
(d) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued
pursuant to the Merger, and such fractional share interests will not
entitle the owner thereof to vote or to any rights as a stockholder of
Parent. Parent shall deliver to each Stockholder who would otherwise
have been entitled to receive in the Merger a fraction of a Gross
Share, cash (without interest) in an amount equal to such fractional
part of a Gross Share multiplied by $7.29 in lieu of any such
fractional share otherwise deliverable to such Stockholder as a Gross
Share. Parent shall deliver to each Stockholder who would otherwise
have been entitled to receive a fraction of an Earnout Share, cash
(without interest) in an amount equal to such fractional
14
part of an Earnout Share multiplied by $7.29 in lieu of such fractional
share otherwise deliverable to such Stockholder as an Earnout Share.
(e) Stock Legends. The shares of Parent Common Stock to be
issued in the Merger shall be characterized as "restricted securities"
under the Securities Act and shall be subject to the Transfer
Restrictions set forth in Section 6.11. Each certificate representing
any of such shares of Parent Common Stock shall bear a legend identical
or similar in effect to the following legend (together with any other
legend or legends required by applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
LIMITATIONS ON TRANSFER IMPOSED BY THAT CERTAIN AGREEMENT AND
PLAN OF MERGER, DATED AS OF DECEMBER 31, 2001, AMONG SPECTRX,
INC., STERLING MEDIVATIONS, INC., AND OTHER PARTIES SPECIFIED
THEREIN. ANY ATTEMPTED TRANSFER IN VIOLATION OF SUCH
PROVISIONS SHALL BE OF NO FORCE AND EFFECT.
2.4 Preliminary Closing Date Balance Sheet. No later than ten (10) days
prior to the Closing Date, the Company shall prepare and deliver to Parent an
unaudited consolidated balance sheet for the Company, prepared in good faith,
estimated as of the Closing, pro forma as to, and giving effect to, any
transactions or operations previously occurring or anticipated to occur
subsequent to its preparation and on or before the Closing ("Preliminary Closing
Date Balance Sheet"), subject to the right of Parent to make a good faith
objection thereto, delivered no later than five (5) days prior to the Closing.
Concurrently with delivery of the Preliminary Closing Date Balance Sheet, the
Company shall deliver to Parent a statement setting forth a calculation, based
on the Preliminary Closing Date Balance Sheet, of the Company's cash and
inventory balances estimated as of the Closing Date (the "Preliminary Current
Items") and the Company's Deal Expenses estimated to be unpaid as of the Closing
Date (the "Preliminary Unpaid Deal Expenses").
2.5 Closing Date Balance Sheet.
(a) Company Calculations. As promptly as practicable, but no
later than ninety (90) days after the Closing Date, Parent shall
prepare and deliver to the Stockholder Representatives an unaudited
consolidated balance sheet of the Company as of the
15
Closing Date (the "Closing Date Balance Sheet"). The Closing Date
Balance Sheet shall be prepared in accordance with GAAP based upon the
books and records of the Company. Concurrently with delivery of the
Closing Date Balance Sheet, Parent shall deliver to the Stockholder
Representatives a statement (the "Reconciliation Statement") setting
forth a calculation, based on the Closing Date Balance Sheet, of the
Company's cash and inventory balances as of the Closing Date (the
"Closing Date Current Items") and the Company's unpaid Deal Expenses
(the "Closing Date Unpaid Deal Expenses"). The Stockholder
Representatives shall have thirty (30) days following delivery of the
Closing Date Balance Sheet and the Reconciliation Statement during
which to notify Parent of any dispute regarding the Closing Date
Balance Sheet or the calculations set forth in the Reconciliation
Statement, which notice shall set forth in reasonable detail the basis
for such dispute. Parent shall give the Stockholder Representatives and
any independent auditors designated by the Stockholder Representatives
access at all reasonable times to the properties, books, records and
personnel of the Surviving Corporation for purposes of reviewing the
Closing Date Balance Sheet and the Reconciliation Statement. If the
Stockholder Representatives fails to notify Parent of any such dispute
within such 30-day period, the Closing Date Balance Sheet and the
calculations set forth in the Reconciliation Statement shall be deemed
to be final and binding upon Parent, the Stockholder Representatives
and the Stockholders. In the event that the Stockholder Representatives
shall so notify Parent of any dispute, the Stockholder Representatives
and Parent shall cooperate in good faith to resolve such dispute as
promptly as possible.
(b) Closing Date Balance Sheet and Reconciliation Statement
Dispute Resolution. If the Stockholder Representatives and Parent are
unable to resolve any such dispute concerning the Closing Date Balance
Sheet or the Reconciliation Statement within thirty (30) days of the
delivery of notice of a dispute, such dispute shall be resolved by an
independent accounting firm (the "Accounting Firm") reasonably
acceptable to Parent and the Stockholder Representatives, and such
determination shall be final and binding on Parent, the Stockholders
and the Stockholder Representatives. If the Stockholder Representatives
and Parent cannot mutually agree on the identity of the Accounting
Firm, the Stockholder Representatives and Parent shall each submit to
the other party's independent auditor the name of a "big five
accounting firm" which does not at such time and has not in the two (2)
years prior to such time provided material services to any of the
Stockholder Representatives, the Company, Parent or any of their
respective Affiliates, and the Accounting Firm shall be selected by lot
from these two (2) firms by the independent auditors of the parties.
Any expenses relating to the engagement of the Accounting Firm shall be
paid by the party whom the Accounting Firm determines to be the
non-prevailing party with respect to such dispute, and in the absence
of such a determination, shall be shared equally by Parent and the
Stockholders. The Stockholders' portion, if any, of such expenses shall
be deducted from the value of the Closing Date Current Items, as
determined by the Accounting Firm. The Accounting Firm shall be
instructed to use every reasonable effort to perform its services
within thirty (30) days of submission of the Closing Date Balance Sheet
and the Reconciliation Statement to it and, in any case, as promptly as
practicable after such submission.
16
(c) Final Determination. For purposes of this Agreement, a
"Final Determination" shall mean the earliest of (i) the expiration of
the applicable time periods for notifying parties of disputes pursuant
to Section 2.5(a) (assuming no such notification has been made during
such time periods), (ii) the Parties reaching a final agreement on such
amount or (iii) the Accounting Firm rendering its determination
pursuant to paragraph 2.5(b) above.
2.6 Current Items Adjustment.
(a) Current Items Deficiency. If the Reconciled Amount is less
than the Additional Amount (the amount of such deficiency is
hereinafter referred to as the "Final Deficiency"), the aggregate
number of (i) Escrow Shares deliverable and due to the Stockholders
pursuant to the Escrow Agreement and (ii) Option Shares shall be
reduced by a number equal to the quotient of the Final Deficiency
divided by $7.29 (the "Final Reduction"). The number of shares of
Parent Common Stock equal to the product of the Final Reduction and the
Aggregate Stockholders Percentage Interest shall be released from the
escrow established under the Escrow Agreement to Parent, and the number
of Option Shares shall be reduced by the number of shares of Parent
Common Stock equal to the product of the Final Reduction and the
Aggregate Optionees Percentage Interest.
(b) Current Items Excess. If the Reconciled Amount is greater
than the Additional Amount (the amount of such excess is hereinafter
referred to as the "Final Excess"), the aggregate number of (i) Escrow
Shares deliverable and due to the Stockholders pursuant to the Escrow
Agreement and (ii) Option Shares shall be increased by a number equal
to the quotient of the Final Excess divided by $7.29 (the "Final
Addition"). The number of shares of Parent Common Stock equal to the
product of the Final Addition and the Aggregate Stockholders Percentage
Interest shall be deposited by Parent into the escrow established
pursuant to the Escrow Agreement, and the number of Option Shares shall
be increased by the number of shares of Parent Common Stock equal to
the product of the Current Items Reduction and the Aggregate Optionees
Percentage Interest.
2.7 Delivery of Escrow Consideration. Except as otherwise provided in
this Agreement, the Escrow Shares shall be delivered as provided in the Escrow
Agreement.
2.8 Earnout Shares. If the Product Line achieves certain financial
goals detailed in this Section 2.8 within the earlier of (i) three (3) years of
the launch of the Initial Products or (ii) December 31, 2006, upon the
achievement of such financial goals, Parent hereby agrees to deliver Earnout
Shares to the Stockholders and to allocate Earnout Shares in connection with the
Assumed Options as calculated in this Section 2.8. The Company agrees that
Parent's obligation to provide cash or other capital following the Effective
Time shall be dictated by Section 6.10 hereof.
(a) Earnout Shares shall have been earned under the following
conditions:
(i) If the Product Line achieves four million dollars
($4,000,000) in fiscal year Cash Flow, determined after the
third consecutive quarter of one
17
million dollars ($1,000,000) or more in Cash Flow, adjusted
for non-recurring events and other non-sustainable cash flows,
then, an aggregate 274,348 Earnout Shares shall have been
earned.
(ii) If the Product Line achieves eight million
dollars ($8,000,000) in fiscal year Cash Flow, determined
after the third consecutive quarter of two million dollars
($2,000,000) or more in Cash Flow, adjusted for non-recurring
events and other non-sustainable cash flows, then, an
aggregate 274,348 Earnout Shares shall have been earned.
(iii) If the Product Line achieves twelve million
dollars ($12,000,000) in fiscal year Cash Flow, determined
after the second consecutive quarter of three million dollars
($3,000,000) or more in Cash Flow, adjusted for non-recurring
events and other non-sustainable cash flows, then, an
aggregate 274,348 Earnout Shares shall have been earned.
(iv) If the Product Line achieves twenty million
dollars ($20,000,000) in fiscal year Cash Flow, determined
after the second consecutive quarter of five million dollars
($5,000,000) or more in Cash Flow, adjusted for non-recurring
events and other non-sustainable cash flows, then, an
aggregate 411,523 Earnout Shares shall have been earned.
(b) To the extent any Earnout Shares have been earned pursuant
to Section 2.8(b), Stockholders shall, in the aggregate, be entitled to
that number of Earnout Shares equal to the product of the aggregate
Stockholders' percentage interest in any Earnout Shares (the "Aggregate
Stockholders Percentage Interest") as set forth on Exhibit A and the
number of Earnout Shares earned pursuant to Section 2.8(b) (the
"Stockholder Earnout Shares"), and, the Assumed Options shall, in the
aggregate and subject to Sections 2.8(c) and 2.8(d), have allocated as
additional Option Shares that number of Earnout Shares equal to the
product of the Aggregate Optionees Percentage Interest and the Earnout
Shares earned pursuant to Section 2.8(b) (the "Option Earnout Shares").
(c) Each Stockholder shall be entitled to receive that number
of any Earnout Shares earned pursuant to Section 2.8(a) equal to the
product of the Individual Stockholder's Percentage Interest of such
Stockholder and the Stockholder Earnout Shares, which Earnout Shares
shall be distributed within fifteen (15) days of Parent receiving
quarter-end financial statements that have been reviewed by appropriate
independent auditors showing the above financial goals being met. Each
Optionee shall be entitled to receive, upon exercise of an Assumed
Option, that number of any Earnout Shares earned pursuant to Section
2.8(a) equal to the product of the Individual Optionee's Percentage
Interest of such Optionee and the Option Earnout Shares.
(d) To the extent Earnout Shares are deliverable in respect of
Assumed Options that have been exercised, such exercising Optionee
shall be entitled to delivery of the Earnout Shares in the same manner
as a Stockholder.
18
2.9 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Company Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by Stockholders who
have complied with the procedures for appraisal set forth in Section 262 of the
Delaware General Corporation Law (the "Dissenting Shares") (i) shall only be
entitled to such rights as are granted under Section 262 of the Delaware General
Corporation Law, and (ii) shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.2 hereof, unless and
until such holder shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to appraisal and payment under the
Delaware General Corporation Law. If such holder shall have so failed to perfect
or shall have effectively withdrawn or lost such right, such shares of Company
Stock shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the
consideration provided for in Section 2.2, without any interest thereon. The
Company shall give Parent (i) prompt notice of any written demands for appraisal
of any shares of Company Common Stock, attempted withdrawals of such demands,
and any other instruments served pursuant to the Delaware General Corporation
Law received by the Company relating to stockholders' rights of appraisal and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the Delaware General Corporation Law. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisals of shares of Company Stock,
offer to settle any such demands or approve any withdrawal of any such demands.
2.10 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The Parties hereby adopt this Agreement as a "plan of reorganization" with
respect to the Company and Sub within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
2.11 Further Action. If, at any time after the Effective Time, any
further action is determined by Parent or the Surviving Corporation to be
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title, right and possession of and to all
rights and property of the Company, the officers and directors of the Surviving
Corporation shall be fully authorized (in the name of the Company and otherwise)
to take such action.
ARTICLE 3
REPRESENTATION AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub as
follows:
3.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own, lease and operate the
properties used in its business and to carry on its business as now being
conducted, except where the failure to be so qualified would not have a Material
Adverse Effect. The Company has no Subsidiaries or direct or indirect equity
interest or investment in any other Person. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification
19
as a foreign corporation is required for the Company to carry on its business as
now being conducted. Schedule 3.1 hereto lists: (i) the states and other
jurisdictions where the Company is so qualified; and (ii) the assumed names
under which the Company conducts business and contains complete and correct
copies of the Certificate of Incorporation and Bylaws of the Company, each as
amended and presently in effect.
3.2 Capitalization.
(a) The authorized capital stock of the Company and the number
of shares of capital stock that are issued and outstanding are set
forth on Schedule 3.2 hereto. The shares listed on Schedule 3.2 hereto
constitute all the issued and outstanding shares of capital stock of
the Company, have been validly authorized and issued and are fully paid
and non-assessable. Except those shares of Company Common Stock
issuable pursuant to Stock Options, the Company has no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly: (i) calls for issuance, sale, pledge or other
disposition of any shares, or any acquisition, purchase or repurchase,
of capital stock of the Company or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Company;
(ii) obligates the Company to grant, offer or enter into any of the
foregoing; or (iii) relates to the voting or control of such capital
stock, securities or rights, except as provided in this Agreement.
(b) None of the issued and outstanding shares of the capital
stock of the Company has been issued in violation of (i) any
pre-emptive rights in the Company's Certificate of Incorporation,
Bylaws or in any agreement to which the Company is a party, or (ii) any
federal or state securities laws. Other than as set forth in Stock
Agreements, the Company has not agreed to register any securities under
the Securities Act.
3.3 Authority, Approvals and Consents; No Conflicts. The Company has
the corporate power and authority to enter into this Agreement and the
Transaction Documents to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize and
approve this Agreement, the Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by, and constitutes a valid and binding obligation of,
the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable equitable principles, or
by bankruptcy, insolvency, reorganization, moratorium or similar laws from time
to time in effect affecting the enforcement of creditors' rights generally.
Except as provided on Schedule 3.3, the execution, delivery and performance by
the Company of this Agreement, the Transaction Documents to which it is a party
and the consummation by the Company of the transactions contemplated hereby and
thereby do not and will not: (a) contravene any provisions of the Certificate of
Incorporation or Bylaws of the Company; (b) conflict with, result in a breach of
any provision of, constitute a default under, result in the modification or
cancellation of, or give rise to any right of termination or acceleration, or
require a prepayment, in respect of, any Company Agreement to
20
the extent such conflict, breach or default is material or would permit any
party to such Company Agreement other than the Company to terminate such Company
Agreement in accordance with its terms, or require any consent or waiver of any
party to any Company Agreement; (c) result in the creation of any Lien upon, or
any Person obtaining any right to acquire, any properties, assets or rights of
the Company (other than the rights of Parent to acquire the Company pursuant to
this Agreement); (d) violate or conflict with any Legal Requirements existing on
the date of this Agreement that are applicable to the Company or any of its
businesses or properties; or (e) require any authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any Governmental Authority.
Except as referred to above, no permit or approval of, or notice to any
Governmental Authority is necessary to be obtained or made by the Company to
enable the Company to continue to conduct its business and operations and use
their properties after the Closing in a manner which is in all material respects
consistent with that in which they are presently conducted and used.
3.4 [Intentionally omitted]
3.5 Financial Statements; Liabilities. Attached as Schedule 3.5 are
true and complete copies of the audited balance sheet of the Company as of
December 31, 2000 (the December 31, 2000 balance sheet is hereinafter referred
to as the "2000 Balance Sheet"), and the related audited statements of income,
stockholders' equity and cash flow for the fiscal year ended December 31, 2000,
together with the report thereon issued by PricewaterhouseCoopers LLP and
together with the notes thereto (the "Audited Financial Statements"). Also
attached as Schedule 3.5 are the unaudited financial statements, including
balance sheet, statement of income, stockholder's equity and statement of cash
flow, for and as of September 30, 2001 (the "Unaudited Financial Statements" and
together with the Audited Financial Statements referred to herein collectively
as the "Company Financial Statements"). The Company Financial Statements are in
accordance with books and records of the Company, and fairly present, subject in
the case of the Unaudited Financial Statements to year end audit adjustments and
the absence of footnotes, the financial position, results of operations,
stockholders' equity and changes in the financial position of the Company as of
the dates and for the periods indicated in accordance with GAAP, except as
indicated therein or in the notes thereto. The Company Financial Statements
include all adjustments, which consist of only normal recurring accruals,
necessary for such fair presentations. The statements of income included in the
Company Financial Statements do not contain any items of special or
non-recurring income except as expressly identified therein, and the balance
sheets included in the Company Financial Statements do not reflect any write up
or revaluation increasing the book value of any assets except as expressly
identified therein. The books and accounts of the Company are complete and
current and fairly reflect all of the transactions, items of income and expense
and all assets and liabilities of the businesses of the Company consistent with
prior practices of the Company. The Company does not have any liability of any
nature whatsoever (whether known or unknown, due or to become due, accrued,
absolute, contingent or otherwise), including, without limitation, any unfunded
obligation under employee benefit plans or arrangements as described in Sections
3.16 and 3.17 hereof or liabilities for Taxes, except for liabilities reflected
or reserved against in the Unaudited Financial Statement and current liabilities
incurred in the Ordinary Course of Business after the date of the Unaudited
Financial Statements.
21
3.6 Absence of Changes; Conduct of Business. Except as set forth on
Schedule 3.6, since the date of the 2000 Balance Sheet, the Company has operated
in the Ordinary Course of Business and since such date there has not been (a)
any event or development that has, individually or in the aggregate, a Material
Adverse Effect, or (b) any action taken by the Company during such period that,
if taken during the period from the date of this Agreement through the Closing
Date, would constitute a breach of Section 6.3.
3.7 Taxes.
(a) All Tax Returns required to be filed by or on behalf of
the Company have been prepared and duly and timely filed with the
appropriate taxing authorities in all jurisdictions in which such Tax
Returns are required to be filed (after giving effect to any valid
extensions of time in which to make such filings), and all such Tax
Returns were true, complete and correct in all material respects, (ii)
all material Taxes required to be paid, as shown on such Tax Returns,
by or on behalf of the Company or in respect of the Company's income,
assets or operations have been fully and timely paid, (iii) the Company
has not executed or filed with the IRS or any other Tax authority any
agreement, waiver or other document or arrangement extending or having
the effect of extending the period for assessment or collection of
Taxes (including, but not limited to, any applicable statute of
limitations), and no power of attorney with respect to any Tax matter
is currently in force, and (iv) all Taxes required to be withheld by
the Company have been duly and timely withheld and have been paid over
to the appropriate taxing authorities for all periods under all
applicable Legal Requirements. The Company has made adequate provision
on its books for the payment of all Taxes (including for the current
fiscal period) owed by the Company. Correct and complete copies of all
income Tax Returns of the Company for the last fiscal year preceding
the date hereof have been furnished or made available to Parent. The
Company has furnished or made available to Parent correct and complete
copies of all material notices and correspondence sent or received
since December 31, 2000 by the Company to or from any federal, state or
local tax authorities.
(b) The Company has not been subject to a federal or state tax
audit of any kind and no adjustment has been proposed by the IRS with
respect to any return for any Tax year. The Company has not received
any assessment of additional Taxes in writing for and period for which
Tax returns have been filed.
(c) No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns to the effect
that it is or may be subject to taxation by that jurisdiction.
(d) Neither the Company nor any other Person on behalf of the
Company has: (i) agreed to or is required to make any adjustments
pursuant to ss.481(a) of the Code or any similar provision of state,
local or foreign law by reason of a change in accounting method
initiated by the Company or has knowledge that the IRS has proposed any
such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes
in accounting methods that relate to the business or operations of the
Company or (ii) executed or entered into a closing
22
agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign
law with respect to the Company.
(e) No property owned by the Company is: (i) property required
to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986; (ii) constitutes "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code; or (iii) is "tax-exempt
bond financed property" within the meaning of Section 168(g) of the
Code.
(f) The Company is not a party to any tax-sharing or similar
agreement or arrangement (whether or not written) pursuant to which it
will have any obligation to make any payments after the Closing. The
Company has not been a member of an Affiliated Group filing a
consolidated federal income tax return. The Company has no, nor will it
have, any liability for the Taxes of any Person other than the Company
(i) under Treas. Reg. ss. 1.1502-6 (or any similar provision of state,
local or foreign law), (ii) as a transferee or successor, (iii) by
contract or (iv) otherwise.
(g) The Company is not subject to any private letter ruling of
the IRS or comparable rulings of other taxing authorities.
(h) There are no Liens as a result of any unpaid Taxes upon
any of the assets of the Company, other than Permitted Liens.
3.8 Legal Matters. Except as provided on Schedule 3.8 (the "Scheduled
Claims"), there is no Claim pending against, or to the Company's knowledge,
threatened against or affecting, the Company, any Employee Benefit Plan or any
of their respective assets, properties, Licenses or rights before any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, domestic or foreign. Neither the Company, nor any of its assets, are
subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any Governmental Authority, domestic or foreign.
There have been no citations, notices or complaints issued to or received by the
Company by the Occupational Health and Safety Administration or any similar
state or local agency.
3.9 Property.
(a) The Company has good, valid and marketable title in fee
simple, free and clear of all Liens to the properties and assets owned
by, and has a valid and binding leasehold interest in the properties
and assets leased to the Company (including improvements to the Leased
Real Property (the "Improvements") all machinery, equipment and other
tangible property), and all such properties and assets are adequate for
the purposes for which such assets are currently used or are held for
use, and are in good repair and operating condition (subject to normal
wear and tear) and, to the Company's knowledge, there are no facts or
conditions affecting such assets which could, individually or in the
aggregate, interfere in any material respect with the use, occupancy or
operation thereof as currently used, occupied or operated, or their
adequacy for such use.
23
(b) The Company owns no real property. Schedule 3.9(b)
contains a complete list of all real property leased by the Company
setting forth the address, landlord and tenant for each such lease. The
Company has delivered to Parent complete copies of such leases. Each
such lease is legal, valid, binding, in full force and effect and
enforceable, except as may be limited by bankruptcy, insolvency,
reorganization and similar applicable laws affecting creditors
generally and by the availability of equitable remedies. The Company
has not been in the last 12 months, in default, violation or breach in
any respect under any such lease, and no event has occurred and is
continuing that constitutes or, with notice or the passage of time or
both, would constitute a default, violation or breach in any respect
under any such lease with respect to the Company, or, the Company's
knowledge, any other party thereto. Each such lease grants the tenant
under the Lease the exclusive right to use and occupy the demised
premises thereunder (the "Leased Real Property"). The Company enjoys
peaceful and undisturbed possession under its respective Leases for the
Leased Real Property. The Company is the owner of the furniture and
other personal property and equipment located within or utilized in its
business and located at the Leased Real Property.
(c) The Leased Real Property constitutes all the fee and
leasehold interests in real property held for use in connection with,
necessary for the conduct of, or otherwise material to, the business of
the Company, as applicable, as it is currently conducted. To the
knowledge of the Company, there are no eminent domain or other similar
proceedings pending or threatened affecting any portion of the Leased
Real Property. There is no writ, injunction, decree, order or judgment
outstanding, nor any action, claim, suit or proceeding, pending or
threatened, relating to the ownership, lease, use, occupancy or
operation by any Person of any Leased Real Property.
3.10 Environmental Matters.
(a) The Company has complied, and is in compliance with
Environmental, Health, and Safety Requirements except where such
instances of non-compliance, individually or in the aggregate, would
not have a Material Adverse Effect. Except as set forth in Schedule
3.10 hereto and where it, individually or in the aggregate, would not
result in a Material Adverse Effect, (i) no Hazardous Substance has
been stored, treated, released, disposed of or discharged on, about,
from or affecting any of the Leased Real Property, and (ii) the Company
has no liability which is based upon or related to the environmental
conditions under or about any of the Leased Real Property.
(b) Except as set forth in Schedule 3.10, the Company has not
(i) given any report or notice to any governmental agency or authority
involving the use, management, handling, transport, treatment,
generation, storage, spill, escape, seepage, leakage, spillage,
emission, release, discharge, remediation or clean-up of any Hazardous
Substance on or about any of the Leased Real Property or caused by the
Company or any Affiliate thereof, or (ii) received any complaint,
order, citation or notice with regard to a Hazardous Substance or any
other environmental, health or safety matter affecting any of the
Leased Real Property, under the federal Comprehensive Environmental
Response, Compensation and Liability Act or under any other federal,
state or local law, ordinance, rule or regulation.
24
(c) The Company has not received any written or oral notice,
report or other information regarding any actual or alleged violation
of Environmental, Health and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to the Company or the Company's
facilities arising under Environmental, Health and Safety Requirements.
(d) The Company has not, either expressly or by operation of
law, assumed or undertaken any liability, including without limitation
any obligation for corrective or remedial action, of any other Person
relating to Environmental, Health and Safety Requirements, except where
such assumption or undertaking, individually or in the aggregate, would
not cause a Material Adverse Effect.
(e) The Company has provided to Parent all environmental
studies and reports obtained by it or known to it and in the Company's
possession pertaining to the Leased Real Property, the Improvements,
the Company and any property formerly owned, occupied or leased by the
Company.
3.11 Inventories. The values at which inventories are carried on the
Audited Financial Statements reflect the normal inventory valuation policies of
the Company, and the values at which inventories are carried on the Unaudited
Financial Statements reflect the normal inventory valuation policies of the
Company, but, in either case, not in excess of the lower of cost or net
realizable value. All inventories reflected on the Company's Unaudited Financial
Statements or arising since the date thereof are currently marketable and are of
merchantable quality.
3.12 Products. Set forth on Schedule 3.12 are all of the Company's
products, noting, where applicable, those products where FDA approval has been
applied for and/or received, and listing the approval obtained and application
made. For those products listed on Schedule 3.12 as receiving FDA approval, such
approval is in good standing, has not been revoked, rescinded, amended or
modified, and to the Company's knowledge, no event has occurred or notification
received by the Company from the FDA or any other party that would, in any way,
adversely affect or otherwise jeopardize the FDA approval status of such
products. No applications made or other materials submitted by the Company to
the FDA contained an untrue statement of material fact, or to the Company's
knowledge, omitted to state a material fact required to be stated therein or
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
3.13 Insurance. The Company has provided Parent with copies of all
policies of fire, liability, workers' compensation and other forms of insurance
owned or held by the Company, all of which are listed in on Schedule 3.13. Such
policies are in such amounts and cover such risks customarily insured against by
businesses of the type operated by the Company. All such policies are in full
force and effect, all premiums due with respect thereto covering all periods up
to and including the Closing will have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. All pending
claims, if any, made against the Company that are covered by insurance have been
disclosed to appropriate insurance companies and are described on Schedule 3.13
and no claims have been denied coverage during the last three (3) years. During
the last three years, no policy of the Company has been canceled by the
25
issuer thereof. The Company has not been refused any insurance with respect to
its assets or operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with which it has
carried insurance during the last eighteen (18) months.
3.14 Contracts.
(a) Schedule 3.14 contains a complete list of all agreements,
contracts, commitments and other instruments and arrangements (whether
written or oral) of the types described below to which the Company is a
party or by which its properties are bound ("Company Agreements"):
(i) loan agreements, indentures, letters of credit,
mortgages, security agreements, pledge agreements, deeds of
trust, bonds, notes, guarantees and other agreements and
instruments relating to the borrowing of money or obtaining of
or extension of credit;
(ii) brokerage or finder's agreements;
(iii) joint venture, partnership and similar
contracts involving a sharing of profits or expenses
(including but not limited to joint research and development
and joint marketing contracts);
(iv) stock purchase agreements, merger agreements,
asset purchase agreements and other acquisition or divestiture
agreements, including but not limited to any agreements
relating to the sale, lease or disposal of any assets (other
than sales of inventory in the Ordinary Course of Business) or
involving continuing indemnity or other obligations;
(v) orders and other contracts for the purchase or
sale of materials, supplies, products or services, each of
which involves aggregate payments in excess of $10,000 for
purchases or $10,000 for sales;
(vi) contracts with respect to which the aggregate
amount that could reasonably be expected to be paid or
received thereunder in the future exceeds $10,000 per annum or
$10,000 in the aggregate;
(vii) sales agency, manufacturer's representative,
dealer, marketing or distributorship agreements;
(viii) a covenant not to compete or other agreement,
amendment or restriction that limits or in any way restricts
the conduct of any business by Company anywhere in the world;
(ix) a license, sublicense, option or other contract
relating in whole or in part to the Intellectual Property
Rights;
(x) a confidentiality agreement made for the benefit
of any third party;
26
(xi) powers of attorney; and
(xii) any guaranty, warranty or indemnity given by
the Company to its customers or to any third party.
For all purposes herein, the term "Company Agreements" shall also
include, without limitation, any other material contracts, agreements or
commitments included on any other schedule or exhibit hereto by virtue of any
other representation or warranty of the Company contained in this Agreement,
which are not required to be listed on Schedule 3.14.
(b) The Company has (i) delivered to Parent complete copies of
all written Company Agreements, together with all amendments thereto,
on Schedule 3.14 and (ii) has set forth on Schedule 3.14 accurate
descriptions of all material terms of all oral Company Agreements. All
Company Agreements are in full force and effect and enforceable against
each party thereto, except as such enforceability may be limited by the
effect of bankruptcy, insolvency or similar laws affecting creditors'
rights generally or by general principles of equity. There does not
exist under any Company Agreement any event of default or event or
condition that, after notice or lapse of time or both, would constitute
a violation, breach or event of default thereunder on the part of the
Company to the extent such violation, breach or event of default would
constitute a Material Adverse Effect.
3.15 Labor Relations.
(a) The Company has paid or made provision for the payment of
all salaries and accrued wages and has complied with all applicable
laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the
payment and withholding of taxes, and has withheld and paid to the
appropriate Governmental Authority, or is holding for payment not yet
due, to such authority, any amounts required by law or agreement to be
withheld from the wages or salaries of its employees. Schedule 3.15(a)
contains a list as of the date of this Agreement of all employees and
independent contractors of the Company, their current salaries or rates
and the Company's salary increase guidelines.
(b) Except as set forth on Schedule 3.15(b), the Company is
not a party to any: (i) outstanding employment agreements or contracts
with officers or employees that are not terminable at will, or that
provide for payment of any bonus or commission; (ii) agreement, policy
or practice that requires it to pay termination or severance pay to
exempt, non-exempt or hourly employees (other than as required by law);
(iii) collective bargaining agreement or other labor union contract
applicable to persons employed by the Company, nor are there any
activities or proceedings of any labor union to organize any such
employees. The Company has furnished to Parent complete and correct
copies of all such agreements ("Employment and Labor Agreements"). The
Company has not breached or otherwise failed to comply with any
provisions of any Employment and Labor Agreement to the extent such
breach or other failure to comply would constitute a Material Adverse
Effect.
27
(c) There has not occurred, nor is there pending any unfair
labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"); any labor strike or dispute, union activity,
material slowdown or material work stoppage or lockout actually pending
or threatened, against or affecting the Company, and the Company has
not experienced any such material slow down or material work stoppage,
lockout or other collective labor action by or with respect to
employees of the Company; any representation claim or petition pending
before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the
Company; or any charges with respect to or relating to the Company
pending before the Equal Employment Opportunity Commission or any
state, local or foreign agency responsible for the prevention of
unlawful employment practices. The Company has not received formal
notice from any federal, state, local or foreign agency responsible for
the enforcement of labor or employment laws of an intention to conduct
an investigation of the Company and no such investigation is in
progress. The Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and
Retraining Notification Act, as codified at 29 U.S.C.ss.ss.2101-2109,
and the regulations promulgated therein.
3.16 Employee Benefit Plans.
(a) Schedule 3.16(a) lists each Employee Benefit Plan that the
Company maintains, administers or contributes to, or with respect to
which it has any material contingent liability. The Company has
provided to Parent a true and complete copy of each Employee Benefits
Plan, current summary plan description (and, if applicable, related
trust document) and all amendments thereto and written interpretations
thereof and all material communications received from or sent to the
Internal Revenue Service or Department of Labor.
(b) Schedule 3.16(b) identifies each Benefit Arrangement that
the Company maintains or administers. The Company has furnished to
Parent copies or descriptions of each Benefit Arrangement. Each Benefit
Arrangement has been maintained in material compliance with its terms
and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Benefit Arrangement.
(c) The Company does not maintain and has never maintained an
"employee benefit plan" (as defined in Section 3(3) of ERISA) which is
or was (i) a plan subject to Title IV of ERISA or (ii) a "multiemployer
plan" (as defined in Section 3(37) of ERISA).
(d) Benefits under any Employee Benefit Plan or Benefit
Arrangement are as represented in the documents provided by the Company
pursuant to paragraphs (a) and (b) of this Section 3.7 and have not
been increased or modified (whether written or not written) subsequent
to the dates of such documents. The Company has not communicated to any
employee or former employee any intention or commitment to modify any
Employee Benefit Plan or Benefit Arrangement or to establish or
implement any other employee or retiree benefit or compensation
arrangement.
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(e) Each Employee Benefit Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified and has been
so qualified during the period from its adoption to date, and, to the
knowledge of the Company, no event has occurred since such adoption
that would adversely affect such qualification and each trust created
in connection with each such Employee Benefit Plan or forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code. The
Company has received from the Internal Revenue Service a favorable
determination letter on each such Employee Benefit Plan; no such
determination letter has been revoked; and all plan amendments required
as a condition to the issuance of any such letter have been adopted in
a timely manner. Each Employee Benefit Plan has been maintained and
administered in material compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the Code.
(f) To the Company's knowledge, neither the Company nor any of
its stockholders, directors, officers or employees, nor any fiduciary
of any Employee Benefit Plan, has engaged in any transaction with
respect to an Employee Benefit Plan that could subject the Company to a
tax, penalty or liability for a prohibited transaction, as defined in
Section 406 of ERISA or Section 4975 of the Code.
(g) The Company does not have any current or projected
liability in respect of post-retirement or post-employment welfare
benefits for retired, current or former employees except to the extent
otherwise required by the health care continuation coverage
requirements of COBRA as set forth in Section 4980B(f) of the Code and
Sections 601 through 608 of ERISA. No health, medical, death or
survivor benefits have been provided under any Benefit Arrangement to
any person who is not an employee or former employee of the Company or
a dependent thereof.
(h) There is no litigation, administrative or arbitration
proceeding or other dispute pending or, to the Company's knowledge,
threatened that involves any Employee Benefit Plan or Benefit
Arrangement which could reasonably be expected to result in any
material liability to the Company, any employees or directors of the
Company, or any fiduciary (as defined in ERISA Section 3(21)) of such
Employee Benefit Plan or Benefit Arrangement.
(i) Except as set forth on Schedule 3.16(i), no employee or
former employee of the Company will become entitled to receive from the
Company or Parent any bonus, retirement, severance, job security or
similar benefit or enhanced benefit (including, without limitation,
acceleration of compensation, an award, vesting or exercise of an
incentive award) or any fee or payment of any kind solely as a result
of any of the transactions contemplated hereby.
(j) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in
the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the code (i.e., a golden parachute), or
result in the imposition of excise tax under Section 4999 of the Code.
29
(k) No Employee Benefit Plan that is an employee welfare
benefit plan, as defined in Section 3(l) of ERISA, is funded through a
"welfare benefit fund" (within the meaning of Section 419(e) of the
Code) and no benefits under the Employee Benefit Plan are provided
through a voluntary employees' beneficiary association (within the
meaning of Section 501(c)(9) of the Code) or a supplemental
unemployment benefit plan (within the meaning of Section 501(c)(17) of
the Code).
(l) To the Company's knowledge, no facts or circumstances
exist, no actions have been taken or omitted to be taken, nothing has
occurred, and nothing will occur as a result of the consummation of the
transactions contemplated by this Agreement, such that the Company
could reasonably be expected to be, or is subject (directly or
indirectly, such as through an indemnification, guaranty or similar
agreement or obligation) to any liability for any claims, judgments,
damages, penalties, taxes, assessments or similar items with respect to
any employee benefit plan (as defined in Section 3(3) of ERISA) (other
than one of the Employee Pension Benefit Plans listed on Schedule
3.16(a)) currently or formerly maintained by a member of a Controlled
Group of Corporations of which the Company is a member or to which any
such company has contributed or has been obligated to contribute during
the six years prior to the date hereof.
(m) All contributions required to be made to date have, or
prior to the Closing will have, been made, or have been accrued as
liabilities on the Company Financial Statements, and the Company will
not have any liability (actual or contingent) under any insurance
policy (or ancillary agreement relating to such insurance policy) in
the nature of a retroactive rate adjustment or loss sharing or similar
arrangement arising wholly or partially out of events occurring prior
to the Closing.
3.17 Transactions with Insiders. Set forth on Schedule 3.17 hereto is a
complete and accurate description of (i) all transactions between the Company or
any Employee Benefit Plan, on the one hand, and any Insider, on the other hand,
that have occurred since January 1, 1999 and that exceed $10,000 individually or
in the aggregate, and (ii) all written or oral agreements or contracts, and any
other written instruments, evidencing or made in connection with any transaction
involving the sale or acquisition of assets, or any liabilities arising in
connection therewith, which involved the Company, on the one hand, and any
Insider or any of its Affiliates, on the other hand.
3.18 Propriety of Past Payments. Except for transactions or events that
are immaterial in nature: no funds or assets of the Company have been used, for
illegal purposes; no unrecorded funds or assets of the Company have been
established for any purpose; no accumulation or use of the Company's corporate
funds or assets has been made without being properly accounted for in the
respective books and records of the Company; all payments by or on behalf of the
Company have been duly and properly recorded and accounted for in their
respective books and records; no false or artificial entry has been made in the
books and records of the Company for any reason; no payment has been made by or
on behalf of the Company with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents supporting
such payment; and the Company has not made, directly or indirectly, any illegal
contributions to any political party or candidate, either domestic or foreign.
30
3.19 Brokers. Neither the Company, nor any director, officer, employee
or representative thereof, nor the Stockholders or any representative of the
Stockholders, has employed any broker or finder or has incurred or will incur
any broker's, finder's or similar fees, commissions or expenses, in each case in
connection with the transactions contemplated by this Agreement.
3.20 Intellectual Property
(a) Schedule 3.20(a) contains a complete and accurate list and
description of all Intellectual Property Rights consisting of (i)
registered trademarks, logotypes, service marks, certification marks,
trade names, assumed names and all other names or marks used to
identify products or services of the Business ("Trademarks"), and
applications for the registration of Trademarks, as well as all
unregistered Trademarks to the extent those that are unregistered are
material to the Business; (ii) registered copyrights and applications
for registration of copyrights; (iii) patents and patent applications,
including any continuations, continuations-in-part and renewals of any
of the same; and (iv) Internet domain names. Such section also lists
the owner of such Intellectual Property Rights. True, correct and
complete copies of all registrations, certificates or other instruments
representing the Intellectual Property Rights identified on Schedule
3.20(a) have been delivered to Parent. Except as disclosed in such
schedule, (x) all registrations and patent letters identified in such
section are valid and in force and (y) all applications to register or
obtain any copyrights, patents or trademarks so identified are pending
and in good standing and all are, to the Company's knowledge, without
challenge of any kind.
(b) The Company is the sole and exclusive owner of or has a
valid license to use -- and has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works
of and sublicense, without payment to any other person -- all the
Intellectual Property Rights, and the consummation of the Merger will
not conflict with, alter or impair any such rights. In respect of the
Intellectual Property Rights that constitute issued patents, such
rights are valid and enforceable. No Intellectual Property Right is
subject to any outstanding Judgment or any Company Agreement, and no
option, license, sublicense of other agreement has been granted in
favor of any third party with respect to such rights.
(c) To the Company's knowledge, none of the Intellectual
Property Rights infringes the intellectual property rights of any third
party or, to the knowledge of the Company, is being infringed or
misappropriated by others. The Company has not received notice that any
of the Intellectual Property Rights infringes any intellectual property
rights of others, and the Company has not been charged or, to its
knowledge, threatened in writing to be charged with infringing.
(d) To the Company's knowledge, the Company does not employ
any person who is obligated under any contract, covenant or commitment,
or other agreement, or subject to any Judgment, that would interfere
with his or her best efforts to promote the interests of the Company or
that would conflict with the operation of the Company or its business.
Except as set forth on Schedule 3.20(d), all Intellectual Property
Rights that were
31
previously or are currently owned or held, directly or indirectly, by
any officer, director, stockholder, or employee of the Company have
been, or on or prior to the Closing Date shall have been, duly and
effectively transferred to the Company.
(e) Except as set forth on Schedule 3.20(e), there are no
pending, or to the knowledge of the Company threatened, proceedings,
including, without limitation, suit for misappropriation or opposition,
cancellation, or interference proceeding, relating to any Intellectual
Property Rights.
3.21 Compliance with Laws; Licenses.
(a) Except as set forth in Schedule 3.21(a) and where it,
individually or in the aggregate, would not cause a Material Adverse
Effect, the Company has conducted and continues to conduct its
businesses in accordance with all Licenses and Legal Requirements
applicable to any of the businesses in which the Company is engaged,
and the Company is not in violation of any such License or Legal
Requirement.
(b) Except where it, individually or in the aggregate, would
not cause a Material Adverse Effect, the Company holds all Licenses
that are necessary to own, lease and operate the assets and properties
they currently own, lease and operate and to conduct their respective
businesses and operations in the manner previously and currently
conducted. Schedule 3.21(b) sets forth all Licenses held by the
Company, together with any pending applications filed by the Company
for other Licenses. The Company has delivered to Parent correct and
complete copies of all Licenses held by the Company (including the
applications related thereto) and all pending applications listed on
Schedule 3.21(b). To the Company's knowledge, no event has occurred
with respect to any such License or application that would permit the
revocation, termination, suspension or denial thereof or would result
in any impairment of the rights of the holder thereof. No notice has
been received and to Company's knowledge no investigation, review or
proceeding is pending or threatened by any Governmental Authority with
regard to any alleged violation by the Company of any License or Legal
Requirement or any alleged failure by the Company to have any Licenses.
3.22 Deposit Accounts; Powers of Attorney. Schedule 3.22 contains an
accurate list, as of the date of this Agreement, of (a) the name of each
financial institution in which the Company has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held; (c) the type of account;
and (d) the name of each Person authorized to draw thereon or have access
thereto.
3.23 Disclosure. No representation of warranty of the Company in this
Agreement contains an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
3.24 Stockholder Representatives. The Company has performed any actions
necessary to designate and appoint the Stockholder Representatives as the agent
and representative of the Stockholders to perform all such acts as are required,
authorized or contemplated by this
32
Agreement and execute any Transaction Documents, or any documents specified by
such Transaction Documents, as attorney-in-fact for each Stockholder, and the
actions performed by such Stockholder Representatives shall be binding and
enforceable against each Stockholder as if such Stockholder had directly taken
such action. The other Parties are and will be entitled to give notices only to
the Stockholder Representatives for any notice contemplated by this Agreement to
be given to any such Stockholder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE MAJOR STOCKHOLDERS
Each Major Stockholder hereby individually, and not jointly, represents
and warrants to Parent and Sub as follows:
4.1 Authority. Such Major Stockholder has all requisite power and
authority and has full legal capacity and is competent to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by such Major Stockholder
and constitutes a valid and binding obligation of such Major Stockholder,
enforceable against such Major Stockholder in accordance with its terms. The
execution, delivery and performance by such Major Stockholder of this Agreement
and the consummation of the transaction contemplated hereby and thereby do not
and will not: (a) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material contract, agreement, commitment,
understanding, arrangement or restriction to which such Major Stockholder is a
party or to which such Major Stockholder or any of such Major Stockholders'
property is subject; (b) violate or conflict with any Legal Requirements
applicable to such Major Stockholder or any of such Major Stockholder's
businesses properties; or (c) require any authorization, consent, order, permit
or approval of, or notice to, or filing, registration or qualification with, any
Governmental Authority, as same may apply to such Major Stockholder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub hereby jointly and severally represents and
warrants to the Company as follows:
5.1 Organization and Good Standing. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware.
5.2 Authority. Each of Parent and Sub have the corporate power and
authority to execute and deliver this Agreement and the Transaction Documents to
which each is a party and to perform their respective obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Transaction Documents to which each is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by the Board of Directors of Parent and Sub and no other corporate
proceedings on
33
the part of Parent or Sub are necessary to authorize and approve this Agreement
and the Transaction Documents and the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by, and constitutes
a valid and binding obligation of, Parent and Sub, enforceable against Parent
and Sub in accordance with its terms, except as enforceability may be limited by
applicable equitable principles, or by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting the enforcement
of creditors' rights generally.
5.3 No Conflicts. The execution, delivery and performance by Parent and
Sub of this Agreement, the Transaction Documents to which each is a party and
the consummation of the transactions contemplated hereby and thereby do not and
will not: (a) contravene any provisions of the Certificate of Incorporation or
Bylaws of Parent or Sub; (b) conflict with, result in a breach of any provision
of, constitute a default under, result in the modification or cancellation of,
or give rise to any right of termination or acceleration, or require a
prepayment, in respect of, any material mortgage, deed of trust, conveyance to
secure debt, note, loan, lien, lease, agreement, instrument or any order,
judgment, decree or other arrangement to which Parent or Sub is a party or is
bound or by which they or their assets are affected; (c) result in the creation
of any Lien upon, or any Person obtaining any right to acquire, any properties,
assets or rights of the Company (except as provided in this Agreement); (d)
violate or conflict with any Legal Requirements applicable to Parent or Sub or
any of their properties or assets or (e) require any authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any Governmental Authority, except for the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware and
filings with the SEC.
5.4 SEC Reports and Financial Statements. Since January 1, 1999, Parent
has filed all forms, reports and documents with the SEC required to be filed by
it pursuant to the federal securities laws and the SEC rules and regulations
thereunder, all of which have complied as of their respective filing dates, or
in the case of registration statements, their respective effective dates, in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder (collectively,
the "SEC Reports"). None of such SEC Reports, including, without limitation, any
exhibits, financial statements or schedules included therein, at the time filed,
contained any untrue statement of a material fact or omitted to state a 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 consolidated balance sheets and related consolidated statements
of income, stockholders' equity and cash flows (including the related notes and
schedules thereto) of Parent included in the SEC Reports complied as to form, at
the time filed, in all material respects with the published rules and
regulations of the SEC with respect thereto at the time filed, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
and include all adjustments consisting of normal recurring accruals necessary
(in the case of unaudited interim financial statements) to present fairly, in
all material respects, the consolidated financial position of Parent as of their
respective dates, all in conformity with GAAP applied on a consistent basis,
except as otherwise noted therein or as permitted under the Exchange Act.
5.5 Capitalization.
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(a) As of the date hereof, the authorized capital stock of
Parent consists of 50,000,000 shares of common stock, $0.001 par value,
and 5,000,000 shares of preferred stock, $0.001 par value, of which
525,000 shares of preferred stock has been designated as Redeemable
Convertible Preferred Stock (the "Parent Preferred Stock"). As of
November 21, 2001, there are 10,573,101 shares of Parent Common Stock
issued and outstanding and 525,000 shares of Parent Preferred Stock
issued and outstanding and no other shares of capital stock which are
issued and outstanding. As of November 21, 2001, there are options
outstanding issued by Parent to purchase an aggregate of 1,364,199
shares of Parent Common Stock, and warrants to purchase an aggregate of
379,127 shares of Parent Common Stock. In addition, Parent is a party
to that certain Preferred Stock Purchase Agreement dated November 30,
1999 by and between Parent and Xxxxxx Laboratories, an Illinois
corporation, pursuant to which Parent may be required to issue and sell
up to 728,457 shares of Parent Common Stock to Xxxxxx Laboratories. All
of the outstanding shares of Parent Common Stock and Parent Preferred
Stock are duly authorized, validly issued, fully paid and
nonassessable, and were issued in material compliance with applicable
federal and state securities laws, including exemptions therefrom, and
none of such issuances were made in violation of any pre-emptive or
other rights. Except as set forth above, there are no options, warrants
or other rights (including conversion or pre-emptive rights) or
agreements outstanding to purchase any of Parent's authorized and
unissued capital stock.
(b) As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, $0.001 par value. As of
November 27, 2001, there are 1,000 shares of common stock of Sub issued
and outstanding all of which are duly authorized, validly issued, fully
paid and nonassessable, and were issued in material compliance with
applicable federal and state securities laws, and no other shares of
capital stock which are issued and outstanding. There are no options,
warrants or other rights (including conversion or pre-emptive rights)
or agreements outstanding to purchase any of Sub's authorized and
unissued capital stock.
5.6 Tax-Free Reorganization.
(a) Neither Parent nor Sub will take, or cause the Surviving
Corporation to take, any position on any Federal, state or local income
or franchise tax return, or to take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code,
unless otherwise required by a "determination" (as defined in Section
1313(a)(1) of the Code) or by applicable state or local tax law (and
then only to the extent required by such applicable state or local tax
law).
(b) Following the Merger, Parent will not cause or permit the
Surviving Corporation to take any action that would result in a
violation of the "substantially all of its properties" requirement of
Section 368(a)(2)(E) of the Code.
(c) Neither Parent nor any corporation that is related to
Parent has any plan or intention, following the Merger, to reacquire,
or to cause any corporation that is related to Parent to acquire, any
Parent Common
35
Stock, except in the case of any Parent Common Stock (other than stock
acquired in the Merger) held by employees of Parent (or a corporation
related to Parent) whose employment with Parent (or such corporation)
is terminated for any reason. For purposes of this representation, a
corporation shall be treated as related to Parent if such corporation
is related to Parent within the meaning of Treasury Regulation Section
1.368-1(e)(3).
(d) Parent has no plan or intention to sell, transfer or
dispose of any capital stock of the Surviving Corporation or to cause
the Surviving Corporation to issue additional shares of its capital
stock.
(e) Parent has no plan or intention to liquidate the Surviving
Corporation, to merge the Surviving Corporation with or into another
corporation, to sell or otherwise dispose of any of the capital stock
of the Surviving Corporation, to cause the Surviving Corporation to
distribute to Parent any assets of the Surviving Corporation or the
proceeds of any borrowings incurred by the Surviving Corporation, or to
cause the Surviving Corporation to sell or otherwise dispose of any of
the assets held by the Company at the time of the Merger, except for
dispositions of such assets in the Ordinary Course of Business and
transfers described in Section 368(a)(2)(C) of the Code or Treasury
Regulation Section 1.368-2(k).
(f) As specified in Section 12.1 hereof, Parent and Sub will
each pay their respective expenses, if any, incurred in connection with
the Merger.
(g) Following the Merger, Parent will cause the Surviving
Corporation to continue the Company's "historic business" or to use a
significant portion of the Company's "historic business assets" in a
business (as such terms are defined in Treasury Regulation Section
1.368-1(d)).
(h) Neither Parent nor Sub is an investment company as defined
in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(i) Sub is a corporation newly formed for the purpose of
participating in the Merger and at no time prior to the Merger has had
assets (other than nominal assets contributed upon the formation of
Sub, which assets will be held by the Company following the Merger),
liabilities, or business operations. Sub will have no liabilities
assumed by the Company and will not transfer to the Company any assets
subject to liabilities. Prior to the Merger, Parent will be in control
of Sub within the meaning of Section 368(c).
5.7 No Broker's Fees. Neither Parent nor Sub shall be required to pay
any brokerage commissions, finder's fees, fees for financial advisory services
or similar compensation in connection with the transactions contemplated by this
Agreement.
5.8 Absence of Certain Changes. Except as set forth on Schedule 5.8, or
as contemplated by this Agreement, since September 30, 2001, there has not been
any material adverse change in the business, properties, operations or financial
condition of Parent.
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ARTICLE 6
COVENANTS AND ADDITIONAL AGREEMENTS
6.1 Access; Confidentiality. Between the date hereof and the Closing
Date, the Company will: (i) provide to the officers and other authorized
representatives of Parent and Sub full access, during normal business hours, to
any and all premises, properties, files, books, records, documents and other
information of the Company, and will cause the Company's officers to furnish to
Parent and its authorized representatives any and all financial, technical and
operating data with other information pertaining to the businesses and
properties of the Company (including the Leased Real Property and the
Improvements); and (ii) make available for inspection and copying by Parent and
Sub true and complete copies of any documents relating to the foregoing. Parent
and Sub will hold, and will cause their representatives to hold, in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law) all
Confidential Information and will not disclose the same to any third party
except as may reasonably be necessary to carry out or enforce this Agreement and
the transactions contemplated hereby, including any due diligence review by or
on behalf of Parent and Sub. If this Agreement is terminated, Parent and Sub
will, and will cause their representatives to, promptly return to the Company,
upon the reasonable request of the Company, all Confidential Information
furnished by the Company, including all copies and summaries thereof. The
Company and each of the Major Stockholders agree to maintain in confidence, and
not disclose to others until Parent makes a public announcement concerning the
transactions contemplated by this Agreement or otherwise consents in writing,
the terms of the transactions provided for herein, or the existence of this
Agreement, provided that, disclosure, as necessary, to obtain the approval of
the Stockholders and to otherwise comply with the terms and conditions of this
Agreement, may be made to Stockholders, and to the extent necessary, to their
representatives who agree in writing (an a form reasonably approved by Parent)
to maintain such information on a confidential basis.
6.2 Furnishing Information; Announcements. The Stockholder
Representatives and the Company, on the one hand, and Parent and Sub, on the
other hand, will, as soon as practical after reasonable request therefor,
furnish to the other all information concerning each Stockholder and the Company
or Parent and Sub, respectively, required for inclusion in any statement or
application made by Parent or Sub or the Company or the Stockholders to any
governmental or regulatory body or to any third party or in connection with
obtaining any consent in connection with the transactions contemplated by this
Agreement. Neither the Stockholder Representatives nor the Company, nor any
representative thereof, shall issue any press release or otherwise make any
public statement with respect to the transactions contemplated hereby without
the prior written consent of Parent.
6.3 Certain Changes and Conduct of Business.
(a) From and after the date of this Agreement and until the
Closing Date, the Company shall conduct its businesses solely in the
Ordinary Course of Business and, without the prior consent of Parent,
the Company shall not, except as required or permitted pursuant to the
terms hereof, including the taking of such action necessary in order to
effect the actions set forth on Schedule 3.6:
37
(i) make any material change in the conduct of its
businesses and operations or enter into any transaction other
than in the Ordinary Course of Business;
(ii) make any change in its certificate of
incorporation or bylaws, issue any additional shares of
capital stock or equity securities or grant any option,
warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or
exchangeable for its capital stock or alter any material term
of any if its outstanding securities or make any change in its
outstanding shares of capital stock or other ownership
interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock
dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness
for borrowed money, issue any notes, bonds, debentures or
other corporate securities or grant any option, warrant or
right to purchase any thereof, except pursuant to transactions
in the Ordinary Course of Business; (B) issue any securities
convertible or exchangeable for debt securities of the
Company; or (C) issue any options or other rights to acquire
from the Company, directly or indirectly, debt securities of
the Company or any security convertible into or exchangeable
for such debt securities;
(iv) make any sale, assignment, transfer, abandonment
or other conveyance of any of its assets or any part thereof,
except transactions pursuant to existing Company Agreements
and dispositions in the Ordinary Course of Business;
(v) subject any of its assets, or any part thereof,
to any Liens (other than Permitted Liens) or suffer such to be
imposed other than such liens as may arise in are Ordinary
Course of Business;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any
combinations thereof) in respect of any shares of its capital
stock or redeem, retire, purchase or otherwise acquire,
directly or indirectly, any shares of capital stock of the
Company;
(vii) acquire any assets, raw materials or
properties, or enter into any other transaction, other than in
the Ordinary Course of Business;
(viii) enter into any new (or amend any existing)
employee benefit plan, program or arrangement or any new (or
amend any existing) employment severance or consulting
agreement, grant any general increase in the compensation of
officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in compensation payable or
to become playable to any employee, except in accordance with
pre-existing contractual provisions or consistent with past
practices;
38
(ix) make or commit to make any individual material
capital expenditure in excess of $10,000, or aggregate capital
expenditures in excess of $25,000, except in the Ordinary
Course of Business;
(x) pay, loan or advance any amount to, or sell,
transfer or lease any properties or assets to, or enter into
any agreement or arrangement with, any of its Affiliates,
except in the Ordinary Course of Business;
(xi) guarantee any indebtedness for borrowed money or
any other obligation of any other Person, other than in the
Ordinary Course of Business;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it
(or on behalf of it) on the date hereof;
(xiii) make any loan, advance or capital contribution
to investment in any Person, except in the Ordinary Course of
Business;
(xiv) make any change in any method of accounting or
Accounting Principle, method, estimate or practice except for
any such change required by reason of a concurrent change in
GAAP or write-down the value of any inventory or write-off as
uncollectible any accounts receivable except in the Ordinary
Course of Business;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material
respect or terminate any material commitment, bid or
expenditure, other than in the Ordinary Course of Business; or
(xvii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date,
the Company shall:
(i) continue to maintain, in all material respects,
the Company's properties, all Leased Real Property and all
Improvements in accordance with present practices in a
condition suitable for their current use;
(ii) comply with all applicable Environmental Laws,
and, in the event it shall receive notice that there exists a
violation of any Environmental Law with respect to its
operations, any Improvements or any Leased Real Property,
promptly (and in any event within the time period permitted by
the applicable governmental authority) remove or remedy such
violation in accordance with all applicable Environmental
Laws;
(iii) file, when due or required, or extend as
reasonably necessary, federal, state, foreign and other tax
returns and other reports required to be filed and pay when
due all Taxes, assessments, fees and other charges lawfully
levied
39
or assessed against it unless the validity thereof is
contested in good faith and by appropriate proceedings
diligently conducted;
(iv) keep its books of account, records and files in
the Ordinary Course of Business and in accordance with
existing practices;
(v) preserve its business organization intact and use
its reasonable commercial efforts to continue to maintain
existing business relationships with suppliers, customers,
licensors and others with whom business relationships exists
other than relationships that are, at the time, not
economically beneficial to it; and
(vi) continue to conduct its business in the ordinary
course consistent with past practices.
6.4 No Negotiations. No Major Stockholder, nor the Company, nor the
Company's officers, directors, employees, advisors, agents, representatives,
Affiliates or anyone acting on behalf of the Stockholders, the Company or such
persons, shall, directly or indirectly, encourage, solicit, initiate or engage
in discussions or negotiations with, or provide any information to, any Person
(other than Parent or its representatives) concerning any merger, sale of assets
(other than in the Ordinary Course of Business), purchase or sale of shares of
capital stock or similar transaction involving the Company. The Major
Stockholders or the Company, as the case may be, shall promptly communicate to
Parent any inquiries or communications concerning any such transaction
(including the identity of any Person making such inquiry or communication)
which the Major Stockholders or the Company may receive or of which the Major
Stockholders or the Company may become aware.
6.5 Consents; Cooperation. Subject to the terms and conditions hereof,
the Company and Parent and Sub will use their respective best efforts at their
own expense (unless otherwise set forth herein):
(a) to take all actions and do all things necessary, proper or
advisable, and to cooperate with each other, to expeditiously
consummate the transactions contemplated hereby;
(b) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all Government Approvals, and make all
filings and registrations with Governmental Authorities which are
required on their respective parts for: (i) the consummation of the
transactions contemplated by this Agreement; (ii) the ownership or
leasing and operating after the Closing by the Company of all its
material properties; and (iii) the conduct after the Closing by the
Company of its businesses as conducted by it on the date hereof;
(c) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf
of third persons (including Governmental Authorities) challenging this
Agreement or the transactions contemplated hereby; and
40
(d) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
6.6 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the Parties hereto agrees to use its best efforts at its own
expense to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers of the Company shall take all such necessary action.
6.7 Notification of Certain Matters. Between the date hereof and the
Closing, each Party to this Agreement will give prompt notice in writing to the
other Party hereto of: (i) any information that indicates that any
representation and warranty of such Party contained herein was not true and
correct as of the date made, or will not be true and correct as of the Closing;
(ii) the occurrence of any event which could result in the failure to satisfy a
condition specified in Article 7 or Article 8 hereof, as applicable; and (iii)
any notice or other communication from any third Person alleging that the
consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement.
6.8 Stock Agreement Termination. The Company and the Major Stockholders
have obtained or will obtain written binding agreements of termination (the
"Termination Agreements") prior to Closing from the requisite parties whose
consent is required to amend or terminate any and all Stock Agreements that
provide for the termination of all such agreements effective immediately prior
to the Effective Time.
6.9 Board of Directors Observation. Until March 31, 2003, Xxxx Xxxxxxx,
or another person appointed in writing by the Stockholder Representatives
approved by Parent, shall have the right to receive notice of, observe, but not
vote at, and, to the extent reasonable in the applicable context, participate in
the meetings of the Board of Directors of Parent or its successor so long as
such observer executes a Confidentiality and Non-Disclosure Agreement, in the
form attached hereto as Exhibit C, with respect to such meetings. The Company
agrees that such observer shall be subject to Parent's policies with respect to
xxxxxxx xxxxxxx and other similar policies established by Parent from time to
time.
6.10 Post-Closing Liquidity. After the Closing, Parent agrees to
provide cash funding to support the Product Line for development under the terms
and conditions stated in this Section 6.10, provided, however that the amount
and timing of cash funding shall be determined by Parent employing its
reasonable business judgment. Parent agrees to use commercially reasonable
efforts to lower the Product Line's cash requirements related to its product
lines, including, but not limited to, vendor financing, supplier cooperation in
inventory flow, and other economic means to reduce annual cash flow
requirements. Included in the computation of Cash Flow, the Company agrees that,
as the Product Line, it will be allocated a portion of Parent's corporate
overhead on a direct charge basis (See Exhibit H).
(a) The Company and Parent agree that the budgeted cash
requirements of the Company in respect of the Product Line for the
remainder of the calendar year 2001
41
and the calendar year 2002 is $2,000,000 (the "Cash Budget"), and any
changes to the Cash Budget prior to Closing may only be effected with
the approval of Parent. In the exercise of its business judgment,
Parent will use the Cash Budget as a guide for overall funding and the
timing thereof.
(b) In the event that the Product Line fails to achieve its
quarterly revenue plan, Parent will investigate the cause of such
failure, and as a result, using its reasonable business judgment,
Parent may decrease or increase its level of cash funding and the
timing thereof. The Parties agree that factors to be considered in
Parent's reasonable business judgment include, but are not limited to,
demand for the Product Line's products; profitability associated with
the Product Line's products; Parent's ability to raise additional
capital; Parent's allocation of its capital across its existing
products and to other business opportunities; results of independent
patient surveys presenting information that compares the Product Line's
product(s) to its leading competitor(s); force majeure and other
similar factors.
(c) If the Company's Initial Products fail (i) to generate a
gross margin in excess of $0 or (ii) to be approved by the FDA by
December 31, 2002, Parent's obligation to provide any Earnout Shares
will continue so long as the financial goals stated in Section 2.8
hereof are met, but Parent's obligations under this Section 6.10 shall
terminate.
(d) If Parent provides the Product Line with at least four
million dollars ($4,000,000) in Cumulative Cash Funding by December 31,
2004, the Parties agree that an irrebuttable presumption will have been
established that this Section 6.10 has been fully satisfied. For the
purposes of this Section 6.10, "Cumulative Cash Funding" is defined as
direct cash funding for the Product Line's activities, including direct
expenses, fixed asset purchases and working capital committed for the
Product Line's activities. Allocations for the purpose of approximating
actual corporate activity for the Product Line are included in the
above cash funding; allocations for the purpose of determining
contribution to corporate overhead are not to be included.
6.11 Transfer Restrictions. Each Stockholder will be prohibited from
selling, conveying or transferring in any manner (other than pursuant to Article
11 hereof) any shares of Parent Common Stock acquired in the Merger for a period
ending on the first (1st) anniversary of the Closing Date, and certificates
representing such shares of Parent Common Stock will contain an appropriate
restrictive legend to that effect, as provided in Section 2.3(a) of this
Agreement.
6.12 Company Stockholder Communications.
(a) Within five (5) Business Days of the date of this
Agreement, and in any event prior to Closing, the Company agrees to (i)
provide written confirmation to Parent identifying those Stockholders
that are Accredited Investors, including the basis for determining such
status, and identifying those Stockholders that are not Accredited
Investors; and (ii) with respect to any Stockholders who are not
Accredited Investors, have such Stockholders appoint a Purchaser
Representative to the reasonable satisfaction of Parent and Parent's
counsel that the issuance of shares of Parent Common Stock in the
42
Merger to any Stockholder will qualify as a private placement of
securities under Rule 506 of Regulation D under the Securities Act.
(b) In the event that any Stockholder to receive any shares of
Parent Common Stock in the Merger cannot be characterized as an
Accredited Investor, the Company further agrees to (i) promptly upon
receipt, distribute the information statement or other document
provided by Parent to the such Stockholder and provide written
confirmation to Parent of such distribution and (ii) promptly use
reasonable efforts to cooperate to provide information regarding the
Company that is required to be included in any such information
statement or other document. In connection with the foregoing
covenants, the Company will obtain appropriate confidentiality and
non-disclosure agreements in a form reasonably approved by Parent.
6.13 Major Stockholder Voting Covenant.
(a) As long as this Agreement has not terminated in accordance
with Section 11, the Major Stockholders agree that they will cause the
shares of Company Stock that they own (the "Major Stockholders Shares")
to be voted at any meeting of stockholders called by the Company and
any and all postponements and adjournments thereof or through any
written consent in lieu of a meeting (i) to approve the Merger and any
other matter that could reasonably be expected to facilitate the Merger
and (ii) against any Adverse Proposal. For purposes of this Agreement,
"Adverse Proposal" means any action, proposal or agreement that could
result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of Parent under the
Agreement, or otherwise, which could materially frustrate, prevent or
delay the consummation of the transactions contained in the Transaction
Documents.
(b) The Major Stockholders will not, except as permitted by
this Agreement, (i) grant any proxies or powers of attorney with
respect to any of the Major Stockholders Shares, (ii) deposit any of
the Major Stockholders Shares into a voting trust or enter into a
voting agreement with respect to the Major Stockholders Shares, or
(iii) take any action that would make any representation or warranty
contained herein untrue or incorrect or have the effect of preventing
the Major Stockholders from performing their respective obligations
under this Agreement.
6.14 Stockholder Approval. The Company shall duly call and hold a
meeting of the Stockholders or obtain written consent of the Stockholders in
lieu thereof in compliance with Delaware law as soon as reasonably practicable
for the purpose of approving the Merger and the transactions contemplated by
this Agreement. The Company shall include in any communications to the
Stockholders, the recommendation of its Board of Directors that the Stockholders
vote in favor of the Merger and the transactions contemplated by this Agreement.
In connection with such meeting or written consent in lieu thereof and the
transactions contemplated hereunder, the Company will (i) use its reasonable
best efforts to obtain the requisite vote or consent of the Stockholders to
approve the Merger and the transactions contemplated by this Agreement and (ii)
otherwise comply with all legal requirements applicable to such meeting or
consent, including, without limitation, the provisions governing notice of
appraisal rights as provided in Section 262 of the Delaware General Corporation
Law.
43
6.15 Closing Conditions. The Company and the Major Stockholders shall each use
its best efforts to satisfy the conditions to Closing provided in Article VII
herein, including obtaining executed Employment Agreements, Employee Covenants
Agreements and Seller's Covenants Not to Compete from all parties to such
agreements other than Parent.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB
TO EFFECT THE CLOSING
The obligations of Parent and Sub under this Agreement to consummate
the transactions contemplated hereby are subject to the satisfaction at or prior
to Closing of each of the following conditions all of which may be waived, in
whole or in part, by Parent for purposes of consummating such transactions, but
without prejudice to any other right or remedy which Parent may have hereunder
as a result of any misrepresentation by or breach of any covenant or warranty of
the Company contained herein or any other certificate or instrument furnished by
or on behalf of any of the Company or the Major Stockholders hereunder:
7.1 Representations and Warranties; Covenants. Each of the
representations and warranties of the Company and Major Stockholders contained
in this Agreement shall be true and correct on the date made and shall be true
and correct in all material respects as of the Closing. Each of the covenants
and obligations of the Company and the Major Stockholders required by any of the
covenants or agreements contained in this Agreement to be performed by them at
or prior to the Closing shall have been duly performed and complied with as of
the Closing. At the Closing, Parent and Sub shall have received a certificate,
dated the Closing Date and duly executed by the President of the Company, and in
respect of each Major Stockholder, executed by such Major Stockholder, to the
effect that the conditions set forth in the two preceding sentences have been
satisfied.
7.2 Authorization; Consent. All notices to, and declarations, filings
and registrations with Governmental Authorities, and all Government Approvals
and all third person Consents required to consummate the transactions
contemplated hereby and necessary for the continued business operations of the
Company, and all other Consents shall have been made or obtained.
7.3 Absence of Litigation. No order, stay, injunction or decree of any
court of competent jurisdiction in the United States shall be in effect: (a)
that prevents or delays the consummation of any of the transactions contemplated
hereby; or (b) would impose any limitation on the ability of Parent or Sub
effectively to exercise all rights of ownership of the Company Common Stock. No
action, suit or proceeding before any court or any governmental or regulatory
entity shall be pending (or threatened by any governmental or regulatory
entity), and no investigation by any governmental or regulatory entity shall
have been commenced (and be pending), seeking to restrain or prohibit (or
questioning the validity or legality of) the consummation of the transactions
contemplated by this Agreement or the Transaction Documents or seeking damages
in connection therewith which Parent or Sub, in good faith and with the advice
of counsel,
44
believes it makes it undesirable to proceed with the consummation of the
transactions contemplated hereby.
7.4 No Material Adverse Effect. During the period from the date of this
Agreement to the Closing Date, there shall not have been any Material Adverse
Effect.
7.5 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the
Stockholders and the Company under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholders and the Company in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
Parent and Sub.
7.6 Employment Agreements. The Company and each of the Persons listed
on Schedule 7.6 shall have entered into employment agreements (collectively, the
"Employment Agreements") substantially in the form of Exhibit E (with such
Employment Agreements providing for the annual salary for each respective such
Person as indicated on Schedule 7.6). Xxxx Xxxxxxx and the other members of Chay
Medical, LLC shall cause, to the extent necessary, the intellectual property
rights referred to in the License Agreement provided as Exhibit E-1 to be fully
conveyed and transferred to Chay Medical, LLC, and provide Parent with evidence
thereof, and shall cause Chay Medical, LLC to execute and deliver the License
Agreement between Chay Medical, LLC and Parent in the form of Exhibit E-1.
7.7 Confidentiality, Inventions Agreements. The Company and each of the
Persons listed on Schedule 7.7 shall have entered into the First Amendment to
the Amended and Restated Employee Proprietary Information and Inventions
Agreement (collectively, the "Employee Covenants Agreements") substantially in
the form of Exhibit F.
7.8 Seller's Covenant Not to Compete. Each of the Stockholders listed
on Schedule 7.8 shall have entered into a Seller's Covenant Not to Compete
(collectively, the "Seller's Covenants Not to Compete") substantially in the
form of Exhibit G.
7.9 Debt Conversion; Warrant Exercise. The Company shall have taken all
actions necessary to cause its outstanding convertible promissory notes and
warrants issued pursuant to that certain Note and Warrant Purchase Agreement
dated June 29, 2001 by and among the Company and the Purchasers listed on
Schedule A thereto to be converted into Company Preferred Stock, exercised into
Company Preferred Stock or terminated, as the case may be, all effective prior
to the Effective Time.
7.10 Stockholder Approval. The Company shall have provided satisfactory
evidence to Parent that the Stockholders have approved the Merger and the
transactions contemplated by the Transaction Documents, in accordance with
Delaware law.
7.11 Appraisal Rights. Stockholders holding no more than five percent
(5%) of the aggregate shares of Company Stock shall have failed to waive their
appraisal rights pursuant to, and in accordance with, Section 262 of the
Delaware General Corporation Law.
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ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY TO EFFECT THE CLOSING
The obligations of the Company under this Agreement to consummate the
transactions contemplated hereby are subject to the satisfaction at or prior to
Closing of each of the following conditions all of which may be waived, in whole
or in part, by the Company for purposes of consummating such transactions, but
without prejudice to any other right or remedy which the Company may have
hereunder as a result of any misrepresentation by or breach of any covenant or
warranty of Parent or Sub contained herein or any other certificate or
instrument furnished by or on behalf of the Parent or Sub hereunder:
8.1 Representations and Warranties; Covenants. Each of the
representations and warranties of Parent and Sub contained in this Agreement
shall be true and correct in all material respects on the date made and shall be
true and correct in all material respects as of the Closing. Each of the
covenants and obligations of Parent and Sub required by this Agreement to be
performed by them at or prior to the Closing shall have been duly performed and
complied with as of the Closing. At the Closing, the Company shall have received
a certificate, dated the Closing Date and duly executed by an officer of Parent
and of Sub to the effect that the conditions set forth in the preceding two
sentences have been satisfied.
8.2 Authorization of the Agreement; Consents. All notices to, and
declarations, filings and registrations with Governmental Authorities, and all
Government Approvals and all third person Consents required to consummate the
transactions contemplated hereby and necessary for the continued business
operations of the Company, and all other Consents shall have been made or
obtained.
8.3 Absence of Litigation. No order, stay, injunction or decree of any
court of competent jurisdiction in the United States shall be in effect: (a)
that prevents or delays the consummation of an of the transactions contemplated
hereby; or (b) would impose any limitation on the ability of the Stockholders
effectively to exercise all rights of ownership of Parent Common Stock.
8.4 Legal Matters. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of Parent or Sub
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of Parent or Sub in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form and
substance to counsel for the Company and the Stockholders.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) by written mutual consent of Parent and the Company;
46
(b) by either Parent, Sub or the Company by written notice if
the Closing shall not have taken place on or prior to December 31, 2001
(the "Closing Date Deadline"), or such other date as shall have been
approved by Parent, Sub and the Company in writing (provided that the
terminating Party is not otherwise in material breach of its
representation, warranties, covenants or agreements under this
Agreement);
(c) by Parent or Sub if any of the conditions specified in
Article 7 hereof have not been met or waived by Parent or Sub at such
time as such condition is no longer capable of satisfaction (provided
that neither Parent nor Sub is otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(d) by the Company if any of the conditions specified in
Article 8 hereof have not been met or waived by the Company at such
time as such condition is no longer capable of satisfaction (provided
that neither the Company nor any of the Major Stockholders is otherwise
in material breach of his or its representations, warranties, covenants
or agreements under this Agreement); or
(e) by either Parent, Sub or the Company if there has been a
material breach on the part of the Company or the Major Stockholders on
the one hand, or Parent or Sub, on the other hand, of any
representation, warranty, covenant or agreement set forth in this
Agreement, which breach has not been cured within ten (10) Business
Days following receipt by the breaching Party of written notice of such
breach;
(f) by Parent or Sub, if the covenant provided in Section 6.12
hereof has not been performed in full within the time period specified
therein.
If Parent, Sub or the Company shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effectuated by written
notice to the other parties specifying the provision hereof pursuant to which
such termination is made.
9.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.1 above, this Agreement shall forthwith become null and
void, and none of the Parties hereto or any of their respective officers,
directors, employees, agents, affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto, except for any liability arising out of a breach of this Agreement prior
to its termination. Notwithstanding the foregoing, if this Agreement is
terminated prior to Closing, no Major Stockholder shall have any liability or
obligation whatsoever hereunder or with respect hereto.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
10.1 Indemnification. Subject to Sections 10.2, 10.3 and 10.4 hereof,
the parties hereto agree as follows:
(a) Prior to Closing, the Company agrees to indemnify and hold
Parent harmless from and against all liability, loss, damage, or injury
and all reasonable costs and
47
expenses (including reasonable counsel fees and costs of any suit
related thereto) ("Losses") suffered or incurred by Parent from any
breach of any covenant, representation or warranty of the Company or
the Major Stockholders contained in this Agreement or in any of the
Transaction Documents to which it is a party, and by reason of any
Losses suffered or incurred by Parent by reason of any of the Scheduled
Claims.
(b) Upon the Closing, the Entire Stockholder Consideration
shall be placed in escrow pursuant to the Escrow Agreement for a period
of six (6) months after the Closing for the purpose of, and the Parties
covenant and agree that it shall be used for, indemnifying and holding
Parent (and Surviving Corporation subsequent to Closing) harmless from
and against all Losses suffered or incurred by Parent or Surviving
Corporation from any breach of any covenant, representation or warranty
of the Company or the Major Stockholders contained in this Agreement or
in any of the Transaction Documents to which any of them is a party.
(c) Each Major Stockholder agrees to indemnify and hold Parent
and Surviving Corporation harmless from and against all Losses suffered
or incurred by Parent or Surviving Corporation from any breach of any
covenant, representation or warranty of the Company or the Major
Stockholders contained in this Agreement, to the extent that Parent and
Surviving Corporation have not been indemnified in respect of such
Losses pursuant to the Escrow Agreement.
(d) Since, following the Closing, Sub will be merged into the
Company and the Surviving Corporation will be owned by Parent, the
Parties agree that the Stockholders will have no right of reimbursement
or contribution against the Surviving Corporation (including, without
limitation, any rights of law), and any Losses suffered or incurred
against which Parent and Surviving Corporation are indemnified and held
harmless as provided above shall be deemed suffered by Parent, which
shall, either independently or jointly with the Surviving Corporation,
be entitled to enforce such indemnity.
(e) Any examination, inspection or audit of the properties,
financial condition or other matters of the Company and its business
conducted by Parent or Sub prior to the Closing under this Agreement
shall in no way limit, affect or impair the ability of Parent and
Surviving Corporation to receive indemnification provided for herein
for breaches of the representations, warranties, covenants and
obligations of the Company set forth in this Agreement, unless the
applicable matter has been disclosed to Parent or Sub on the Schedules
hereto.
10.2 Limitations on Indemnification. The maximum aggregate liability of
the Major Stockholders for indemnification under this Agreement, apart and
exclusive of any loss of escrowed property any such Major Stockholder may suffer
pursuant to the operation of the Escrow Agreement, shall be equal to $7.29
multiplied by the number of shares of Parent Common Stock that are delivered to
such Major Stockholder by the Escrow Agent; provided, however, that the
liability of such Major Stockholders for any breach of any representation or
warranty made by such Major Stockholder in Article 4, and for the breach by such
Major Stockholder of any covenant or obligation contained herein shall be
several, and not joint, with the other Major Stockholders, such that each Major
Stockholder shall be liable and shall pay in
48
respect of this agreement to indemnify, only that portion of Losses resulting
from any such breaches based on such Major Stockholder's pro rata percentage
ownership of the capital stock of Company as follows:
Xxxx Xxxxxxx 30.48%
Xxxxx Xxxxxxx 17.24%
Satellite Healthcare, Inc. 17.58%
--------
Total 65.30%
========
10.3 Minimum Aggregate Liability Amount. Parent and the Surviving
Corporation agree not to seek recourse against, and shall not be provided
indemnification pursuant to the Escrow Agreement or from the Major Stockholders
under this Article 10 on account of any Losses until the aggregate amount
thereof exceeds $50,000 (the "Stockholder Minimum Aggregate Liability Amount"),
at which time claims may be asserted only for amounts in excess of the
Stockholder Minimum Liability Amount. Notwithstanding the foregoing, there shall
be no Stockholder Minimum Aggregate Liability Amount for, and the Stockholder
Minimum Aggregate Liability Amount shall not be charged for or reduced by, any
liability, loss damage, injury or claim resulting from the covenants,
representations and warranties contained in the provisions of Sections 3.2, 3.7
or 12.1.
10.4 Survival Period for Indemnification Claims. A claim for
indemnification based on the covenants, representations and warranties contained
in the provisions of Section 3.2 shall survive for the longest period available
under applicable laws and may be made at any time during such periods. Except
for such claims, a claim for indemnification hereunder shall be forever barred
unless made by notifying the indemnifying party (a) in the case of a claim based
upon a tax liability of the Company (including, without limitation, any claim
based upon an assertion that any of the previously filed tax returns of the
Company are inaccurate or incomplete), within the statutory period of
limitations under the applicable tax statute unless such claim is raised by the
taxing authority by way of an offset against any claim or suit for refund or is
allowed to be assessed after the expiration of the applicable statute of
limitations pursuant to a validly executed waiver or extension thereof or
pursuant to the mitigation provisions contained in the Code, in which case a
claim may be made within one year after such offset or assessment or (b) in all
other cases on or before March 31, 2003.
10.5 Payment of Claims. The Parties hereto agree that during the period
in which the Escrow Shares are held in escrow, Parent and the Surviving
Corporation shall seek payment for claims pursuant to this Agreement from the
Entire Stockholder Consideration held in escrow pursuant to Section 2.3. The
parties further agree that, for purposes of satisfying any claims made from the
Entire Stockholder Consideration held in escrow, the value of each share of
Parent Common Stock shall be deemed to be equal to $7.29.
49
ARTICLE 11
REGISTRATION RIGHTS
This Article 11 sets forth the registration rights applicable to the
Stockholders and Optionees in connection with the Parent Common Stock to be
acquired pursuant to the Merger. Terms defined in this Article shall apply only
to this Article. To the extent this Article contains any covenants,
representations and warranties of any Holder, such covenants, representations
and warranties have been made by the Stockholder Representatives, who has been
duly authorized to do so, on behalf of such Holder.
11.1 Definitions.
As used in this Article, the following terms have the following
meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor federal statute, and the rules and
regulations of the SEC issued under such act, as they each may, from time to
time, be amended.
"Holders" means holders of Registrable Securities, other than
Xxxx and Xxxxx Xxxxxxx Family Trust, Xxxxx X. Xxxxxxx and Xxx X Xxxxxxx JTWROS,
Xxxx Xxxxxxx and Xxxxx Xxxxxxx and each of their respective Affiliates, only to
the extent that each such holder has agreed in a writing to be bound by the
provisions of this Article 11 and has delivered such writing to Parent within
sixty (60) days following the Closing and has promptly delivered information as
to such holder to Parent as Parent shall reasonably request so as to prepare the
Registration Statement.
"indemnified party" has the meaning set forth in Section
11.4(c).
"indemnifying party" has the meaning set forth in Section
11.4(c).
"Other Stockholders" means Persons other than Holders, who, by
virtue of agreements with Parent or any of its Affiliates, whether entered into
prior to, on, or after the date hereof, are entitled to include securities of
Parent in the Registration Statement.
"Parent" has the meaning set forth in the preamble and shall
also include Parent's successors.
"Permitted Interruption" has the meaning set forth in Section
11.5.
"Prospectus" means the prospectus included in the Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to such prospectus, and in each case including all
material incorporated by reference therein.
"Registrable Securities" means the following percentage of the
shares of Parent Common Stock issued to each Holder pursuant to this Agreement
upon distribution of the Escrow Shares: (i) during the period beginning on the
182nd day and ending on the 273rd day
50
after the Closing Date, 10% of such shares and (ii) during the period beginning
on the 274th day and ending on the 365th day after the Closing Date, an
additional 10% of such shares; provided, however, that such percentage shall not
carry over from clause (i) to clause (ii), such that if any of the Registrable
Securities covered by clause (i) remain unsold at the commencement of the period
specified in clause (ii), they may not be sold during such period pursuant to
the Registration Statement.
"Registration Expenses" means any and all expenses incident to
performance of or compliance by Parent with this Article, including without
limitation: (i) all SEC or National Association of Securities Dealers, Inc.
registration and filing fees, (ii) all fees and expenses incurred by Parent in
connection with compliance with state securities or blue sky laws, (iii) all
expenses incurred by Parent of preparing, word processing, printing and
distributing the Registration Statement, any Prospectus, and any amendments or
supplements thereto, (iv) the fees and disbursements of counsel for Parent and
(v) the fees and disbursements of the independent public accountants of Parent,
including the expenses of any special audits, but excluding (x) fees and
expenses of counsel to the Holders and (y) any brokers commissions or similar
fees and transfer taxes relating to the sale or disposition of Registrable
Securities by a Holder.
"Registration Period" has the meaning set forth in Section
11.2.
"Registration Statement" means Parent's "shelf" registration
statement that covers the resale, to be made on a continuous basis, of all of
the shares of Parent Common Stock that constitute Registrable Securities (and
may include other securities of Parent held by Other Stockholders) on an
appropriate registration statement form, under Rule 415 under the Securities
Act, or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
11.2 Registration Statement.
(a) Parent shall prepare and file the Registration Statement
with the SEC and shall use commercially reasonable efforts to cause the
Registration Statement to be declared effective by the SEC within 182
days of the Closing Date and to remain effective until the earlier of
the (i) the 365th day following the Closing Date and (ii) the date on
which all Registrable Securities covered by such Registration Statement
have been sold (the "Registration Period"). The resale of shares of
Registrable Securities pursuant to the Registration Statement shall not
be underwritten.
(b) Parent shall pay all Registration Expenses in connection
with the registration pursuant to this Section 11.2. Each Holder shall
pay (i) all brokers commissions or similar fees and transfer taxes, if
any, related to sales of Registrable Securities by such Holder and (ii)
the fees and expenses of counsel to the Holders, if any, pro rata in
proportion to the number of Registrable Securities to be sold by such
Holder pursuant to the Registration Statement in relation to all
Registrable Securities to be sold pursuant to the Registration
Statement.
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(c) In addition to the Registrable Securities, Parent may
include in the Registration Statement securities held by Other
Stockholders.
11.3 Registration Procedures.
(a) In connection with the obligations of Parent with respect
to the Registration Statement, Parent shall:
(i) prepare and file with the SEC the Registration
Statement on an appropriate form under the Securities Act,
which form (x) shall be selected by Parent and (y) shall be
available for the resale of the Registrable Securities by the
selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable
form;
(ii) prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statements
as may be necessary to keep the Registration Statement
effective for the Registration Period and cause each
Prospectus to be supplemented by any required prospectus
supplement and cause any supplement to be filed pursuant to
Rule 424 under the Securities Act;
(iii) furnish to each Holder of Registrable
Securities, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any supplement
thereto and such other documents as such Holder may reasonably
request, in order to facilitate the public sale or other
disposition of the Registrable Securities; and Parent consents
to the use of such Prospectus and any amendment or supplement
thereto in accordance with applicable law and the terms hereof
by each of the selling Holders of Registrable Securities in
connection with the offering and sale of the Registrable
Securities in accordance with the plan and manner of
distribution as described in the Prospectus;
(iv) use its reasonable best efforts to register or
qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions as any
selling Holder of Registrable Securities shall reasonably
request in writing by the time the Registration Statement is
filed with the SEC, and do any and all other acts and things
that may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction
of such Registrable Securities owned by such Holder; provided,
however, that Parent shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to
qualify but for this Section 11.3(a)(iv), (ii) file any
general consent to service of process or (iii) subject itself
to taxation in any such jurisdiction if it is not otherwise so
subject;
(v) promptly notify each Holder of Registrable
Securities and, if requested by any such Holder, confirm such
advice in writing (i) when the Registration Statement has
become effective and when any post-effective amendment thereto
has been filed and becomes effective, (ii) of any request by
52
the SEC or any state securities authority for amendments and
supplements to the Registration Statement and its Prospectus
or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any
state securities authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose, or of any notification
with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and in any such
case, Parent shall make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement and provide immediate notice to each
Holder of the withdrawal of any such order;
(vi) upon request, furnish to each Holder, without
charge, at least one conformed copy of the Registration
Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits
thereto);
(vii) cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities sold and not bearing any
restrictive legends and enable such Registrable Securities to
be in such denominations and registered in such names as the
selling Holders may reasonably request at least three business
days prior to the delivery of any Registrable Securities sold
under the Registration Statement;
(viii) upon the occurrence of any event during the
Registration Period that makes any statement made in the
Registration Statement or the Prospectus untrue in any
material respect or that requires the making of any changes in
the Registration Statement or Prospectus so that they will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading,
Parent shall immediately notify each selling Holder and use
its commercially reasonable efforts to prepare and file with
the SEC a supplement or post-effective amendment to the
respective Registration Statement or the Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading;
(ix) make available for inspection by one
representative designated by the Holders, at reasonable times
and in a reasonable manner, all financial and other records,
pertinent documents and properties of Parent, and cause the
respective officers, directors and employees of Parent to
supply all information reasonably requested by any such
representative as shall be necessary to conduct a reasonable
investigation within the meaning of the Securities Act;
provided, that, for the purpose of such investigation, such
representative and the Holders have entered into a
confidentiality agreement in a form satisfactory to Parent;
and
53
(x) if reasonably requested by any Holder covered by
the Registration Statement, promptly incorporate in a
Prospectus supplement such information with respect to such
Holder as such Holder reasonably requests to be included
therein.
(b) Parent may require each Holder to furnish to Parent such
information regarding the Holder and evidence of its compliance with
the terms of this Agreement and applicable laws and regulations as
Parent may from time to time reasonably request in writing. Each Holder
agrees to distribute Registrable Securities only in the manner
described in the Registration Statement, which shall be substantially
as set forth in the Plan of Distribution attached as Addendum I. Each
Holder represents and warrants that it has not held any position or
office or had any other material relationship with Parent (or its
predecessors or affiliates) during the three years prior to the date
hereof. Each Holder further represents and warrants that the foregoing
information is accurate and complete and that the securities to be
offered pursuant to the Registration Statement will include only
Registrable Securities. Each Holder agrees to promptly notify Parent of
any inaccuracies or changes in the information provided to Parent that
may occur subsequent to the date hereof at any time while the
Registration Statement remains effective. Each Holder authorizes Parent
to include such information (without independently verifying the
accuracy or completeness thereof) in the Registration Statement and/or
other documents prepared or filed in connection therewith or in
connection with sales of Registrable Securities thereunder. Each Holder
acknowledges that it understands its obligation to comply with the
provisions of the Exchange Act and the rules thereunder relating to
stock manipulation, particularly Regulation M thereunder (or any
successor rules or regulations), in connection with any offering of
Registrable Securities pursuant to the Registration Statement. Each
Holder agrees that neither it nor any person acting on its behalf will
engage in any transaction in violation of such provisions. When
Registrable Securities have been transferred pursuant to a Registration
Statement, each Holder shall provide notice to Parent specifying the
identity of such transferring Holder and the number of shares of
Registrable Securities so transferred, and certifying that (i) the
prospectus delivery requirements of the Securities Act have been
satisfied, (ii) the Holder is named as a "Selling Security Holder" in
the applicable Registration Statement, (iii) the aggregate number of
shares of Parent Common Stock transferred are not in excess of those
listed in the Registration Statement as being offered by such Holder
during the period in which those Registrable Securities may be sold,
and (iv) the transfer was described in the section captioned "Plan of
Distribution" in the Registration Statement.
(c) Each Holder agrees to, as expeditiously as possible, (i)
notify Parent of the occurrence of any event that makes any statement
made in the Registration Statement or Prospectus regarding such Holder
untrue in any material respect or that requires the making of any
changes in the Registration Statement or Prospectus regarding such
Holder so that, in such regard, (A) in the case of the Registration
Statement, it will not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (B) in the
case of the Prospectus, it will not contain any untrue statement of
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and (ii)
54
provide Parent with such information as may be required to enable
Parent to prepare a supplement or post-effective amendment to the
applicable Registration Statement or a supplement to such Prospectus.
(d) Each Holder agrees that, upon receipt of any notice from
Parent of the happening of any event of the kind described in Section
11.3(a)(viii) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration
Statement until such Holder's receipt of the copies of the supplemented
or amended Prospectus contemplated by Section 11.3(a)(viii) hereof,
and, if so directed by Parent, such Holder will deliver to Parent all
copies in its possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. Each Holder
agrees that in the event it receives any notice from Parent under
Section 11.3(a)(viii), it will not disclose such fact to any Person.
11.4 Indemnification and Contribution.
(a) Parent agrees to indemnify and hold harmless each Holder
whose Registrable Securities are included in the Registration Statement
and each Person, if any, who controls such Holder within the meaning of
the Securities Act, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by such Holder or any such controlling Person in
connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto) pursuant to which Registrable Securities were registered under
the Securities Act, including all documents incorporated therein by
reference, or caused by 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, or caused by any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (as amended or supplemented if Parent has furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished
to Parent in writing by any selling Holder or its representatives
expressly for use therein; provided that, with respect to any untrue
statement or omission or alleged untrue statement or omission made in
any preliminary Prospectus, or Prospectus, the indemnity agreement
contained in this Section 11.4(a) will not inure to the benefit of any
such Person to the extent that any such losses, claims, damages or
liabilities of such Person result from the fact that there was not sent
or given to any Person who purchased Registrable Securities, at or
prior to the written confirmation of the sale of Registrable Securities
to such Person, a copy of the Prospectus, as then amended or
supplemented (exclusive of material incorporated by reference), if
Parent had previously furnished copies thereof to such Person.
55
(b) Each Holder of Registrable Securities included in the
Registration Statement agrees, severally and jointly, to indemnify and
hold harmless Parent and the other selling Holders and Other
Stockholders participating in the Registration Statement, and each of
their respective directors, officers who sign the Registration
Statement and each Person, if any, who controls Parent and any other
selling Holder or Other Stockholder within the meaning of the
Securities Act to the same extent as the foregoing indemnity from
Parent, but only with respect to information furnished to Parent in
writing by such Holder expressly for use in the Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto); provided that, with respect to any untrue
statement or omission or alleged untrue statement or omission made in
any preliminary Prospectus, or Prospectus, the indemnity agreement
contained in this Section 11.4(b) will not inure to the benefit of any
such Person to the extent that any such losses, claims, damages or
liabilities of such Person result from the fact that there was not sent
or given to any Person who purchased Registrable Securities, at or
prior to the written confirmation of the sale of Registrable Securities
to such Person, a copy of the Prospectus, as then amended or
supplemented (exclusive of material incorporated by reference), if
Parent or Holder had previously furnished copies thereof to such
Person.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of
which indemnity may be sought pursuant to either paragraph (a) or
paragraph (b) above, such Person (the "indemnified party") shall
promptly notify the Person against whom such indemnity may be sought
(the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one
separate firm (in addition to any local counsel) for Parent, its
directors, its officers who sign the Registration Statement and each
Person, if any, who controls Parent within the meaning of the
Securities Act and (b) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Holders and Other
Stockholders and all Persons, if any, who control any Holders or Other
Stockholders within the meaning of the Securities Act, and that all
such fees and expenses shall be reimbursed as they are incurred. In
such case involving the Holders and Other Stockholders and such Persons
who control Holders and Other Stockholders, such firm shall be
designated in writing by the holders of a majority of the Registrable
Securities and other shares included in the registration then
outstanding. In all other cases, such firm shall be designated by
Parent. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld) but,
56
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered
into, and (iii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance
with such request prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in
respect of which such indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified
party, unless such settlement (i) includes an unconditional release of
such indemnified party from all liability on claims that are the
subject matter of such proceeding; provided that such unconditional
release may be subject to a parallel release of a claimant or plaintiff
by such indemnified party from all liability in respect of claims or
counterclaims asserted by such indemnified party, and (ii) does not
include a statement as to, or an admission of, fault, culpability or a
failure to act by or on behalf of any indemnified party; provided,
further, that, as to each indemnified party withholding such consent,
the maximum amount of the losses, damages or liabilities in respect of
which such indemnified party may seek indemnification hereunder with
respect to such claim is limited to the amount that the indemnifying
party would have paid to or on behalf of such indemnified party had
such indemnified party consented to such settlement.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 11.4 is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or
liabilities, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of Parent and the
Holders and Other Stockholders shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by Parent or by the Holders or
Other Stockholders and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Holders' obligations to contribute pursuant to this
Section 11.4(d) are several in proportion to the aggregate amount of
Registrable Securities of such Holder that were registered pursuant to
the Registration Statement.
57
(e) Parent and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 11.4 were determined
by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages and liabilities referred to
in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of fraudulent misrepresentation.
(f) The indemnity and contribution provisions contained in
this Section 11.4 shall remain operative and in full force and effect
regardless of (i) any termination of this Article or this Agreement,
(ii) any investigation made by or on behalf of any Holder or any Person
controlling any Holder, or by or on behalf of Parent, its officers or
directors or any Person controlling Parent, and (iii) any sale of
Registrable Securities pursuant to the Registration Statement.
11.5 Permitted Interruption. Notwithstanding any other provision of
this Agreement, Parent shall not be required to file the Registration Statement,
any amendment or post-effective amendment thereto or Prospectus supplement, or
to supplement or amend the Registration Statement or otherwise facilitate the
resale of Registrable Securities, and Parent shall be free to take or omit to
take any other action that would result in the impracticality of any such
filing, supplement or amendment, (i) in connection with pending corporate
developments, public filings with the SEC and similar events, for a period not
to exceed 30 days in any three-month period or an aggregate of 90 days (whether
or not consecutive) in any twelve-month period or (ii) in connection with any
pending or potential acquisitions, financings or similar transactions, for a
period not to exceed 60 days in any three-month period or 90 days (whether or
not consecutive) in any twelve-month period (any period described in this
Section 11.5 during which Parent is not required to make such filing, amendment
or supplement is herein referred to as a "Permitted Interruption"). If a
Permitted Interruption affects the Registration Statement during the Period such
Registration Statement remains effective, Parent agrees to notify each of the
Holders so affected by a Permitted Interruption as promptly as practicable upon
each of the commencement and the termination of each Permitted Interruption.
Parent shall not be required in the notice of a Permitted Interruption to
disclose the cause for such Permitted Interruption, and each Holder agrees that
it will not disclose receipt of a notice of Permitted Interruption to any
Person. Each Holder agrees that, upon receipt of any notice from Parent, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the Registration Statement until such Holder's receipt of Parent's notice as
to the termination of the Permitted Interruption. In the event of a Permitted
Interruption, the duration of the applicable period in which the Registration
Statement is to remain effective, shall be extended by the number of days of
such period and, in the event the Permitted Interruption occurs between the 182
and 273 day after the Closing Date, the registration period set forth in (ii) of
the definition of "Registrable Securities" will be delayed by the number of says
added to the 273rd day.
11.6 Miscellaneous.
58
(a) Amendments and Waivers. Notwithstanding anything to the
contrary in any other Article of this Agreement, this Article may not
be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless Parent
has obtained the written consent of Holders of at least a majority of
the Registrable Securities then outstanding affected by such amendment,
modification, supplement, waiver or consent; provided, however, that no
amendment, modification, supplement, waiver or consents to any
departure from the provisions of Section 11.4 hereof shall be effective
as against any Holder unless consented to in writing by such Holder.
(b) Successors and Assigns. This Article binds and inures to
the benefit of the Holders and Parent and its successors. No Holder may
assign any of the rights created by this Agreement.
(c) Severability. In the event that any one or more of the
provisions contained in this Article, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
11.7 Registration of Option Shares. Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Assumed Options, and, as soon as
practicable after the Effective Time, Parent shall file a registration statement
on Form S-8 (or other appropriate form) with respect to the shares of Parent
Common Stock subject to the Assumed Options, and shall use its best efforts to
maintain the effectiveness of such registration statement for so long as any of
the Assumed Options remain outstanding.
ARTICLE 12
MISCELLANEOUS
12.1 Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all legal and other fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby (the "Deal
Expenses") through the Closing Date shall be paid by the Party incurring such
Deal Expenses. Deal Expenses of Stockholders shall not be borne by the Company,
Parent or Sub, and shall be paid by the Stockholders.
12.2 Headings. The section headings herein are for convenience of
reference only, do not constitute part of this Agreement, and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
12.3 Notices. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand, recognized overnight delivery service or facsimile transmission
(provided that any facsimile transmission is also sent to the recipient on the
same day by overnight delivery service) or mailed by registered or certified
mail, postage prepaid and return receipt requested, as follows:
59
If to the Company or the Stockholders before the Closing Date, or the
Stockholders after the Closing Date:
Sterling Medivations, Inc.
000 Xxxxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
00 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Stockholder Representatives:
Xxxx Xxxxxxx
Sterling Medivations, Inc.
0000 X. 0xx Xx.
Xxx Xxxx, XX 00000
Phone: (408) 297-9473 ext. 0
Fax: (000) 000-0000
and
Xxxx Xxxxxxx
Satellite Healthcare, Inc.
000 Xxxxxxxxxx Xxx
Xxxxxxx Xxxx, XX 00000-0000
Phone: (650) 367-9504 ext. 187
Fax: (000) 000-0000
60
If to Parent or Sub:
SpectRx, Inc.
0000X Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxx
Attn: Xxxx X. Xxxxxxx,
Chairman and Chief Executive Officer
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
0000 XxxXxxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxx X. Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
or such other address as shall be furnished in writing by such Party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or four (4) days after the date so mailed; provided,
however, that any notice or communication changing any of the addresses set
forth above shall be effective and deemed given only upon its receipt.
12.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure the benefit of the Parties hereto (and with respect to
the Major Stockholders, their personal representatives and heirs) and their
respective successors and permitted assigns, and the provisions of Article 10
hereof shall inure to the benefit of the indemnified parties referred to
therein; provided, however, that neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any of the Parties hereto
without the prior written consent of the other Parties. Notwithstanding the
foregoing, Parent and Sub shall have the unrestricted right to assign this
Agreement and to delegate all or any part of their obligations hereunder to any
Affiliate of Parent, but in such event Parent shall remain fully liable for the
performance of all of such obligations in the manner prescribed in this
Agreement. The rights and obligations of Parent and Sub under this Agreement
shall survive a change-in-control or other sale or merger of Parent, and
continue to bind Parent or its successor notwithstanding any such transaction.
12.5 Entire Agreement. This Agreement (including the Schedules hereto)
and the Transaction Documents embody the entire agreement and understanding of
the Parties with respect to the transactions contemplated hereby and supersede
all prior written or oral commitments, arrangements or understandings between
the Parties with respect thereto and all prior drafts of this Agreement and the
Transaction Documents. There are no restrictions, agreements, promises,
warranties, covenants or undertakings with respect to the transactions
contemplated hereby other than those expressly set forth herein or in the
Transaction Documents.
61
12.6 Waiver and Amendments. The Company, Parent and Sub may by written
notice to the other Parties: (a) extend the time for the performance of any of
the obligations or other actions of the other Parties; (b) waive any
inaccuracies in the representations or warranties of the other Parties contained
in this Agreement; (c) waive compliance with any of the covenants of the other
Parties contained in this Agreement; (d) waive performance of any of the
obligations of the other Parties created under this Agreement; or (e) waive
fulfillment of any of the conditions to its own obligations under this
Agreement. The waiver by any Party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach, whether or not similar. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Parties hereto.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
12.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
any choice or conflict of law provision or rule that would cause the laws of any
other jurisdiction to apply.
12.9 Accounting Terms. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP.
12.10 Schedules. Disclosure of any matter in any Schedule hereto or in
the Financial Statements shall be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
12.11 Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby. To the extent permitted by applicable law, each Party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
12.12 Time Is Of the Essence. Time is of the essence for purposes of
this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
62
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
STERLING MEDIVATIONS, INC.
By: /s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------
Title: Chief Executive Officer
----------------------------
Attest: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
-----------------------------
Title:
----------------------------
SPECTRX, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
----------------------------------
Title: Executive VP, CFO and Secretary
---------------------------------
Attest: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
-----------------------------
Title:
----------------------------
SM MERGER SUB, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
-----------------------------
Title: Secretary and Treasurer
---------------------------
Attest: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
-----------------------------
Title:
----------------------------
63
THE MAJOR STOCKHOLDERS:
Personally and on behalf of the Xxxx and Xxxxx
Xxxxxxx Family Trust
/s/ Xxxxx Xxxxxxx /s/ Xxxx Xxxxxxx
------------------------------------ ---------------------------------
Witness Name: Xxxx Xxxxxxx
Personally and on behalf of Xxx X. Xxxxxxx
/s/ Xxx Xxxxxxx /s/ Xxxxx Xxxxxxx
------------------------------------ ------------------------------------
Witness Name: Xxxxx Xxxxxxx
SATELLITE HEALTHCARE, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------------ -------------------------------
Witness Name: Xxxx Xxxxxxx
-----------------------------
Title: Vice President
-----------------------------
64
ADDENDUM I
PLAN OF DISTRIBUTION
The selling security holders may sell the securities from time to time
on any stock exchange or automated interdealer quotation system on which the
securities are listed, in the over-the-counter market, in privately negotiated
transactions or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at prices otherwise negotiated. The selling security holders may sell the
securities by one or more of the following methods:
(a) block trades in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
(b) purchases by a broker or dealer as principal and resale by the
broker or dealer for its own account;
(c) ordinary brokerage transactions and transactions in which the
broker solicits purchases;
(d) privately negotiated transactions;
(e) short sales;
(f) through option transactions; and
(g) any combination of any of these methods of sale.
The selling security holders may engage brokers and dealers, and any
brokers or dealers may arrange for other brokers or dealers to participate in
effecting sales of the securities. These brokers, dealers or underwriters may
act as principals, or as an agent of a selling security holder. Broker-dealers
may agree with a selling security holder to sell a specified number of the
securities at a stipulated price per security. If the broker-dealer is unable to
sell securities acting as agent for a selling security holder, it may purchase
as principal any unsold securities at the stipulated price. Broker-dealers who
acquire securities as principals may thereafter resell the securities from time
to time in transactions on any stock exchange or automated interdealer quotation
system on which the securities are then listed, at prices and on terms then
prevailing at the time of sale, at prices related to the then-current market
price or in negotiated transactions. Broker-dealers may use block transactions
and sales to and through broker-dealers, including transactions of the nature
described above.
To the extent required under the Securities Act of 1933, as amended,
the aggregate amount of selling security holders' securities being offered and
the terms of the offering, the names of any agents, brokers, or dealers and any
applicable commission with respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any dealers, brokers or agents participating
in the distribution of the securities may receive compensation in
the form of underwriting discounts, concessions, commissions or fees from a
selling security holder and/or purchasers of selling security holders'
securities, for whom they may act (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling security holders and any brokers, dealers or agents that
participate in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, and
any discounts, concessions, commissions or fees received by them and any profit
on the resale of the securities sold by them may be deemed to be underwriting
discounts and commissions.
A selling security holder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the
securities in the course of hedging the positions they assume with that selling
security holder, including, without limitation, in connection with distributions
of the securities by those broker-dealers.
The selling security holders and other persons participating in the
sale or distribution of the securities will be subject to applicable provisions
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including Regulation M. This regulation may limit the
timing of purchases and sales of any of the securities by the selling security
holders and any other person. The anti-manipulation rules under the Securities
Exchange Act of 1934, as amended, may apply to sales of securities in the market
and to the activities of the selling security holders and their affiliates.
Furthermore, Regulation M may restrict the ability of any person engaged in the
distribution of the securities to engage in market-making activities with
respect to the particular securities being distributed for a period of up to
five business days before the distribution. These restrictions may affect the
marketability of the securities and the ability of any person or entity to
engage in market-making activities with respect to the securities.
Parent has agreed to indemnify in certain circumstances the selling
security holders against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. The selling security holders have agreed to
indemnify Parent in certain circumstances against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
2
