===============================================================================
AGREEMENT AND PLAN OF REORGANIZATION
between:
XXXXX LABS, INC.
A Utah Corporation,
AND
CELL PATHWAYS, INC.,
A Delaware Corporation
Dated as of June 22, 1998
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TABLE OF CONTENTS
PAGE
1. DESCRIPTION OF TRANSACTION..........................................1
1.1 Formation of Merger Subsidiaries...........................1
1.2 The Mergers................................................2
1.3 Closing; Effective Time....................................2
1.4 Effect of the Mergers......................................2
1.5 Subsequent Actions.........................................3
1.6 Certificate of Incorporation and Bylaws;
Directors and Officers..............................3
1.7 Conversion of Stock; Options and Warrants..................4
1.8 CPI Charter Amendment......................................8
2. REPRESENTATIONS AND WARRANTIES OF TARGET............................8
2.1 Due Organization; Subsidiaries.............................8
2.2 Articles of Incorporation and Bylaws.......................9
2.3 Capitalization.............................................9
2.4 SEC Filings; Financial Statements.........................10
2.5 Absence of Changes........................................11
2.6 Title to Assets...........................................11
2.7 Real Property; Equipment; Leasehold.......................11
2.8 Proprietary Assets........................................11
2.9 Material Contracts........................................12
2.10 Liabilities...............................................14
2.11 Compliance with Legal Requirements........................14
2.12 Certain Business Practices................................14
2.13 Governmental Authorizations...............................14
2.14 Tax Matters...............................................14
2.15 Employee and Labor Matters; Benefit Plans.................15
2.16 Environmental Matters.....................................17
2.17 Insurance.................................................18
2.18 Transactions with Affiliates..............................18
2.19 Legal Proceedings; Orders.................................18
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TABLE OF CONTENTS
PAGE
2.20 Authority; Binding Nature of Agreement....................19
2.21 No Existing Discussions...................................19
2.22 Vote Required.............................................19
2.23 Non-Contravention; Consents...............................19
2.24 Fairness Opinion..........................................20
2.25 Valid Issuance; Reservation of Shares.....................20
2.26 Financial Advisor.........................................20
2.27 Full Disclosure...........................................20
3. REPRESENTATIONS AND WARRANTIES OF CPI AND HOLDCO...................21
3.1 Organization; Good Standing; Qualification................21
3.2 Certificate of Incorporation and Bylaws...................21
3.3 Holdco....................................................21
3.4 Capitalization............................................21
3.5 Financial Statements......................................23
3.6 Absence of Changes........................................23
3.7 Valid Issuance............................................24
3.8 Title to Assets...........................................24
3.9 Real Property; Equipment; Leasehold.......................24
3.10 Proprietary Assets........................................24
3.11 Material Contracts........................................25
3.12 Liabilities...............................................27
3.13 Compliance with Legal Requirements........................27
3.14 Certain Business Practices................................27
3.15 Governmental Authorizations...............................27
3.16 Tax Matters...............................................27
3.17 Employee and Labor Matters; Benefit Plans.................28
3.18 Environmental Matters.....................................30
3.19 Insurance.................................................30
3.20 Transactions with Affiliates..............................31
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TABLE OF CONTENTS
PAGE
3.21 Legal Proceedings; Orders.................................31
3.22 Authority; Binding Nature of Agreement....................31
3.23 No Existing Discussions...................................32
3.24 Vote Required.............................................32
3.25 Non-Contravention; Consents...............................32
3.26 Financial Advisor.........................................33
3.27 Full Disclosure...........................................34
4. CERTAIN COVENANTS OF THE PARTIES...................................34
4.1 Access and Investigation; Confidentiality.................34
4.2 Operation of Target's Business............................34
4.3 Operation of CPI's Business...............................36
4.4 No Solicitation by Target.................................38
4.5 No Solicitation by CPI....................................39
5. ADDITIONAL COVENANTS OF THE PARTIES................................41
5.1 Registration Statements; Joint Proxy Statement............41
5.2 CPI Stockholders' Meeting.................................42
5.3 Target Stockholders' Meeting..............................43
5.4 Regulatory Approvals......................................44
5.5 Continuation of Target D&O Insurance......................44
5.6 Additional Agreements.....................................44
5.7 Disclosure................................................44
5.8 Tax Matters...............................................45
5.9 Resignation of Officers and Directors.....................45
5.10 FIRPTA Matters............................................45
5.11 Affiliate Agreements......................................45
5.12 Post Merger Holdco Board of Directors.....................45
5.13 Registration Rights.......................................45
5.14 CPI Redeemable Preferred Stock............................46
5.15 Market Stand-off Agreement................................46
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TABLE OF CONTENTS
PAGE
5.16 Nasdaq Listing............................................46
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CPI.........................46
6.1 Accuracy of Representations...............................46
6.2 Performance of Covenants..................................46
6.3 Effectiveness of Registration Statement...................47
6.4 Stockholder Approval......................................47
6.5 Documents.................................................47
6.6 No Material Adverse Change................................47
6.7 No Restraints.............................................47
6.8 Delivery of Affiliates' Agreements........................47
6.9 Consents..................................................47
6.10 Registration..............................................47
6.11 Nasdaq Listing............................................48
6.12 No Governmental Litigation................................48
6.13 No Other Litigation.......................................48
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TARGET......................48
7.1 Accuracy of Representations...............................48
7.2 Performance of Covenants..................................49
7.3 Effectiveness of Registration Statement...................49
7.4 Stockholder Approval......................................49
7.5 Consents..................................................49
7.6 Documents.................................................49
7.7 No Material Adverse Change................................49
7.8 Directors.................................................50
7.9 Registration..............................................50
7.10 Nasdaq Listing............................................50
7.11 Delivery of Affiliates' Agreements........................50
7.12 No Restraints.............................................50
7.13 No Governmental Litigation................................50
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TABLE OF CONTENTS
PAGE
7.14 No Other Litigation.......................................50
7.15 Market Stand-Off Agreements...............................51
8. TERMINATION........................................................51
8.1 Termination...............................................51
8.2 Effect of Termination.....................................52
8.3 Expenses; Termination Fees................................52
9. MISCELLANEOUS PROVISIONS...........................................53
9.1 Amendment.................................................53
9.2 Waiver....................................................53
9.3 No Survival of Representations and Warranties.............54
9.4 Entire Agreement; Counterparts; Applicable Law............54
9.5 Jury Waiver...............................................54
9.6 Attorneys' Fees...........................................54
9.7 Assignability.............................................54
9.8 Notices...................................................54
9.9 Cooperation...............................................55
9.10 Construction..............................................56
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EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Form of Certificate of Incorporation of Holdco Merger Company
Exhibit C - Form of CPI Charter Amendment to Restated Certificate of
Incorporation of Cell Pathways, Inc.
vi
AGREEMENT AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of June 23, 1998, by and between CELL PATHWAYS, INC., a Delaware
corporation ("CPI") and XXXXX LABS, INC., a Utah corporation ("Target"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
WHEREAS, Holdco Company ("Holdco") is a Delaware corporation to be
formed for the purpose of effectuating the transactions contemplated hereby;
WHEREAS, the Boards of Directors of CPI and Target have each determined
that it is in the best interests of their respective stockholders that each
corporation become a subsidiary of Holdco pursuant to the Mergers (as defined in
Section 1.2 below) and desire to make certain representations, warranties and
agreements in connection with the Mergers;
WHEREAS, the Boards of Directors of CPI and Target have each determined
that the Mergers and the other transactions contemplated hereby are consistent
with, and in furtherance of, their respective business strategies and goals and
have each approved the Mergers upon the terms and conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the
formation of Holdco and the Mergers shall constitute one or more tax-free
transactions under the Internal Revenue Code of 1986, as amended (the "Code");
and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Description of Transaction.
1.1 Formation of Merger Subsidiaries. CPI will cause the following to
occur: (i) Holdco to be formed under the Delaware General Corporation Law
("DGCL"), (ii) a wholly owned subsidiary of Holdco to be formed to be merged
into CPI ("C-Sub"); and (iii) a wholly owned subsidiary of Holdco to be formed
to be merged into Target ("T-Sub," and together with C-Sub, the "Merger
Subsidiaries"), in each case as set forth in Section 1.2 hereof. Each of the
Merger Subsidiaries will be formed solely to facilitate the Mergers and will
conduct no business or activity other than in connection with the Mergers. CPI
and Target will cause (i) Holdco and the Merger Subsidiaries to execute and
deliver a joinder to this Agreement pursuant to Section 251 of the DGCL, and
(ii) Holdco to execute formal written consents under Section 228 of the DGCL as
the sole stockholder of each of the Merger Subsidiaries, approving the
execution, delivery and performance of this Agreement by each of the Merger
Subsidiaries.
1
1.2 The Mergers. At the Effective Time (as defined in Section 1.3
hereof) and subject to and upon the terms and conditions of this Agreement and
the DGCL: (i) C-Sub shall be merged with and into CPI, the separate corporate
existence of C-Sub shall cease, and CPI shall continue as the surviving
corporation that shall be a wholly owned subsidiary of Holdco; and (ii) T-Sub
shall be merged with and into Target, the separate corporate existence of T-Sub
shall cease, and Target shall continue as the surviving corporation that shall
be a wholly owned subsidiary of Holdco. The mergers described in clauses (i) and
(ii) of the immediately preceding sentence are herein collectively referred to
as the "Mergers" and each individually as a "Merger." CPI and Target, as the
surviving corporations after the Mergers, are herein collectively referred to as
the "Surviving Corporations" and each individually as a "Surviving Corporation"
and C-Sub and T-Sub as the non-surviving corporations after the Mergers are
herein sometimes collectively referred to as the "Merged Corporations" and each
as a "Merged Corporation." Holdco, CPI, Target, and, individually after entering
into a joinder to this Agreement, Holdco, C-Sub and T-Sub, are herein referred
to collectively as the "Parties" and each individually as a "Party."
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cell Pathways, Inc at 000 Xxxxxxxxxx Xxxxx, Xxxxxxx, XX 00000 at 10:00 a.m.
on a date to be agreed by CPI and Target (the "Closing Date"), which shall be no
later than the tenth business day after the satisfaction or waiver of the
conditions set forth in Sections 6 and 7. Contemporaneously with or as promptly
as practicable after the Closing, the parties shall cause the Mergers to be
consummated concurrently by filing a properly executed Certificate of Merger
with the Secretary of State of the State of Delaware and properly executed
Articles of Merger with the Secretary of State of Utah, respectively, with
respect to each of the Mergers. The Mergers shall take effect at the time such
Certificate of Merger and Articles of Merger are filed with the Secretaries of
State of the State of Delaware and the State of Utah, respectively (the
"Effective Time").
1.4 Effect of the Mergers. At the Effective Time, the effect of the
Mergers shall be as provided in the applicable provisions of DGCL and the Utah
Business Corporation Act, respectively. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (a) all the property,
rights, privileges, powers and franchises of CPI and C-Sub shall continue with,
or vest in, as the case may be, CPI as the Surviving Corporation, and all debts,
liabilities and duties of CPI and C-Sub shall continue to be, or become, as the
case may be, the debts, liabilities and duties of CPI as the Surviving
Corporation and (b) all the property, rights, privileges, powers and franchises
of Target and T-Sub shall continue with, or vest in, as the case may be, Target
as the Surviving Corporation, and all debts, liabilities and duties of Target
and T-Sub shall continue to be, or become, as the case may be, the debts,
liabilities and duties of Target as the Surviving Corporation. As of the
Effective Time, each of the Surviving Corporations shall be a direct
wholly-owned subsidiary of Holdco. At the Effective Time, Holdco shall assume
the 1997 Equity Incentive Plan of CPI, the 1997 Non-Employee Directors Stock
Option Plan of CPI, the approved Employee Stock Purchase Plan of CPI and the
Cell Pathways, Inc. 1995 Stock Award Plan and all stock options outstanding
under such plans. At the Effective Time, Holdco shall also assume the Target
1991 Stock Option Plan, the Target 1995 Stock Option Plan and the Target 1991
Special Directors Stock Option Plan (each a "Target Option Plan," and
collectively the "Target Option Plans") and all stock options outstanding under
such plans.
2
1.5 Subsequent Actions. If, at any time after the Effective Time,
either of the Surviving Corporations shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise in such Surviving Corporation its right, title or interest in, to or
under any of the rights, properties, privileges, franchises or assets of either
of its constituent corporations acquired or to be acquired by such Surviving
Corporation as a result of, or in connection with, one of the Mergers or
otherwise to carry out this Agreement, the officers and directors of such
Surviving Corporation shall be directed and authorized to execute and deliver,
in the name and on behalf of either of such constituent corporations, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties,
privileges, franchises or assets in such Surviving Corporation or otherwise to
carry out this Agreement.
1.6 Certificate of Incorporation and Bylaws; Directors and Officers.
(a) The respective Certificate of Incorporation of each of
C-Sub and T-Sub shall become the Certificates of Incorporation of CPI and
Target, respectively, as the Surviving Corporations.
(b) The respective Bylaws of each of C-Sub and T-Sub shall
become the Bylaws of CPI and Target, respectively, as the Surviving Corporation.
(c) The officers and directors of CPI immediately prior to the
Effective Time shall continue to serve in their respective positions of CPI as
the Surviving Corporation from and after the Effective Time. The officers and
directors of T-Sub immediately prior to the Effective Time shall serve in their
respective positions of Target as the Surviving Corporation from and after the
Effective Time. In addition, the officers of CPI immediately prior to the
Effective Time shall become the officers of Holdco at the Effective Time and the
directors of CPI immediately prior to the Effective Time together with the
persons to be designated pursuant to Section 5.12 below shall be the directors
of Holdco after the Effective Time.
(d) On the Effective Date, Holdco's Certificate of
Incorporation will be amended to change Holdco's name to "Cell Pathways, Inc."
and CPI's Certificate of Incorporation will be amended to change CPI's name to
"CPI, Inc."
3
1.7 Conversion of Stock; Options and Warrants.
The manner and basis of converting the shares of common stock and
preferred stock, where applicable, of the Surviving Corporations and of the
Merged Corporations at the Effective Time, by virtue of the Mergers and without
any action on the part of any of the Parties or the holder of any of such
securities, shall be as hereinafter set forth.
(a) Conversion of Shares.
(i) Each share of CPI Common Stock, par value $0.01
per share ("CPI Common Stock"), and CPI Preferred Stock, par value $0.01 per
share ("CPI Preferred Stock"), issued and outstanding immediately before the
Effective Time (excluding those held in the treasury of CPI and those owned by
Target) and all rights in respect thereof, shall at the Effective Time, without
any action on the part of any holder thereof, forthwith cease to exist and be
converted into the right to receive one share of common stock, par value $.01
per share, of Holdco ("Holdco Common Stock") (such ratio of Holdco Common Stock
to CPI Stock being herein referred to as the "CPI Exchange Ratio").
(ii) Each share of Target Common Stock, par value
$.005 per share ("Target Common Stock") issued and outstanding immediately
before the Effective Time (excluding those held in the treasury of Target and
those owned by CPI) and all rights in respect thereof, shall at the Effective
Time, without any action on the part of any holder thereof, forthwith cease to
exist and be converted into the right to receive .3631326 of a share of Holdco
Common Stock (such ratio of Holdco Common Stock to Target Common Stock being
herein referred to as the "Target Exchange Ratio"; and the CPI Exchange Ratio
and the Target Exchange Ratio being referred to herein collectively as the
"Exchange Ratios").
(iii) Commencing immediately after the Effective
Time, each certificate that, immediately prior to the Effective Time,
represented issued and outstanding shares of CPI Common Stock and CPI Preferred
Stock ("CPI Shares") or Target Common Stock ("Target Shares" and, together with
the CPI Shares, the "Shares"), shall evidence ownership of Holdco Common Stock
on the basis hereinbefore set forth, but subject to the limitations set forth in
this Section 1.7.
(b) Cancellation of Treasury Shares and of Outstanding Holdco
Common Stock.
(i) At the Effective Time, each share of CPI Common
Stock and CPI Preferred Stock held in the treasury of CPI or owned by Target
immediately prior to the Effective Time, and each share of Target Common Stock
held in the treasury of Target or owned by CPI immediately prior to the
Effective Time, shall be canceled and retired and no shares of stock or other
securities of Holdco or either of the Surviving Corporations shall be issuable,
and no payment or other consideration shall be made, with respect thereto.
(ii) At the Effective Time, any shares of Holdco
Common Stock issued prior to the Effective Time shall be canceled and retired
and no shares of stock or other securities of Holdco or any other corporation
shall be issuable, and no payment or other consideration shall be made, with
respect thereto.
4
(c) Conversion of Common Stock of the Merged Corporations into
Common Stock of the Surviving Corporations.
(i) At the Effective Time, each share of Common
Stock, par value $0.01 per share, of C-Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of Holdco, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of Common Stock of CPI,
par value $0.01 per share, as one of the Surviving Corporations (the "New CPI
Common Stock"). Immediately after the Effective Time and upon surrender by
Holdco of the certificate representing the shares of the common stock of C-Sub,
CPI as one of the Surviving Corporations shall deliver to Holdco an appropriate
certificate or certificates representing the New CPI Common Stock created by
conversion of the common stock of C-Sub owned by Holdco.
(ii) At the Effective Time, each share of Common
Stock, par value $0.01 per share, of T-Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of Holdco, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock of
Target, par value $0.01 per share, as one of the Surviving Corporations (the
"New Target Common Stock"). Immediately after the Effective Time and upon
surrender by Holdco of the certificate representing the shares of the common
stock of T-Sub, Target as one of the Surviving Corporations shall deliver to
Holdco an appropriate certificate or certificates representing the New Target
Common Stock created by conversion of the common stock of T-Sub owned by Holdco.
(d) Exchange of Shares Other Than Treasury Shares. Subject to
the terms and conditions hereof, at or prior to the Effective Time, Holdco shall
appoint an exchange agent to effect the exchange of Shares for Holdco Common
Stock in accordance with the provisions of this Section 1.7 (the "Exchange
Agent"). From time to time after the Effective Time, Holdco shall deposit, or
cause to be deposited, certificates representing Holdco Common Stock for
conversion of Shares in accordance with the provisions of Section 1.7(a) hereof
(such certificates, together with any dividends or distributions with respect
thereto, being herein referred to as the "Exchange Fund"). Commencing
immediately after the Effective Time and until the appointment of the Exchange
Agent shall be terminated, each holder of a certificate or certificates
theretofore representing Shares may surrender the same to the Exchange Agent,
and, after the appointment of the Exchange Agent shall be terminated, any such
holder may surrender any such certificate to Holdco. Such holder shall be
entitled upon such surrender to receive in exchange therefor a certificate or
certificates representing the number of full shares of Holdco Common Stock into
which the Shares theretofore represented by the certificate or certificates so
surrendered shall have been converted in accordance with the provisions of
Section 1.7(a) hereof, together with a cash payment in lieu of fractional
shares, if any, in accordance with Section 1.7(f) hereof, and all such shares of
Holdco Common Stock shall be deemed to have been issued at the Effective Time.
Until so surrendered and exchanged, each outstanding certificate that, prior to
the Effective Time, represented issued and outstanding Shares shall be deemed
for all corporate purposes of Holdco, other than the payment of dividends and
other distributions, if any, to evidence ownership of the number of full shares
of Holdco Common Stock into which the Shares theretofore represented thereby
shall have been converted at the Effective Time. Unless and until any such
certificate theretofore representing Shares is so surrendered, no dividend or
other distribution, if any, payable to the holders of record of Holdco Common
Stock as of any date subsequent to the Effective Time shall be paid to the
holder of such certificate in respect thereof. Upon the surrender of any such
certificate theretofore representing Shares, however, the record holder of the
certificate or certificates representing shares of Holdco Common Stock issued in
exchange therefor shall receive from the Exchange Agent or from Holdco, as the
case may be, payment of the amount of dividends and other distributions, if any,
which as of any date subsequent to the Effective Time and until such surrender
shall have become payable with respect to such number of shares of Holdco Common
Stock ("Pre-Surrender Dividends"). No interest shall be payable with respect to
the payment of Pre-Surrender Dividends upon the surrender of certificates
theretofore representing Shares. After the appointment of the Exchange Agent
shall have been terminated, such holders of Holdco Common Stock that have not
received payment of Pre-Surrender Dividends shall look only to Holdco for
payment thereof. Notwithstanding the foregoing provisions of this Section
1.7(d), neither the Exchange Agent nor any Party shall be liable to a holder of
Shares for any Holdco Common Stock or dividends or distributions thereon
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law or to a transferee pursuant to Section 1.7(e) hereof.
5
(e) Transfer Books. The stock transfer books of CPI with
respect to the CPI Shares and the stock transfer books of Target with respect to
the Target Shares shall each be closed at the Effective Time and no transfer of
any Shares will thereafter be recorded on any of such stock transfer books. In
the event of a transfer of ownership of Shares that is not registered in the
stock transfer records of CPI or Target, as the case may be, at the Effective
Time, a certificate or certificates representing the number of full shares of
Holdco Common Stock into which such Shares shall have been converted shall be
issued to the transferee together with a cash payment in lieu of fractional
shares, if any, in accordance with Section 1.7(f) hereof, and a cash payment in
the amount of Pre-Surrender Dividends, if any, in accordance with Section 1.7(d)
hereof, if the certificate or certificates representing such Shares is or are
surrendered as provided in Section 1.7(d) hereof, accompanied by all documents
required to evidence and effect such transfer and by evidence of payment of any
applicable stock transfer tax.
(f) No Fractional Share Certificates.
(i) No scrip or fractional share certificate for
Holdco Common Stock will be issued upon the surrender for exchange of
certificates evidencing Shares. CPI and Target shall cause Holdco to pay to the
Exchange Agent an amount sufficient for the Exchange Agent to pay each holder of
Target Common Stock an amount in cash equal to the product obtained by
multiplying (i) the fractional share interest to which such holder would
otherwise be entitled (after taking into account all shares of Target Common
Stock held at the Effective Time by such holder) by (ii) the closing price of a
share of Target Common Stock on the Nasdaq National Market on the trading day
immediately preceding the Effective Time divided by the Target Exchange Ratio.
6
(ii) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Target Common Stock with
respect to any fractional share interests, the Exchange Agent shall make
available such amounts, net of any required withholding, to such holders of
Target Common Stock, subject to and in accordance with the terms of Section
1.7(d) hereof.
(iii) Any portion of the Exchange Fund that remains
undistributed for six months after the Effective Time shall be delivered to
Holdco, upon demand, and any holders of CPI Common Stock, CPI Preferred Stock or
Target Common Stock who have not theretofore complied with the provisions of
this Section 1.7 shall thereafter look only to Holdco for satisfaction of their
claims for Holdco Common Stock or any cash in lieu of fractional shares of
Holdco Common Stock and any Pre-Surrender Dividends.
(g) Options and Warrants.
(i) At the Effective Time, each option or warrant
granted by CPI to purchase shares of CPI Common Stock or CPI Preferred Stock,
and each Target Option, which is outstanding and unexercised immediately prior
to the Effective Time, shall be assumed by Holdco and be converted into an
option or warrant to purchase shares of Holdco Common Stock in such amount and
at such exercise price as provided below and otherwise having the same terms and
conditions as are in effect immediately prior to the Effective Time (except to
the extent that such terms, conditions and restrictions may be altered in
accordance with their terms as a result of the transactions contemplated
hereby):
(1) the number of shares of Holdco Common
Stock to be subject to the new option or warrant shall be equal to the product
of (x) the number of shares of CPI Common Stock, CPI Preferred Stock or Target
Common Stock subject to the original option or warrant and (y) the CPI Exchange
Ratio (if the original option or warrant related to CPI Common Stock or CPI
Preferred Stock) or the Target Exchange Ratio (if the original option or warrant
related to Target Common Stock), respectively;
(2) the exercise price per share of Holdco
Common Stock under the new option or warrant shall be equal to (x) the exercise
price per share of the CPI Common Stock, CPI Preferred Stock or Target Common
Stock under the original option or warrant divided by (y) the CPI Exchange Ratio
(if the original option or warrant related to CPI Common Stock or CPI Preferred
Stock) or the Target Exchange Ratio (if the original option or warrant related
to Target Common Stock); and
(3) upon each exercise of options or
warrants by a holder thereof, the aggregate number of shares of Holdco Common
Stock deliverable upon such exercise shall be rounded down, if necessary, to the
nearest whole share and the aggregate exercise price shall be rounded up, if
necessary, to the nearest cent. The adjustments provided herein with respect to
any options that are "incentive stock options" (as defined in Section 422 of the
Code) shall be effected in a manner consistent with Section 424(a) of the Code.
7
(h) Certain Adjustments. If between the date of this Agreement
and the Effective Time, the outstanding shares of CPI Common Stock, CPI
Preferred Stock or of Target Common Stock shall be changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, the
exchange ratio established pursuant to the provisions of Section 1.7(a) hereof
shall be adjusted accordingly to provide to the holders of CPI Common Stock, CPI
Preferred Stock and Target Common Stock the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
1.8 CPI Charter Amendment. The Board of Directors of CPI has approved
an amendment to CPI's Certificate of Incorporation attached hereto as Exhibit C
(the "CPI Charter Amendment"), in order to effectuate the consummation of the
Mergers. CPI shall file the CPI Charter Amendment immediately prior to the
Effective Time.
2. REPRESENTATIONS AND WARRANTIES OF TARGET
For purposes of this Section 2, "Target" shall mean each of Target and
its Subsidiaries, collectively. Except as set forth in the Target Disclosure
Schedule or the Target SEC Documents (as defined in Section 2.4 below), Target
represents and warrants to Holdco and CPI, as follows:
2.1 Due Organization; Subsidiaries.
(a) Target is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all necessary power and authority: (i) to conduct its business in the manner
in which its business is currently being conducted; (ii) to own, lease and use
its assets in the manner in which its assets are currently owned, leased and
used; and (iii) to perform its obligations under all contracts by which it is
bound. Target is qualified to do business as a foreign corporation, and is in
good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification except in jurisdictions where the failure
to so qualify, individually and in the aggregate, would not have a Material
Adverse Effect on Target.
(b) Except for those Entities identified in the Target
Disclosure Schedule, Target has no Subsidiaries; and neither Target nor any
Entity identified in the Target Disclosure Schedule owns any capital stock of,
or any equity interest of any nature in, any other Entity other than the
Entities identified in the Target Disclosure Schedule. Target has not agreed or
is not obligated to make or is not bound by any Contract to make any future
investment in or capital contribution to any other Entity. Except as set forth
on the Target Disclosure Schedule, Target has not, at any time, been a general
partner of any general partnership, limited partnership, or other Entity.
8
2.2 Articles of Incorporation and Bylaws. Target has delivered to CPI
complete and accurate copies of the Articles of Incorporation, Bylaws, and other
charter and organizational documents of the Target, including all amendments
thereto.
2.3 Capitalization.
(a) The authorized capital stock of Target consists of:
50,000,000 shares of Target Common Stock, par value $0.005, of which, as of the
date hereof 15,628,587 shares were issued and outstanding and 544,250 shares
were held in its treasury. All of the outstanding shares of Target Common Stock
have been duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth in the Target Disclosure Schedule: (i) none
of the outstanding shares of Target Common Stock is entitled or subject to any
preemptive right, right of participation in future financings, right to maintain
a percentage ownership position, or any similar right; (ii) none of the
outstanding shares of Target Common Stock is subject to any right of first
refusal in favor of Target; and (iii) there is no Target Contract relating to
the voting or registration of, or restricting any Person from purchasing,
selling, pledging or otherwise disposing of (or granting any option or similar
right with respect to), any shares of Target Common Stock. Target is not under
any obligation, or is not bound by any Contract pursuant to which it may become
obligated, to repurchase, redeem or otherwise acquire any outstanding shares of
Target Common Stock or any other securities of Target, other than the
stockholder rights plan disclosed pursuant to Section 2.3(c) hereof.
(b) As of the date hereof: (i) 957,427 shares of Target Common
Stock are reserved for future issuance pursuant to stock options granted and
outstanding under Target's 1995 Stock Option Plan, (ii) 80,000 shares of Target
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under Target's 1991 Special Directors' Stock Option Plan, and
(iii) 434,777 shares of Target Common Stock are reserved for future issuance
pursuant to stock options granted and outstanding under Target's 1991 Stock
Option Plan. The Target Disclosure Schedule sets forth the following information
with respect to each Target Option outstanding as of the date of this Agreement:
(i) the particular plan pursuant to which such Target Option was granted; (ii)
the name of the optionee; (iii) the number of shares of Target Common Stock
subject to such Target Option; (iv) the exercise price of such Target Option;
(v) the date on which such Target Option was granted; (vi) the extent to which
such Target Option is vested and exercisable as of June 23, 1998; and (vii) the
date on which such Target Option expires. Target has delivered to CPI accurate
and complete copies of all stock option plans and forms of option grant pursuant
to which Target has granted any outstanding stock options. Target has no
outstanding stock appreciation rights.
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(c) Except as set forth in the Target Disclosure Schedule,
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of Target or any subsidiary of Target; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
Target or any subsidiary of Target; (iii) stockholder rights plan (or similar
plan commonly referred to as a "poison pill") or Contract under which Target or
any subsidiary of Target is or may become obligated to sell or otherwise issue
any shares of its capital stock or any other securities; or (iv) condition or
circumstance that may reasonably give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of Target or
any subsidiary of Target. There are no bonds, debentures, notes or other
indebtedness of Target outstanding having the right to vote (or convertible into
securities having the right to vote) on any matters on which the stockholders of
Target have the right to vote.
(d) All outstanding securities of Target, including shares of
Target Common Stock, and Target Options, have been issued and granted in all
material respects in compliance with (i) all applicable securities laws and
other applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
2.4 SEC Filings; Financial Statements.
(a) Target has made available to CPI accurate and complete
copies (excluding copies of exhibits) of all registration statements, proxy
statements and other statements, reports, schedules, forms and other documents
filed by Target with the SEC since January 1, 1997 (the "Target SEC Documents").
All statements, reports, schedules, forms and other documents required to have
been filed by Target with the SEC have been so filed by Target on a timely
basis. As of the time it was filed with the SEC (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing):
(i) each of the Target SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Target SEC Documents 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 the
light of the circumstances under which they were made, not misleading.
(b) Except as set forth in the Target Disclosure Schedule, the
consolidated financial statements (including any related notes) contained in the
Target SEC Documents (the "Target Financial Statements"): (i) complied as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered (except as may be indicated in the notes to such financial statements
and, in the case of unaudited statements, as permitted by Form 10-Q of the SEC,
and except that unaudited financial statements may not contain footnotes and are
subject to normal and recurring year-end audit adjustments that will not,
individually or in the aggregate, be material in amount); (iii) fairly present
the financial position of Target as of the respective dates thereof and the
results of operations and cash flows of Target for the periods covered thereby;
and (iv) reflect any contingent liabilities to the extent required to be
reflected therein.
(c) Since December 31, 1997, Target and its subsidiaries have
not incurred any liabilities of the type required under GAAP to be recorded on a
balance sheet or in the footnotes thereto except liabilities incurred in the
ordinary course of business.
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2.5 Absence of Changes. Except as set forth in the Target Disclosure
Schedule or the Target SEC documents, since December 31, 1997:
(a) there has not been any change that has had a Material
Adverse Effect on the business, condition, capitalization, assets, liabilities,
operations or financial performance of Target, and no event has occurred that
could reasonably be expected to have a Material Adverse Effect on Target;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the assets of
Target that are necessary for the conduct of Target's business as currently
conducted (whether or not covered by insurance);
(c) there has not been any transaction, commitment, or other
event or condition (financial or otherwise) that would be prohibited by Section
4.2(b)(i), (iv), (ix), (x) or (xi) if it were to be effected, accepted or were
to take place between the date hereof and the Effective Time.
2.6 Title to Assets. Except as set forth in the Target Disclosure
Schedule or the Target SEC Documents, Target owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including: all
assets reflected in their books and records as being owned by Target. All of
said assets are owned by Target free and clear of any Encumbrances, except for
(a) any lien for current taxes not yet due and payable, (b) minor liens that
have arisen in the ordinary course of business and that do not (in any case or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of Target, and (c) liens described
in the Target Disclosure Schedule.
2.7 Real Property; Equipment; Leasehold. Except as described in the
Target Disclosure Schedule or the Target SEC Documents:
(a) Target does not own any real property or any material
interest in real property, except for the leasehold created under real property
leases set forth in the Target Disclosure Schedule. Complete and correct copies
of such leases have previously been delivered to CPI by Target.
(b) All material items of equipment and other tangible assets
owned by or leased to Target are reasonably adequate for the uses to which they
are being put, are in good condition and repair (ordinary wear and tear
excepted) and are reasonably adequate for the conduct of the business of Target
in the manner in which such business is currently being conducted and in the
manner in which such business is required to be conducted pursuant to Target
Contracts and that are in effect on the date hereof.
2.8 Proprietary Assets.
(a) Target has title, or the right to use, such Proprietary
Assets as are reasonably necessary to enable Target to conduct its business, as
presently conducted.
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(b) Except as set forth on the Target Disclosure Schedule, to
the best of Target's knowledge: (i) none of the Target commercial products and
processes infringes, misappropriates or conflicts with any Proprietary Assets
owned or used by any Person (ii) Target has not received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person; and (iii) no other Person
is infringing, misappropriating or making any unlawful or unauthorized use of
any material Target Proprietary Asset.
2.9 Material Contracts.
(a) The Target Disclosure Schedule identifies each Target
Contract that constitutes a "Target Material Contract." For purposes of this
Agreement, each of the following shall be deemed to constitute a Target Material
Contract:
(i) any Contract relating to the employment of, or
the performance of services by, any director, officer, employee or consultant,
and any Contract pursuant to which Target is or may become obligated to make any
severance, termination, bonus or relocation payment or any similar payment
(other than payments in respect of salary and the grant of standard benefits);
(ii) any Contract that provides for indemnification
of any officer, director, employee or agent;
(iii) any Contract (A) relating to the acquisition,
issuance, voting, registration, sale or transfer of any securities, (B)
providing any Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to any securities, or (C)
providing Target with any right of first refusal with respect to, or right to
repurchase or redeem, any securities;
(iv) any Contract requiring that Target give any
notice, obtain any consent or provide any information to any Person prior to
accepting any Acquisition Proposal;
(v) any Contract (not otherwise identified in this
Section) that (A) has a term of more than sixty (60) days or that may not be
terminated by Target (without penalty) within sixty (60) days after the delivery
of a termination notice by Target and (B) that contemplates or involves (I) the
payment or delivery of cash or other consideration on or after the date hereof
in an amount or having a value in excess of $100,000 in aggregate payments under
such Contract, or (II) the performance of services on or after the date hereof
having a value in excess of $100,000 in aggregate payments under such Contract;
(vi) any Contract (A) to which any Governmental Body
is a party or under which any Governmental Body has any rights or obligations,
or involving or directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between CPI and any contractor or
subcontractor to any Governmental Body) and (B) that contemplates and involves
(I) the payment or delivery of cash or other consideration on or after the date
hereof in an amount or having a value in excess of $100,000 in aggregate
payments under such Contract, or (B) the performance of services on or after the
date hereof having a value in excess of $100,000 in aggregate payments under
such Contract;
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(vii) any open purchase order placed by Target
requiring future aggregate payments in excess of $100,000;
(viii) any Contract (not otherwise identified in
this Section), which would be required as an Exhibit in a registration statement
filed under the Securities Act of 1933.
(b) Each Target Material Contract is valid and in full force
and effect, and is enforceable in accordance with its terms, subject to (i) laws
of general application relating to bankruptcy, insolvency and the relief of
debtors, (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies and (iii) in the case of any Contract with a
Governmental Body, any law applicable thereto.
(c) Except as set forth in the Target Disclosure Schedule: (i)
Target has not materially violated or breached, or committed any material
default under, any Target Material Contract, and, to the best of the knowledge
of Target, no other Person has materially violated or breached, or committed any
material default under, any Target Material Contract; (ii) to the best of the
knowledge of Target, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) could reasonably be
expected to (A) result in a material violation or breach of any of the
provisions of any Target Material Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Target Material Contract, (C)
give any Person the right to accelerate the maturity or performance of any
Target Material Contract, or (D) give any Person the right to cancel, terminate
or materially modify any Target Material Contract; (iii) since December 31,
1997, none of Target has received any written notice or other written
communication regarding any actual or possible violation or breach of, default
under, or any intention to terminate, any Target Contract, except for
communication (A) that has subsequently been revoked; or (B) has been received
from a complaining party that has not contacted Target or otherwise, to Target's
knowledge, taken any action with respect to such party's complaint for a period
of more than six months following receipt of the communication; and (iv) Target
has not waived any of its material rights under any Target Material Contract, in
each case where such breach, default, violation or waiver would have a Material
Adverse Effect on Target.
(d) To the best of the knowledge of Target, no Person is
renegotiating, or has the right to renegotiate, any material amount paid or
payable to Target under any Target Material Contract, or any other material term
or provision of any Target Material Contract, including termination provisions.
(e) The Target Disclosure Schedule sets forth a list of all
claims made under any Target Material Contract that are disputed in any material
respect or, to Target's knowledge, where a dispute as to any material matter has
been threatened.
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2.10 Liabilities. Target does not have any accrued or contingent
liabilities of a nature required to be reflected in financial statements in
accordance with GAAP, except for: (a) liabilities identified as such in the
Target Financial Statements; (b) normal and recurring liabilities that have been
incurred by Target since December 31, 1997 in the ordinary course of business
and consistent with past practices; and (c) other liabilities that have not had
and could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Target.
2.11 Compliance with Legal Requirements. Target is, and, to the best
knowledge of Target, has at all times since inception been, in compliance with
all applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and could not reasonably be expected to have, a
Material Adverse Effect on Target. There is not presently pending any notice or
other communication received by Target from any Governmental Body regarding any
actual or possible violation of, or failure to comply with, any material Legal
Requirement.
2.12 Certain Business Practices. None of Target nor any director,
officer, agent or employee of Target has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
2.13 Governmental Authorizations. Target holds all material
Governmental Authorizations necessary to enable them to conduct their respective
businesses in the manner in which such businesses are currently being conducted.
All such Governmental Authorizations are valid and in full force and effect.
Target is, and to the best knowledge of Target, at all times since inception has
been, in substantial compliance with the terms and requirements of such
Governmental Authorizations. To the best knowledge of Target, since inception,
none of Target has received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any material Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization or (c) any requirement to apply for or hold a Governmental
Authorization not held by Target, in each case where such violation, revocation,
suspension, cancellation, termination or modification would have a Material
Adverse Effect on Target.
2.14 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
Target with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Target Returns") have been or will be filed on
or before the applicable due date (including any extensions of such due date).
All amounts shown on the Target Returns to be due on or before the Closing Date
have been or will be paid on or before the Closing Date.
14
(b) Except as set forth on the Target Disclosure Schedule, the
Target Financial Statements fully accrue all actual and contingent liabilities
for Taxes with respect to all periods through the dates thereof in accordance
with GAAP. Target will establish, in the ordinary course of business and
consistent with its past practices, quarterly reserves adequate for the payment
of all Taxes for the applicable periods from December 31, 1997 through the
Closing Date. Since January 1, 1998 no material Tax liability has been incurred
other than in the ordinary course of business.
(c) Except as set forth in the Target Disclosure Schedule, no
Target Return has ever been examined or audited by any Governmental Body. No
extension or waiver of the limitation period applicable to any of the Target
Returns has been granted (by Target or any other Person), and no such extension
or waiver has been requested by Target.
(d) Except as set forth in the Target Disclosure Schedule, no
claim or Legal Proceeding is pending or, to the best of the knowledge of Target,
has been threatened in writing against or with respect to Target in respect of
any Tax. There are no unsatisfied liabilities for Taxes (including liabilities
for interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Target
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document that are being contested in good faith by Target and with
respect to which adequate reserves for payment have been established). There are
no liens for Taxes upon any of the assets of any of Target except liens for
current Taxes not yet due and payable. None of Target has entered into or become
bound by any agreement or consent pursuant to Section 341(f) of the Code. None
of Target has been, and none of Target will be required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing. None of Target is nor has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code. Target has no liabilities for the Taxes of any other Person except
for payroll taxes collected in the ordinary course of business.
(e) Except as set forth in the Target Disclosure Schedule or
the Target SEC Documents, there is no agreement, plan, arrangement or other
Contract covering any employee or independent contractor or former employee or
independent contractor of any of Target that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. Target is not, nor has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract
(other than a Contract entered into in the ordinary course of business in
connection with the purchase or sale of inventory or supplies).
2.15 Employee and Labor Matters; Benefit Plans.
(a) The Target Disclosure Schedule or the Target SEC Documents
identifies salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefit,
profit-sharing, pension or retirement plan, program or agreement covering one or
more people (collectively, the "Target Plans") sponsored, maintained,
contributed to or required to be contributed to by any of Target for the benefit
of any current of former employee of Target.
15
(b) No Target plan is subject to Title IV of ERISA, Part 3 of
Title I of ERISA or Section 412 of the Code, and no Target Plan constitutes a
"multi-employer plan" (as defined in Section 3(37) of ERISA).
(c) With respect to each Target Plan, Target has made
available to CPI: (i) an accurate and complete copy of each such Target Plan
(including all amendments thereto); (ii) an accurate and complete copy of the
annual report, if required under ERISA, with respect to such Target Plans for
the last two plan years; (iii) an accurate and complete copy of the most recent
summary plan description, together with each summary of material modifications
thereto, if required under ERISA, with respect to such Target Plans; (iv) if
such Target Plans are funded through a trust or a third party funding vehicle,
an accurate and complete copy of the trust or other funding agreement (including
all amendments thereto); (v) accurate and complete copies of all Contracts
relating to such Target Plans, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
record-keeping agreements; and (vi) an accurate and complete copy of the most
recent determination, opinion, notification or advisory letter received from the
Internal Revenue Service with respect to such Target Plans (if such Target Plans
are intended to be qualified under Section 401(a) of the Code).
(d) Target has no plan or commitment to create any additional
Plan, or to modify or change any existing Plan (other than to comply with
applicable law) in a manner that would create any material liability for any of
Target.
(e) No Target Plan provides death, medical or health benefits
coverage (whether or not insured) with respect to any of its current or former
employees after any such employee's termination of service (other than (i)
benefit coverage mandated by applicable law, including coverage provided
pursuant to Section 4980B of the Code ("COBRA"), (ii) deferred compensation
benefits accrued as liabilities on the most recent financial statements included
in the Target SEC filings, and (iii) benefits the full cost of which are borne
by such current or former employees (or the employees' beneficiaries)).
(f) With respect to any Target Plan constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, COBRA has
been complied with in all material respects. The Target Disclosure Schedule
lists all qualified beneficiaries under COBRA with respect to all such Target
Plans.
(g) Each of the Target Plans has been operated and
administered in all material respects in accordance with its terms and
applicable Legal Requirements, including but not limited to ERISA and the Code.
16
(h) All material contributions, premiums or other payments due
from any of Target to (or under) any Target Plan have been fully paid or
adequately provided for on the books and financial statements of Target.
(i) Each of the Target Plans intended to be qualified under
Section 401(a) of the Code has received a favorable determination, opinion,
notification or advisory letter from the Internal Revenue Service, and Target is
not aware of any reason why any such letter should be revoked.
(j) Except as set forth in the Target Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Mergers or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any of Target's current or former employees
or directors (whether or not under any Target Plan), or materially increase the
benefits payable under any Target Plan, or result in any acceleration of the
time of payment or vesting of any such benefits.
(k) Target is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its employees.
(l) Target is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters and the classification of independent contractors
and workers.
2.16 Environmental Matters. Target is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by each of Target of all material permits and other Governmental
Authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof. Target has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that Target is not in
compliance with any Environmental Law, and, to the best of the knowledge of
Target, there are no circumstances that may prevent or interfere with the
compliance by Target with any Environmental Law in the future. To the knowledge
of Target without further inquiry, no current or prior owner of any property
leased or controlled by Target has received any notice or other communications
(in writing or otherwise), whether from a Government Body, citizens group,
employee or otherwise, that alleges that such current or prior owner or Target
is not in compliance with any Environmental Law. To the best of the knowledge of
Target, all property that is leased to, controlled by or used by Target, and all
surface water, groundwater and soil associated with or adjacent to such property
is in clean and healthful condition and is free of any material environmental
contamination of any nature. To the best knowledge of Target, Target has not
disposed of, emitted, discharged, handled, stored, transported, used or released
any Materials of Environmental Concern, arranged for the disposal, discharge,
storage or release of any Materials of Environmental Concern, or exposed any
employee or other individual to any Materials of Environmental Concern or
condition so as to give rise to any material liability or material corrective or
remedial obligation under any Environmental Laws.
17
2.17 Insurance. Target has delivered to CPI a summary of all material
insurance policies and all material self-insurance programs relating to the
business, assets and operations of Target and has made available to CPI copies
of the polices. Each of such insurance policies is in full force and effect.
Except as set forth on the Target Disclosure Schedule, since December 31, 1997,
Target has not received any notice or other communication regarding any actual
or possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any material claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy. Except as set forth in the Target Disclosure
Schedule, there is no pending claim (including any workers' compensation claim)
other than routine claims for benefits under any Target Plan, under or based
upon any insurance policy of Target.
2.18 Transactions with Affiliates.
(a) Except as set forth in the Target Disclosure Schedule or
the Target SEC Reports, since the date of Target's last proxy statement filed
with the SEC, no event has occurred that would be required to be reported by
Target pursuant to Item 404 of Regulation S-K promulgated by the SEC. The Target
Disclosure Schedule identifies each Person who is an "affiliate" (as that term
is used in Rule 145 under the Securities Act) of Target.
(b) The Target Disclosure Schedule contains an accurate and
complete list as of the date of this Agreement of all outstanding loans and
advances made by Target to any employee, director, consultant or independent
contractor other than routine travel advances and advances made for relocation
purposes made to employees in the ordinary course of business.
2.19 Legal Proceedings; Orders.
(a) Except as set forth on the Target Disclosure Schedule or
in the Target SEC Reports, there is no pending Legal Proceeding, and (to the
best of the knowledge of Target) no Person has threatened to commence any Legal
Proceeding: (i) that involves Target or any of the assets owned or used by
Target; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Mergers or any of
the other transactions contemplated by this Agreement. To the best of the
knowledge of Target, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding
that would reasonably be expected to have a Material Adverse Effect on Target.
(b) There is no material order, writ, injunction, judgment or
decree to which Target, or any of the assets owned or used by Target, is
subject. To the best of the knowledge of Target, no officer or key employee of
Target is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of Target.
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2.20 Authority; Binding Nature of Agreement. Target has the absolute
and unrestricted right, power and authority to enter into and to perform their
obligations under this Agreement. The board of directors of Target (at a meeting
duly called and held) has unanimously (a) determined that the Mergers are
advisable and fair and in the best interests of Target and its stockholders, (b)
authorized and approved the execution, delivery and performance of this
Agreement by Target, (c) recommended the approval of the Mergers by the holders
of Target Common Stock, and (d) directed that the Mergers be submitted for
consideration by Target's stockholders at the Target Stockholders' Meeting (as
defined in Section 5.3). This Agreement constitutes the legal, valid and binding
obligation of Target and, enforceable against Target in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.21 No Existing Discussions. Target has terminated (or will terminate
as soon as practical after execution of this Agreement) any existing discussions
with any Person that relate to any Acquisition Proposal.
2.22 Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Target Common Stock entitled to vote at the Target
Stockholders Meeting (the "Required Target Stockholder Merger Vote"), is the
only vote of the holders of any class or series of Target's capital stock
necessary to approve the issuance of Target Common Stock in the Merger.
2.23 Non-Contravention; Consents. Neither (1) the execution, delivery
or performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Mergers or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of Target's Articles of Incorporation, Bylaws or other
charter or organizational documents of any of Target, or (ii) any resolution
adopted by the stockholders, the board of directors or any committee of the
board of directors of any of Target;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge the Mergers or
any of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which Target, or any of the assets owned or
used by Target, is subject, if the result would have a Material Adverse Effect
on Target;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Target or that otherwise relates to Target's
business or to any of the assets owned or used by Target, if the result would
have a Material Adverse Effect on Target;
19
(d) contravene, conflict with or result in a violation or
material breach of, or result in a default (or an event that with notice or
lapse of time or both would become a default) under, any provision of any Target
Contract that is or would constitute a Target Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any such
Target Material Contract, (ii) a rebate, charge-back, penalty or change in
delivery schedule under any such Target Material Contract, (iii) accelerate the
maturity or performance of any such Target Material Contract, or (iv) cancel,
terminate or materially modify any term of such Target Material Contract, if the
result would have a Material Adverse Effect on Target; or
(e) result in the imposition or creation of any Encumbrance
upon or with respect to any asset owned or used by Target (except for minor
liens that will not, in any case or in the aggregate, materially detract from
the value of the assets subject thereto or materially impair the operations of
any of Target).
Except as may be required by the Exchange Act, the DGCL, the Utah
Business Corporation Act, and the NASD Bylaws (as they relate to the Form S-4
Registration Statement and the Joint Proxy Statement) Target is not, and will
not be, required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Mergers or any of the other
transactions contemplated by this Agreement.
2.24 Fairness Opinion. Target's Board of Directors has received the
written opinion of Xxxxxx Xxxxxxxxxx Xxxxx, financial advisor to Target, dated
as of the date of this Agreement, to the effect that the terms of the Mergers
are fair to Target from a financial point of view.
2.25 Valid Issuance; Reservation of Shares. The Target Common Stock to
be issued to Holdco in the Merger in exchange for surrender of the T-Sub Common
Stock will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
2.26 Financial Advisor. Except for Xxxxxx Xxxxxxxxxx Xxxxx, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Target. Target has furnished to CPI accurate and complete copies of all
agreements under which any such fees, commissions, or other amounts have been
paid or may become payable and all indemnification and other arrangements
relating to the engagement of Xxxxxx Xxxxxxxxxx Xxxxx.
2.27 Full Disclosure. This Agreement (including the Target Disclosure
Schedule) does not, and the certificate referred to in Section 6.5(c) will not,
(i) contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any material
fact necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
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3. REPRESENTATIONS AND WARRANTIES OF CPI AND HOLDCO
Except as set forth in the CPI Disclosure Schedule, CPI represents and
warrants to Target as follows:
3.1 Organization; Good Standing; Qualification
(a) CPI is, and Holdco will be when organized, a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has, or in the case of Holdco will have,
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own, lease and use its
assets in the manner in which its assets are currently owned, leased and used;
and (iii) to perform its obligations under all CPI Contracts by which it is
bound. CPI is, or in the case of Holdco will be, qualified to do business as a
foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification
except in jurisdictions where the failure to so qualify, individually and in the
aggregate, would not have a Material Adverse Effect on CPI.
(b) CPI has no Subsidiaries and does not own any capital stock
of, or any equity interest of any nature in, any other Entity, other than the
Entities identified in the CPI Disclosure Schedule. Except as set forth in the
CPI Disclosure Schedule, CPI has not agreed nor is it obligated to make, nor is
it bound by any Contract under which it may become obligated to make, any future
investment in or capital contribution to any other Entity. Except as set forth
in the CPI Disclosure Schedule, CPI has not, at any time, been a general partner
of any general partnership, limited partnership or other Entity.
3.2 Certificate of Incorporation and Bylaws. CPI has delivered to
Target accurate and complete copies of the Certificate of Incorporation, Bylaws
and other charter and organizational documents of CPI, including all amendments
thereto.
3.3 Holdco. When organized, Holdco's Certificate of Incorporation shall
be in the form attached as Exhibit B hereto, and its bylaws shall be in the form
delivered to Target by CPI. Holdco will not have conducted any business, other
than consummation of the transactions contemplated herein, prior to the
Effective Time. Immediately prior to the Effective Time, Holdco's entire
outstanding capitalization shall consist solely of 100 shares of common stock,
which shares shall be owned, beneficially and of record, by CPI.
3.4 Capitalization
(a) The authorized capital stock of CPI consists of: (i)
22,400,000 shares of CPI Common Stock, $0.01 par value, of which, as of the date
hereof, 2,990,095 shares were issued and outstanding, (ii) 61,250 shares of CPI
Redeemable Preferred Stock, $0.01 par value, of which, as of the date hereof,
all were issued and outstanding and (iii) 18,400,000 shares of CPI Preferred
Stock, of which, as of the date hereof, (A) 872,400 shares are designated Series
A Preferred Stock of which 872,400 shares are issued and outstanding; (B)
848,100 shares are designated Series B Preferred Stock of which 848,100 shares
are issued and outstanding; (C) 700,000 shares are designated Series C Preferred
Stock of which 700,000 shares are issued and outstanding; (D) 675,350 shares are
designated Series D Preferred Stock, of which 616,807.5 shares are issued and
outstanding; (E) 3,204,865 shares are designated Series E Preferred Stock, of
which 3,121,642 shares are issued and outstanding; (F) 4,934,788 shares are
designated Series F Preferred Stock, of which 4,809,437 shares are issued and
outstanding; and (G) 5,400,000 shares are designated as Series G Preferred
Stock, of which 4,645,879 shares are issued and outstanding. Except as set forth
in the CPI Disclosure Schedule, all of the outstanding shares of CPI Common
Stock, CPI Redeemable Preferred Stock and CPI Preferred Stock have been duly
authorized and validly issued, and are fully paid and nonassessable. Except as
set forth in the CPI Disclosure Schedule: (i) none of the outstanding shares of
CPI Common Stock, CPI Redeemable Preferred Stock or CPI Preferred Stock is
entitled or subject to any preemptive right, right of participation in future
financings, right to maintain a percentage ownership position, or any similar
right; (ii) none of the outstanding shares of CPI Common Stock or CPI Preferred
Stock is subject to any right of first refusal in favor of CPI; and (iii) there
is no Contract relating to the voting or registration of, or restricting any
Person from purchasing, selling, pledging or otherwise disposing of (or granting
any option or similar right with respect to), any shares of CPI Common Stock or
CPI Preferred Stock. Except as set forth in the CPI Disclosure Schedule, CPI is
not under any obligation, and is not bound by any Contract pursuant to which it
may become obligated, to repurchase, redeem or otherwise acquire any outstanding
shares of CPI Common Stock, CPI Redeemable Preferred Stock or CPI Preferred
Stock.
21
(b) As of the date hereof, 740,429 shares of CPI Common Stock
remain available for grant under the CPI Option Plan (defined below) and 363,141
shares of CPI Common Stock remain to be granted under the Directors' Plan
(defined below). The CPI Disclosure Schedule sets forth the following
information with respect to each CPI Option outstanding as of the date of this
Agreement: (i) the name of the optionee; (ii) the number of shares of CPI Common
Stock subject to such CPI Option; (iii) whether the CPI Option was granted
pursuant to the 1997 Equity Incentive Plan (the "CPI Option Plan") or was
granted under the 1997 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan" and, together with the Option Plan, the "Option Plans").(iv)
the exercise price of such CPI Option; (v) the date on which such CPI Option was
granted; and (vi) the extent to which such CPI Option is vested and exercisable
as of the date hereof. CPI has delivered to Target accurate and complete copies
of all stock option plans and forms of option grant pursuant to which CPI has
granted any outstanding stock options. As of the date hereof, warrants to
purchase 69,044 shares of Series E Preferred, warrants to purchase 125,351
shares of Series F Preferred, warrants to purchase 227,793 shares of Series G
Preferred Stock and a warrant to purchase 5,000 shares of Common Stock remained
outstanding. The CPI Disclosure Schedule sets forth the following information
with respect to each outstanding warrant to purchase CPI Common Stock and CPI
Preferred Stock: (i) the name of the holder of such warrant; (ii) the number of
shares of CPI Common Stock or CPI Preferred Stock subject to such warrant; (iii)
the exercise price of such warrant; (iv) the date on which such warrant was
issued; and (v) the date on which such warrant expires. CPI has delivered to
Target an accurate and complete copy of each such warrant.
(c) Except as set forth in the CPI Disclosure Schedule, there
is no: (i) outstanding subscription, option, call, warrant or right (whether or
not currently exercisable) to acquire any shares of the capital stock or other
securities of CPI; (ii) outstanding security, instrument or obligation that is
or may become convertible into or exchangeable for any shares of the capital
stock or other securities of CPI; (iii) stockholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which CPI is or may
become obligated to sell or otherwise issue any shares of its capital stock or
any other securities; or (iv) condition or circumstance that may reasonably give
rise to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of capital
stock or other securities of CPI. Except as set forth on the CPI Disclosure
Schedule, or elsewhere in this Section 3.3, there are no bonds, debentures,
notes or other indebtedness of CPI outstanding having the right to vote (or
convertible into securities having the right to vote) on any matters on which
the stockholders of CPI have the right to vote.
22
(d) All outstanding securities of CPI, including shares of CPI
Common Stock, CPI Redeemable Preferred Stock and CPI Preferred Stock, all
outstanding CPI Options and all outstanding warrants to purchase CPI Common
Stock or CPI Preferred Stock, have been issued and granted in all material
respects in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
3.5 Financial Statements.
(a) The CPI Disclosure Schedule sets forth CPI's audited
balance sheets as of December 31, 1996 and December 31, 1997 and related audited
statements of operations, stockholders' equity and cash flows for the three
years then ended (collectively, the "Audited Financial Statements"), and the
unaudited financial statements as of March 31, 1998 (together with the Audited
Financial Statements, the "CPI Financials"). The CPI Financials were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered. The CPI Financials present
fairly in all material respects the financial condition and operating results of
CPI as of the dates and during the periods indicated therein and reflect any
contingent liabilities to the extent required to be reflected therein.
(b) Since December 31, 1997, CPI has not incurred any
liabilities of the type required under GAAP to be recorded on a balance sheet or
reported in the footnotes thereto except liabilities incurred in the ordinary
course of business.
3.6 Absence of Changes. Since December 31, 1997:
(a) there has not been any change that has had a Material
Adverse Effect on the business, condition, capitalization, assets, liabilities,
operations or financial performance of CPI taken as a whole, and no event has
occurred that could reasonably be expected to have a Material Adverse Effect on
CPI;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the assets of
CPI (whether or not covered by insurance);
23
(c) there has not been any transaction, commitment, or other
event or condition (financial or otherwise) that would be prohibited by Section
4.3(b)(i) or (iii) if it were to be effected, accepted or were to take place,
between the date hereof and the Effective Time.
3.7 Valid Issuance. The Holdco Common Stock to be issued in the Mergers
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
3.8 Title to Assets. Except as set forth in the CPI Disclosure
Schedule, CPI owns, and has good, valid and marketable title to, all assets
purported to be owned by it, including all assets reflected in CPI's books and
records as being owned by CPI. All of said assets are owned by CPI free and
clear of any Encumbrances, except for (a) any lien for current taxes not yet due
and payable, (b) minor liens that have arisen in the ordinary course of business
and that do not (in any case or in the aggregate) materially detract from the
value of the assets subject thereto or materially impair the operations of CPI,
and (c) liens described in the CPI Disclosure Schedule.
3.9 Real Property; Equipment; Leasehold.
(a) CPI does not own any real property or any interest in real
property, except for the leasehold created under the real property lease(s) set
forth in the CPI Disclosure Schedule. Complete and correct copies of such
lease(s) have previously been delivered to Target by CPI.
(b) All material items of equipment and other tangible assets
owned by or leased to CPI are reasonably adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are reasonably adequate for the conduct of CPI's business in the manner in
which such business is currently being conducted and in the manner in which such
business is required to be conducted pursuant to CPI Contracts and that are in
effect on the date hereof.
3.10 Proprietary Assets.
(a) The CPI Proprietary Assets constitute such Proprietary
Assets as are reasonably necessary to enable CPI to conduct its business as it
is currently being conducted.
(i) CPI owns or has the right to use such
Proprietary Assets as are currently used in the business and such ownership and
use will not be adversely affected by the transactions contemplated hereby. So
far as is known to CPI, no present or former employee of, or consultant to, CPI
or any other person (including, without limitation, any former employer of a
present or former employee or consultant of CPI) has any proprietary, commercial
or other interest in such Proprietary Assets other than rights, if any, in
respect of which there has been adequate assignment or license to CPI to permit
CPI to conduct its business as presently conducted.
(ii) CPI has taken commercially reasonable measures
in the normal course of its business to protect through non-disclosure
agreements such Proprietary Assets as CPI has decided to, and is legally and
practically able to, keep secret. CPI has not received notice from a third party
of any (nor is it aware of any) claim of infringement or other violation
relating to any such Proprietary Assets, nor does CPI know of any facts upon
which any such claim could reasonably be based.
24
(iii) In conducting its business as presently
conducted, CPI has no knowledge that it is infringing upon or unlawfully or
wrongfully using any patent, trademark, tradename, service xxxx, copyright or
any other form of intellectual property or trade secret, owned or claimed by
another and has no knowledge that any of the compositions of matter or
therapeutic methods that CPI is currently planning to develop clinically
infringes upon or results in the unlawful or wrongful use of any patent,
trademark, trade name, service xxxx, copyright or any other form of intellectual
property or trade secret, owned or claimed by another. CPI has not received any
notice or any claim of infringement or any other claim or proceeding relating to
any such patent, trademark, trade name, service xxxx, copyright, trade secret or
any other form of intellectual property or any agreement relating thereto.
3.11 Material Contracts.
(a) The CPI Disclosure Schedule identifies each CPI Contract
that constitutes a "CPI Material Contract." For purposes of this Agreement, each
of the following shall be deemed to constitute a CPI Material Contract:
(i) any Contract relating to the employment of, or
the performance of services by, any officer, director or employee and any
Contract pursuant to which CPI is or may become obligated to make any severance,
termination, bonus or relocation payment or any other payment (other than
payments in respect of salary and the grant of standard benefits);
(ii) any Contract that provides for indemnification
of any officer, director, employee or agent;
(iii) any Contract (A) relating to the acquisition,
issuance, voting, registration, sale or transfer of any securities, (B)
providing any Person with any preemptive right, right of participation, right of
maintenance or any similar right with respect to any securities, or (C)
providing CPI with any right of first refusal with respect to, or right to
repurchase or redeem, any securities;
(iv) any Contract requiring that CPI give any
notice, obtain any consent or provide any information to any Person prior to
accepting any Acquisition Proposal;
(v) any Contract (not otherwise identified in this
Section) that (A) has a term of more than sixty (60) days or that may not be
terminated by CPI (without penalty) within sixty (60) days after the delivery of
a termination notice by CPI and (B) that contemplates or involves (I) the
payment or delivery of cash or other consideration on or after the date hereof
in an amount or having a value in excess of $300,000 in aggregate payments under
such Contract, or (II) the performance of services on or after the date hereof
having a value in excess of $300,000 in aggregate payments under such Contract;
25
(vi) any Contract (A) to which any Governmental Body
is a party or under which any Governmental Body has any rights or obligations,
or involving or directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between CPI and any contractor or
subcontractor to any Governmental Body) and that (B) contemplates or involves
(I) the payment or delivery of cash or other consideration on or after the date
hereof in an amount or having a value in excess of $300,000 in aggregate
payments under such Contract, or (II) the performance of services on or after
the date hereof having a value in excess of $300,000 in aggregate payments under
such Contract;
(vii) any open purchase order placed by CPI
requiring future aggregate payments in excess of $300,000; and
(viii) any Contract (not otherwise identified in
this Section) that would be required as an exhibit in a registration statement
under the Securities Act of 1933.
(b) Each CPI Material Contract is valid and in full force and
effect, and is enforceable in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies and (iii) in the case of any Contract with a
Governmental Body, laws applicable thereto.
(c) Except as set forth in the CPI Disclosure Schedule: (i)
CPI has not materially violated or breached, or committed any material default
under, any CPI Material Contract, and, to the best of the knowledge of CPI, no
other Person has materially violated or breached, or committed any material
default under, any CPI Material Contract; (ii) to the best of the knowledge of
CPI, no event has occurred, and no circumstance or condition exists, that (with
or without notice or lapse of time) could reasonably be expected to (A) result
in a material violation or breach of any of the provisions of any CPI Material
Contract, (B) give any Person the right to declare a default or exercise any
remedy under any CPI Material Contract, (C) give any Person the right to
accelerate the maturity or performance of any CPI Material Contract, or (D) give
any Person the right to cancel, terminate or materially modify any CPI Material
Contract; (iii) since December 31, 1997, CPI has not received any written notice
or other written communication regarding any actual or possible violation or
breach of, default under, or intention to terminate, any CPI Contract except for
communication (A) that has subsequently been revoked; or (B) has been received
from a complaining party that has not contacted CPI or otherwise, to the
knowledge of CPI, taken any action with respect to such party's complaint for a
period of more than six months following receipt of the communication; and (iv)
CPI has not waived any of its material rights under any CPI Material Contract,
in each case where such breach, default, violation or waiver would have a
Material Adverse Effect on CPI.
(d) To the best of the knowledge of CPI, no Person is
renegotiating, or has the right to renegotiate, any material amount paid or
payable to CPI under any CPI Material Contract, or any other material term or
provision of any CPI Material Contract, including termination provisions.
26
(e) The CPI Disclosure Schedule sets forth a list of all
claims made under any CPI Material Contract that are disputed in any material
respect or, to CPI's knowledge, where a dispute as to any material matter has
been threatened.
3.12 Liabilities. CPI has no accrued or contingent liabilities of a
nature required to be reflected in financial statements in accordance with GAAP,
except for: (a) liabilities identified as such in the CPI Financials; (b) normal
and recurring liabilities that have been incurred by CPI since December 31, 1997
in the ordinary course of business and consistent with past practices; and (c)
other liabilities that have not had and could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on CPI.
3.13 Compliance with Legal Requirements. CPI is, and to the best
knowledge of CPI has at all times since inception been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and could not reasonably be expected to have a
Material Adverse Effect on CPI. There is not presently pending any notice or
other communication received by CPI from any Governmental Body regarding any
actual or possible violation of, or failure to comply with, any material Legal
Requirement.
3.14 Certain Business Practices. Neither CPI nor any director, officer,
agent or employee of CPI has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
3.15 Governmental Authorizations. CPI holds all material Governmental
Authorizations necessary to enable CPI to conduct its business in the manner in
which its business is currently being conducted. All such Governmental
Authorizations are valid and in full force and effect. CPI is, and to the best
knowledge of CPI, at all times since inception has been, in substantial
compliance with the terms and requirements of such Governmental Authorizations.
Since inception, CPI has not received any notice or other communication from any
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any material Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization or (c) any requirement to apply for or hold Governmental
Authorization not held by CPI, in each case where such violation, revocation,
suspension, cancellation, termination or modification would have a Material
Adverse Effect on CPI.
3.16 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
CPI with any Governmental Body with respect to any taxable period ending on or
before the Closing Date (the "CPI Returns") have been or will be filed on or
before the applicable due date (including any extensions of such due date). All
amounts shown on the CPI Returns to be due on or before the Closing Date have
been or will be paid on or before the Closing Date.
27
(b) The CPI Financials fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof in
accordance with generally accepted accounting principles. CPI will establish, in
the ordinary course of business and consistent with its past practices,
quarterly reserves adequate for the payment of all Taxes for the applicable
periods from December 31, 1997 through the Closing Date. Since December 31,
1997, no material Tax liability has been incurred other than in the ordinary
course of business.
(c) Except as set forth in the CPI Disclosure Schedule, no CPI
Return has ever been examined or audited by any Governmental Body. No extension
or waiver of the limitation period applicable to any of the CPI Returns has been
granted (by CPI or any other Person), and no such extension or waiver has been
requested from CPI.
(d) No claim or Legal Proceeding is pending or, to the best of
the knowledge of CPI, has been threatened in writing against or with respect to
CPI in respect of any Tax. There are no unsatisfied liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by CPI (other than liabilities for Taxes asserted under any such notice
of deficiency or similar document that are being contested in good faith by CPI
and with respect to which adequate reserves for payment have been established).
There are no liens for Taxes upon any of the assets of CPI except liens for
current Taxes not yet due and payable. CPI has not entered into nor has it
become bound by any agreement or consent pursuant to Section 341(f) of the Code.
CPI has not been, and will not be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing. CPI is not nor has it been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code. CPI has
no liability for the taxes of any other Person except for payroll taxes
collected in the ordinary course of business.
(e) Except as set forth in the CPI Disclosure Schedule, there
is no agreement, plan, arrangement or other Contract covering any employee or
independent contractor or former employee or independent contractor of CPI that,
considered individually or considered collectively with any other such
Contracts, will, or could reasonably be expected to, give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code. CPI is not, nor has it ever been, a
party to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract (other than a Contract entered into in
the ordinary course of business in connection with the purchase or sale of
inventory or supplies).
3.17 Employee and Labor Matters; Benefit Plans.
(a) The CPI Disclosure Schedule identifies each salary, bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan or program (collectively, the "CPI Plans") sponsored,
maintained, contributed to or required to be contributed to by CPI for the
benefit of any current or former employee of CPI.
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(b) No CPI Plan is subject to Title IV of ERISA, Part 3 of
Title I of ERISA or Section 412 of the Code, and no CPI Plan constitutes a
"multi-employer plan" (as defined in Section 3(37) of ERISA).
(c) With respect to each CPI Plan, CPI has made available to
Target: (i) an accurate and complete copy of each such CPI Plan (including all
amendments thereto); (ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such CPI Plans for the last two plan
years; (iii) an accurate and complete copy of the most recent summary plan
description, together with each summary of material modifications thereto, if
required under ERISA, with respect to such CPI Plans, (iv) if such CPI Plans are
funded through a trust or any third party funding vehicle, an accurate and
complete copy of the trust or other funding agreement (including all amendments
thereto); (v) accurate and complete copies of all Contracts relating to such CPI
Plans, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and record-keeping agreements; and
(vi) an accurate and complete copy of the most recent determination, opinion,
notification or advisory letter received from the Internal Revenue Service with
respect to such CPI Plans (if such CPI Plans are intended to be qualified under
Section 401(a) of the Code).
(d) CPI has no plan or commitment to create any additional
Plan, or to modify or change any existing Plan (other than to comply with
applicable law) in a manner that would create any material liability for CPI.
(e) No CPI Plan provides death, medical or health benefits
coverage (whether or not insured) with respect to any current or former employee
of CPI after any such employee's termination of service (other than (i) benefit
coverage mandated by applicable law, including coverage provided pursuant to
Section 4980B of the Code ("COBRA"), (ii) deferred compensation benefits accrued
as liabilities on the CPI Financials, and (iii) benefits the full costs of which
are borne by current or former employees of CPI (or the employees'
beneficiaries)).
(f) With respect to any CPI Plan constituting a group health
plan within the meaning of Section 4980B(g)(2) of the Code, the provisions of
COBRA have been complied with in all material respects. The CPI Disclosure
Schedule lists all qualified beneficiaries under COBRA with respect to all such
CPI Plans.
(g) Each of the CPI Plans has been operated and administered
in all material respects in accordance with its terms and applicable Legal
Requirements, including but not limited to ERISA and the Code.
(h) All material contributions, premiums or other payments due
from CPI to (or under) any CPI Plan have been fully paid or adequately provided
for on the books and financial statements of CPI.
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(i) Each of the CPI Plans intended to be qualified under
Section 401(a) of the Code has received a favorable determination, opinion,
notification or advisory letter from the Internal Revenue Service, and CPI is
not aware of any reason why any such letter should be revoked.
(j) Except as set forth in the CPI Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, will result in any payment (including any bonus, golden parachute or
severance payment) to any current or former employee or director of CPI (whether
or not under any CPI Plan), or materially increase the benefits payable under
any CPI Plan, or result in any acceleration of the time of payment or vesting of
any such benefits.
(k) CPI is not a party to any collective bargaining contract
or other Contract with a labor union involving any of its employees.
(l) The CPI Disclosure Schedule identifies each Employee who
is not fully available to perform work because of disability or other leave and
sets forth the basis of such leave and the anticipated date of return to full
service.
(m) CPI is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters and the classification of independent contractors
and workers.
3.18 Environmental Matters. CPI is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by CPI of all permits and other Governmental Authorizations required
under applicable Environmental Laws, and compliance with the terms and
conditions thereof. CPI has not received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that CPI is not in compliance with any
Environmental Law. To the knowledge of CPI without further inquiry, no current
or prior owner of any property leased or controlled by CPI has received any
notice or other communication (in writing or otherwise), whether from a
Government Body, citizens group, employee or otherwise, that alleges that such
current or prior owner or CPI is not in compliance with any Environmental Law.
To the best knowledge of CPI, all property that is leased to, controlled by or
used by CPI, and all surface water, groundwater and soil associated with or
adjacent to such property is in clean and healthful condition and is free of any
material environmental contamination of any nature. To the best knowledge of
CPI, CPI has not disposed of, emitted, discharged, handled, stored, transported,
used or released any Materials of Environmental Concern, arranged for the
disposal, discharge, storage or release of any Materials of Environmental
Concern, or exposed any employee or other individual to any Materials of
Environmental Concern or condition so as to give rise to any material liability
or material corrective or remedial obligation under any Environmental Laws.
30
3.19 Insurance. CPI has delivered to Target a summary of all material
insurance policies and all material self-insurance programs relating to the
business, assets and operations of CPI and has made available to Target copies
of the policies. Each of such insurance policies is in full force and effect.
Since September 30, 1997, CPI has not received any notice or other communication
regarding any actual or possible (a) cancellation or invalidation of any
insurance policy, (b) refusal of any coverage or rejection of any material claim
under any insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy. Except as set forth in
the CPI Disclosure Schedule, there is no pending claim (including any workers'
compensation claim) other than routine claims for benefits under any CPI Plan
under or based upon any insurance policy of CPI.
3.20 Transactions with Affiliates.
(a) Since December 31, 1997, except as set forth in the CPI
Disclosure Schedule, no event has occurred that would be required to be reported
by CPI pursuant to Item 404 of Regulation S-K promulgated by the SEC if CPI was
a reporting company. The CPI Disclosure Schedule identifies each Person who is
an "affiliate" (as that term is used in Rule 145 under the Securities Act) of
CPI as of the date of this Agreement.
(b) The CPI Disclosure Schedule contains an accurate and
complete list as of the date of this Agreement of all outstanding loans and
advances made by CPI to any employee, director, consultant or independent
contractor other than routine travel advances and advances made for relocation
purposes made to employees in the ordinary course of business.
3.21 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and (to the best of
the knowledge of CPI ) no Person has threatened to commence any Legal
Proceeding: (i) that involves CPI or any of the assets owned or used by CPI; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the knowledge of
CPI, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that could reasonably be expected to give rise to or serve
as a basis for the commencement of any such Legal Proceeding that would
reasonably be expected to have a Material Adverse Effect on CPI.
(b) There is no material order, writ, injunction, judgment or
decree to which CPI, or any of the assets owned or used by CPI, is subject. To
the best of the knowledge of CPI, no officer or key employee of CPI is subject
to any order, writ, injunction, judgment or decree that prohibits such officer
or other employee from engaging in or continuing any conduct, activity or
practice relating to the business of CPI.
3.22 Authority; Binding Nature of Agreement.
(a) CPI has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement. The
board of directors of CPI (at a meeting duly called and held) has unanimously
(i) determined that the Mergers are advisable and fair and in the best interests
of CPI and its stockholders, (ii) authorized and approved the execution,
delivery and performance of this Agreement by CPI and unanimously approved the
Mergers, and (iii) recommended the approval of this Agreement and the Mergers by
the holders of CPI Common Stock and CPI Preferred Stock and directed that this
Agreement and the Mergers be submitted for consideration by the CPI stockholders
at a CPI Stockholders' Meeting (as defined in Section 5.2). This Agreement
constitutes the legal, valid and binding obligation of CPI, enforceable against
CPI in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
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(b) Prior to the Effective Time, Holdco will have the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement. Prior to the Effective Time, Holdco will have
had the board of directors of Holdco (at a meeting duly called and held)
unanimously (i) determine that the Mergers are advisable and fair and in the
best interests of Holdco and its stockholders, (ii) authorize and approve the
execution, delivery and performance of this Agreement by Holdco and unanimously
approve the Mergers, and (iii) recommend the approval of this Agreement and the
Mergers by the sole stockholder of Holdco. Such sole stockholder shall have
approved this Agreement and the Mergers. This Agreement will constitute the
legal, valid and binding obligation of Holdco enforceable against Holdco in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.23 No Existing Discussions. CPI has terminated any existing
discussions with any Person that relate to any Acquisition Proposal. Neither
CPI, nor any Representative of CPI, is currently engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
3.24 Vote Required. The approval by vote or written consent of each of
(a) the holders of more than 50% of the shares of CPI Common Stock then
outstanding, (b) the holders of more than 50% of the shares of the CPI Series A
Preferred Stock and CPI Series B Preferred Stock, voting together as a single
class, and (c) the holders of more than 50% of the shares of CPI Series C
Preferred Stock, CPI Series D Preferred Stock, CPI Series E Preferred Stock, CPI
Series F Preferred Stock and CPI Series G Stock then outstanding, voting
together as a single class, are the only votes of the holders of any class or
series of CPI's capital stock necessary to approve this Agreement and the
Mergers. The approval or written consent of (i) the holders of more than 50% of
the shares of CPI Common Stock and CPI Preferred Stock, voting together as a
single class, and (ii) the holders of more than 50% of the shares of each
outstanding series of CPI Preferred Stock, each such series voting as a separate
class, are the only votes of holders of any class or series of CPI's capital
stock necessary to approve the CPI Charter Amendment. The stockholder approvals
referred to in the preceding two sentences are collectively referred to herein
as the "Required CPI Stockholder Vote."
3.25 Non-Contravention; Consents. Neither (x) the execution, delivery
or performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
32
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the Certificate of Incorporation, Bylaws or other
charter or organizational documents of CPI, or (ii) any resolution adopted by
the stockholders, the board of directors or any committee of the board of
directors of CPI;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge the Merger or
any of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which CPI or Holdco, or any of the assets
owned or used by CPI, is subject, if the result would have a Material Adverse
Effect on CPI;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by CPI or that otherwise relates to the business of
CPI or to any of the assets owned or used by CPI, if the result would have a
Material Adverse Effect on CPI;
(d) contravene, conflict with or result in a violation or
material breach of, or result in a default (or an event that with notice or
lapse of time or both would become a default) under, any provision of any CPI
Material Contract, or give any Person the right to (i) declare a default or
exercise any remedy under any such CPI Material Contract, (ii) a rebate,
charge-back, penalty or change in delivery schedule under any such CPI Material
Contract, (iii) accelerate the maturity or performance of any such CPI Material
Contract (including the vesting of all outstanding CPI Stock Options), or (iv)
cancel, terminate or materially modify any term of such CPI Material Contract,
if the result would have a Material Adverse Effect on CPI; or
(e) result in the imposition or creation of any Encumbrance
upon or with respect to any asset owned or used by CPI (except for minor liens
that will not, in any case or in the aggregate, materially detract from the
value of the assets subject thereto or materially impair the operations of CPI).
Except as may be set forth in the CPI Disclosure Schedule or as
required by the Exchange Act, the DGCL and the NASD Bylaws (as they relate to
the Form S-4 Registration Statement and the Joint Proxy Statement) CPI is not,
nor will it be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
3.26 Financial Advisor. Except as set forth in the CPI Disclosure
Schedule, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Mergers or any of the
other transactions contemplated by this Agreement based upon arrangements made
by or on behalf of CPI. CPI has furnished to Target accurate and complete copies
of all agreements under which any such fees, commissions or other amounts have
been paid or may become payable and all indemnification and other arrangements.
33
3.27 Full Disclosure. This Agreement (including the CPI Disclosure
Schedule) does not, and the certificate referred to in Section 7.6(c) will not,
(i) contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any material
fact necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
4. CERTAIN COVENANTS OF THE PARTIES
4.1 Access and Investigation; Confidentiality.
(a) During the period from the date of this Agreement through
the Effective Time (the "Pre-Closing Period"), CPI and Target each shall, and
CPI and Target shall cause the respective Representatives of CPI and Target
Corporations to, provide each other and their respective Representatives with
reasonable access to each others' respective personnel and assets and books,
records, Tax Returns, work papers and other documents, and such additional
financial, operating and other data and information regarding each other and
their Subsidiaries, as Target and CPI may reasonably request, subject to
appropriate safeguards with respect to confidentiality.
(b) Each of the parties hereto hereby agrees to and reaffirms
the terms and provisions of the confidentiality agreements between them dated as
of March 5, 1998 and March 4, 1998.
4.2 Operation of Target's Business.
(a) During the Pre-Closing Period: (i) Target shall ensure
that each of the Target Corporations conducts its business and operations (A) in
the ordinary course and in accordance with the operating plan previously
described by Target to CPI and (B) in compliance with all applicable Legal
Requirements and the requirements of all Target Material Contracts; (ii) Target
shall use reasonable efforts to ensure that each of the Target Corporations
preserves intact its current business organization, keeps available the services
of its current officers and employees and maintains its relations and goodwill
with all suppliers, customers, landlords, creditors, licensors, licensees,
employees and other Persons having business relationships with the respective
Target Corporations; and (iii) Target shall keep in full force all insurance
policies referred to in Section 2.17 or replace such policies with comparable or
superior policies; (iv) Target shall provide all notices, assurances and support
required by any Target Contract relating to any Proprietary Asset in order to
ensure that no condition under such Target Contract occurs that could result in,
or could increase the likelihood of, any transfer or public disclosure by any
Target Corporation of any Proprietary Asset; and (v) Target shall (to the extent
requested by CPI) cause its officers to report periodically to CPI concerning
the status of Target's business.
34
(b) During the Pre-Closing Period, without the prior written
consent of CPI, Target shall not and shall not permit any of the other Target
Corporations to:
(i) declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock, or
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities, except for repurchases at less than fair market value pursuant to
employment or consulting agreements in effect prior to the date hereof;
(ii) hire any new employees whose annual salary
exceeds $80,000, excluding those persons hired to replace employees who
terminate their employment with a Target Corporation during the Pre-Closing
Period;
(iii) sell, issue, grant or authorize the issuance
or grant of (A) any capital stock or other security (except Target Common Stock
upon the valid exercise of Target Options, (B) any option, call, warrant or
right to acquire any capital stock or other security, (C) any instrument
convertible into or exchangeable for any capital stock or other security;
(iv) except as contemplated by this Agreement, amend
or waive any of its rights under, or accelerate the vesting under, any provision
of any of Target Option Plans, any provision of any agreement evidencing any
outstanding stock option or any restricted stock purchase agreement, or
otherwise modify any of the terms of any outstanding option, warrant or other
security or any related Contract;
(v) take any action to permit holders of Target
stock options to receive cash payments in connection with the transactions
contemplated by this Agreement;
(vi) except as contemplated by this Agreement, amend
or permit the adoption of any amendment to its Certificate of Incorporation or
Bylaws or other charter or organizational documents, or effect or become a party
to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(vii) except as contemplated by this Agreement, form
any Subsidiary or acquire any equity interest or other interest in any other
Entity;
(viii) make any capital expenditure, except capital
expenditures in an aggregate amount of no more than $50,000;
(ix) establish, adopt or amend any employee benefit
plan or pay any bonus or make any profit sharing or similar payment greater than
$10,000 in any individual case or $50,000 in the aggregate, or increase the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees greater
than $10,000 in any individual case or $50,000 in the aggregate;
(x) change any of its methods of accounting or
material accounting practices in any respect;
35
(xi) make any material Tax election;
(xii) commence or settle any material Legal
Proceeding;
(xiii) materially amend or otherwise modify any of
the terms of its engagement of the financial advisor referenced in Section 2.26
above;
(xiv) enter into any material transaction or take
any other material action in each case either inconsistent with the operating
plan previously provided by Target to CPI, or outside the ordinary course of
business;
(xv) agree or commit to take any of the actions
described in clause "(i)" through "(xiv)" of this Section 4.2(b).
(c) During the Pre-Closing Period, Target shall promptly
notify CPI in writing of: (i) the discovery by Target of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Target in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by Target in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Target; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 6 or Section 7 impossible or unlikely or that has had or
could reasonably be expected to have a Material Adverse Effect on the Target
Corporations. No notification given to CPI pursuant to this Section 4.2(c) shall
limit or otherwise affect any of the representations, warranties, covenants or
obligations of Target contained in this Agreement.
4.3 Operation of CPI's Business.
(a) During the Pre-Closing Period: (i) CPI shall conduct its
business and operations (A) in the ordinary course and in accordance with past
practices or the operating plan previously described by CPI to Target and (B) in
compliance with all applicable Legal Requirements and the requirements of all
CPI Material Contracts; (ii) CPI shall use reasonable efforts to ensure that CPI
preserves intact its current business organization, keeps available the services
of its current officers and employees and maintains its relations and goodwill
with all suppliers, customers, landlords, creditors, licensors, licensees,
employees and other Persons having business relationships with CPI; (iii) CPI
shall keep in full force all insurance policies referred to in Section 3.19 or
replace any such policies that terminate with comparable or superior policies;
(iv) CPI shall provide all notices, assurances and support required by any CPI
Contract relating to any CPI Proprietary Asset in order to ensure that no
condition under such CPI Contract occurs that could result in, or could increase
the likelihood of, any transfer or public disclosure by CPI of any CPI
Proprietary Asset; and (v) CPI shall (to the extent requested by Target) cause
its officers to report periodically to Target concerning the status of CPI's
business.
36
(b) During the Pre-Closing Period, CPI shall not (without the
prior written consent of Target):
(i) declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock, or
repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities, except for repurchases at less than fair market value pursuant to
employment or consulting agreements in effect prior to the date hereof and
except for the redemption, prior to the Effective Time, of the CPI Redeemable
Preferred Stock pursuant to the terms set forth in the CPI Disclosure Schedule;
(ii) sell, issue, grant or authorize the issuance or
grant of any capital stock or other security except: CPI Common Stock or
Preferred Stock upon the valid exercise of CPI Options or CPI warrants
outstanding on the date of this Agreement; CPI Common Stock or warrants issued
pursuant to equipment lease financings and similar transactions or otherwise in
the ordinary course of business; CPI Series G Preferred Stock and warrants in
completion of the Series G financing; stock options (and stock issuable upon
exercise thereof) to employees and directors under its existing stock option
plans and in the ordinary course of business with an exercise price of not less
than $6.60 per share of CPI Common Stock; and shares of CPI Common Stock, if
any, issued in connection with the redemption of the CPI Redeemable Preferred
Stock.
(iii) except as contemplated by this Agreement,
amend or waive any of its rights under, or accelerate the vesting under, any
provision of any CPI Option Plans, any provision of any agreement evidencing any
outstanding stock option or any restricted stock purchase agreement, or
otherwise modify any of the terms of any outstanding option, warrant or other
security or any related Contract, provided that CPI shall be entitled to make
any changes that do not materially increase CPI's obligations under any
agreement evidencing any outstanding stock option, restricted stock purchase
agreement, warrant or other security or any related Contract;
(iv) except as contemplated by this Agreement, amend
or permit the adoption of any amendment to its Certificate of Incorporation or
Bylaws or other charter or organizational documents, or effect or become a party
to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction which would materially adversely affect the transactions
provided in this Agreement.
(v) except as discussed or projected in discussions
with or presentations to Target, enter into or become bound by, or permit any of
the assets owned or used by it to become bound by, any CPI Material Contract, or
amend or terminate, or waive or exercise any material right or remedy under, any
CPI Material Contract, provided that CPI shall be entitled to make any changes
that do not materially increase CPI's obligations under any CPI Material
Contract;
37
(vi) change any of its methods of accounting or
accounting practices in any respect;
(vii) make any material Tax election;
(viii) amend or otherwise modify any of the terms of
any CPI Warrants, except to the extent necessary to terminate such Warrants or
reduce the number of shares issuable upon exercise thereunder; or
(ix) agree or commit to take any of the actions
described in clauses "(i)" through "(viii)" of this Section 4.3(b).
(c) During the Pre-Closing Period, CPI shall promptly notify
Target in writing of: (i) the discovery by CPI of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy in any representation or
warranty made by CPI in this Agreement; (ii) any event, condition, fact or
circumstance that occurs, arises or exists after the date of this Agreement and
that would cause or constitute a material inaccuracy in any representation or
warranty made by CPI in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement; (iii) any material breach of any covenant or obligation of CPI; and
(iv) any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Section 6 or Section 7
impossible or unlikely or that has had or could reasonably be expected to have a
Material Adverse Effect on CPI. No notification given to Target pursuant to this
Section 4.3(c) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of CPI contained in this Agreement.
4.4 No Solicitation by Target.
(a) Target shall not directly or indirectly, and shall not
authorize or permit any of the other Target Corporations or any Representative
of any of the Target Corporations directly or indirectly to, (i) solicit,
initiate, knowingly encourage or induce the making, submission or announcement
of any Acquisition Proposal or take any similar action, (ii) furnish any
non-public information regarding any of the Target Corporations to any Person in
connection with or in response to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction. Without
limiting the generality of the foregoing, Target acknowledges and agrees that
any violation of any of the restrictions set forth in the preceding sentence by
any Representative of any of the Target Corporations, whether or not such
Representative is purporting to act on behalf of Target, shall be deemed to
constitute a breach of this Section 4.4 by Target.
38
(b) Nothing contained in this Agreement shall prevent Target
or its Board of Directors from (i) furnishing information regarding any of the
Target Corporations (including copy of this Section 4.4) to any Person in
connection with or in response to a bona fide, unsolicited Acquisition Proposal
or engaging in discussions or negotiations with respect thereto if and only to
the extent that (A) the Board of Directors of Target determines in good faith,
after consultation with its financial advisor that such Acquisition Proposal is
reasonably likely to result in a Superior Offer, (B) the Board of Directors of
Target determines in good faith, after consultation with its outside counsel,
including discussions of applicable legal standards under Utah law, that such
action is required in order for the Board of Directors to comply with its
fiduciary duties under applicable law, (C) the Person who has requested such
information has executed and delivered to Target a non-disclosure agreement that
is not less restrictive than the non-disclosure agreement in effect between
Target and CPI, and (D) Target has not breached Section 4.4(a)(i), or (ii)
complying with Rule 14e-2 and Rule 14d-9 promulgated under the Exchange Act. In
addition, nothing in Section 4.4(a) above shall prevent the Board of Directors
of Target from recommending a Superior Offer to its stockholders, if the Board
of Directors determines, after consultation with its outside counsel, including
discussions of applicable legal standards under Utah law, that, in light of such
Superior Offer, such recommendation is required in order for the Board of
Directors to comply with its fiduciary obligations to Target's stockholders
under applicable law (which determination shall be made in light of a revised
proposal, if any, made by CPI prior to the date of such determination); provided
however that Target (i) shall provide CPI with at least 48 hours prior written
notice of its intentions to hold any meeting at which Target's Board of
Directors is reasonably expected to consider an Acquisition Proposal, or such
lesser amount of time as has been given to the Board of Directors in relation to
such meeting, and (ii) Target shall not recommend to its stockholders a Superior
Offer for at least two (2) business days after Target has provided CPI with the
material terms of such Superior Offer.
(c) Target shall promptly advise CPI orally and in writing of
any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. Target shall keep CPI
informed with respect to material changes to the terms of any such Acquisition
Proposal and any material modification or proposed modifications thereto.
(d) Target shall immediately cease and cause to be terminated
any existing discussions with any Person that relate to any Acquisition Proposal
and shall request the return or destruction of any confidential information
previously disclosed to such Person and shall use commercially reasonable
efforts to ensure that such information is destroyed or returned.
4.5 No Solicitation by CPI.
(a) CPI shall not, directly or indirectly, and shall not
authorize or permit any Representative of CPI, directly or indirectly, to (i)
solicit, initiate, knowingly encourage or induce the making, submission or
announcement of any Acquisition Proposal or take any similar action, (ii)
furnish any non-public information regarding CPI to any Person in connection
with or in response to an Acquisition Proposal, (iii) engage in discussions or
negotiations with any Person with respect to any Acquisition Proposal, (iv)
approve, endorse or recommend any Acquisition Proposal or (v) enter into any
letter of intent or similar document or any Contract contemplating or otherwise
relating to any Acquisition Transaction. Without limiting the generality of the
foregoing, CPI acknowledges and agrees that any violation of any of the
restrictions set forth in the preceding sentence by any Representative of CPI,
whether or not such Representative is purporting to act on behalf of CPI, shall
be deemed to constitute a breach of this Section 4.5 by CPI.
39
(b) Nothing contained in this Agreement shall prevent CPI or
its Board of Directors from (i) furnishing information regarding CPI (including
a copy of this Section 4.5) to any Person in connection with or in response to a
bona fide, unsolicited Acquisition Proposal or engaging in discussions or
negotiations with respect thereto if and only to the extent that (A) the Board
of Directors of CPI determines in good faith, after consultation with its
financial advisor that such Acquisition Proposal is reasonably likely to result
in a Superior Offer, (B) the Board of Directors of CPI determines in good faith,
after consultation with its outside counsel, including discussions of applicable
legal standards under Delaware law, that such action is required in order for
the Board of Directors to comply with its fiduciary duties under applicable law,
(C) the Person who has requested such information has executed and delivered to
CPI a non-disclosure agreement that is not less restrictive than the
non-disclosure agreement in effect between CPI and Target, and (D) CPI has not
breached Section 4.5(a)(i), or (ii) complying with Rule 14e-2 and Rule 14d-9
promulgated under the Exchange Act. In addition, nothing in Section 4.5(a) above
shall prevent the Board of Directors of CPI from recommending a Superior Offer
to its stockholders, if the Board of Directors determines, after consultation
with its outside counsel, including discussions of applicable legal standards
under Delaware law that, in light of such Superior Offer, such recommendation is
required in order for the Board of Directors to comply with its fiduciary
obligations to CPI's stockholders under applicable law (which determination
shall be made in light of a revised proposal, if any, made by the Target prior
to the date of such determination); provided however that CPI (i) shall provide
Target with at least 48 hours prior written notice of its intention to hold any
meeting at which CPI's Board of Directors is reasonably expected to consider an
Acquisition Proposal, or such lesser amount of time as has been given to the
Board of Directors in relation to such meeting, and (ii) shall not recommend to
its stockholders a Superior Offer for at least two (2) business days after CPI
has provided Target with the material terms of such Superior Offer.
(c) CPI shall promptly advise Target orally and in writing of
any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. CPI shall keep Target
informed with respect to material changes to the terms of any such Acquisition
Proposal and any material modification or proposed modifications thereto.
(d) CPI shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal and
shall request the return or destruction of any confidential information
previously disclosed to such Person and shall use commercially reasonable
efforts to ensure that such information is destroyed or returned.
40
5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Registration Statements; Joint Proxy Statement.
(a) As promptly as practicable after the date of this
Agreement, CPI and Target shall prepare and cause to be filed with the SEC the
Joint Proxy Statement and simultaneously or thereafter CPI shall prepare and
cause to be filed with the SEC the Form S-4 Registration Statement, in which the
Joint Proxy Statement will be included as a prospectus. Each of CPI and Target
shall use all reasonable efforts to cause the Form S-4 Registration Statement
and the Joint Proxy Statement to comply with the rules and regulations
promulgated by the SEC, to respond promptly to any comments of the SEC or its
staff and to have the Form S-4 Registration Statement declared effective under
the Securities Act as promptly as practicable after it is filed with the SEC.
Target will use all reasonable efforts to cause the Joint Proxy Statement to be
mailed to Target's stockholders, and CPI will use all reasonable efforts to
cause the Joint Proxy Statement to be mailed to the CPI's stockholders, as
promptly as practicable after the Form S-4 Registration Statement is declared
effective under the Securities Act. CPI and Target shall promptly furnish to the
other all information concerning CPI and Target stockholders and the Target
Corporations, respectively, that may be required or reasonably requested in
connection with any action contemplated by this Section 5.1. CPI and Target
shall notify the other promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for any amendment or
supplement to the Form S-4 Registration Statement or Joint Proxy Statement or
for any other information and shall supply the other with copies of all
correspondence between such party and the SEC or its staff or other governmental
officials with respect to the S-4 Registration Statement or Joint Proxy
Statement. The information supplied by each of, Target and CPI for inclusion in
the Form S-4 Registration Statement and the Joint Proxy Statement shall not (i)
at the time the Form S-4 Registration Statement is declared effective, (ii) at
the time the Joint Proxy Statement is first mailed to the stockholders of Target
and CPI, respectively, (iii) at the time of the CPI Stockholders' Meeting and at
the time of the Target Stockholders' Meeting, and (iv) at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If Target or CPI becomes aware of any information, that should be
disclosed in an amendment or supplement to the Form S-4 Registration Statement
or the Joint Proxy Statement, then Target or CPI, as the case may be, shall
promptly inform the other Party thereof and shall cooperate with the other in
filing such amendment or supplement with the SEC and, if appropriate, in mailing
such amendment or supplement to the stockholders of CPI or the stockholders of
Target.
(b) Prior to the Effective Time, CPI and Target shall use best
efforts to obtain all regulatory approvals needed to ensure that the Holdco
Common Stock to be issued in the Merger (i) will be registered or qualified
under the securities law of every jurisdiction of the United States in which any
registered holder of CPI Common Stock, CPI Preferred Stock or Target Common
Stock has an address of record on the record date for determining the
stockholders entitled to notice of and to vote at Stockholders' Meeting; and
(ii) will be approved for quotation at the Effective Time on the Nasdaq National
Market.
41
(c) On or prior to the Closing Date, Holdco shall file a
Registration Statement on Form S-8 covering the offer and sale by Holdco of
Holdco Common Stock pursuant to the CPI Options and Target Options.
5.2 CPI Stockholders' Meeting.
(a) CPI shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and hold a meeting of the
holders of CPI Common Stock and CPI Preferred Stock to consider, act upon and
vote upon the approval of the CPI Charter Amendment, this Agreement and of the
Mergers (the "CPI Stockholders' Meeting"). The CPI Stockholders' Meeting will be
held as promptly as practicable and in any event within forty-five (45) days
after the Form S-4 Registration Statement is declared effective under the
Securities Act. CPI shall ensure that the CPI Stockholders' Meeting is called,
noticed, convened, held and conducted, and that all proxies solicited in
connection with the CPI Stockholders' Meeting are solicited, in compliance with
all applicable Legal Requirements. CPI's obligation to call, give notice of,
convene and hold the CPI Stockholders' Meeting in accordance with this Section
5.2(a) shall not be limited or otherwise affected by the withdrawal, amendment
or modification of the recommendation of the board of directors of CPI with
respect to the Merger, except as is required by applicable law.
(b) Subject to Section 5.2(c): (i) the Board of Directors of
CPI shall unanimously recommend that the CPI stockholders vote in favor of and
approve the CPI Charter Amendment, this Agreement and the Mergers at the CPI
Stockholders' Meeting; (ii) the Joint Proxy Statement shall include a statement
to the effect that the board of directors of CPI has unanimously recommended
that the CPI's stockholders vote in favor of and approve the CPI Charter
Amendment, this Agreement and the Mergers at the CPI Stockholders' Meeting; and
(iii) neither the Board of Directors of CPI nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify,
in a manner adverse to Target, the unanimous recommendation of the Board of
Directors of CPI that CPI's stockholders vote in favor of and approve the CPI
Charter Amendment, this Agreement and the Mergers. For purposes of this
Agreement, said recommendation of the board of directors of CPI shall be deemed
to have been modified in a manner adverse to Target if said recommendation shall
no longer be unanimous.
(c) Nothing in Section 5.2(b) shall prevent the Board of
Directors of CPI from withdrawing, amending or modifying its unanimous
recommendation in favor of the Mergers at any time prior to the approval of this
Agreement by the Required CPI Stockholder Vote if (i) a Superior Offer is made
to CPI and is not withdrawn, (ii) neither CPI nor any of its Representatives
shall have violated any of the restrictions set forth in Section 4.5, and (iii)
the Board of Directors of CPI concludes in good faith, after consultation with
its outside counsel, including discussion of applicable legal standards under
Delaware law, that, in light of such Superior Offer, the withdrawal, amendment
or modification of such recommendation is required in order for the Board of
Directors of CPI to comply with its fiduciary obligations to the CPI's
stockholders under applicable law. Except as may be limited by applicable law,
nothing contained in this Section 5.2 shall limit CPI's obligation to call, give
notice of, convene and hold the CPI Stockholders' Meeting (regardless of whether
the unanimous recommendation of the board of directors of CPI shall have been
withdrawn, amended or modified).
42
5.3 Target Stockholders' Meeting.
(a) Target shall take all action necessary under all
applicable Legal Requirements to call, give notice of, convene and hold a
meeting of the holders of Target Common Stock to consider, act upon and vote
upon the approval of this Agreement and of the Mergers (the "Target
Stockholders' Meeting"). The Target Stockholders' Meeting will be held as
promptly as practicable and in any event within forty-five (45) days after the
Form S-4 Registration Statement is declared effective under the Securities Act.
Target shall ensure that the Target Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited in connection with
the Target Stockholders' Meeting are solicited in compliance with all applicable
Legal Requirements. Target's obligation to call, give notice of, convene and
hold the Target Stockholders' Meeting in accordance with this Section 5.3(a)
shall not be limited or otherwise affected by any withdrawal, amendment or
modification of the recommendation of the Board of Directors of Target with
respect to the Merger, except as may be required by applicable law.
(b) Subject to Section 5.3(c): (i) the Board of Directors of
Target shall unanimously recommend that Target's stockholders vote in favor of
and approve this Agreement and the Mergers; (ii) the Joint Proxy Statement shall
include a statement to the effect that the Board of Directors of Target has
unanimously recommended that Target's stockholders vote in favor of and approve
this Agreement and the Mergers at the Target Stockholders' Meeting; and (iii)
neither the board of directors of Target nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify,
in a manner adverse to CPI, the unanimous recommendation of the board of
directors of Target that Target's stockholders vote in favor of and approve this
Agreement and the Mergers. For purposes of this Agreement, said recommendation
of the Board of Directors of Target shall be deemed to have been modified in a
manner adverse to CPI if said recommendation shall no longer be unanimous.
(c) Nothing in Section 5.3(b) shall prevent the Board of
Directors of Target from withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger at any time prior to the approval of this
Agreement by the Required Target Stockholder Merger Vote if (i) a Superior Offer
is made to Target and is not withdrawn, (ii) neither Target nor any of its
Representatives shall have violated any of the restrictions set forth in Section
4.4, and (ii) the Board of Directors of Target concludes in good faith, based
upon the advice of its outside counsel, including a discussion of applicable
legal standards under Delaware law, that the withdrawal, amendment or
modification of such recommendation is required in order for the Board of
Directors of Target to comply with its fiduciary obligations to Target's
stockholders under applicable law. Except as may be limited by applicable law,
nothing contained in this Section 5.3 shall limit Target's obligation to call,
give notice of, convene and hold the Target Stockholders' Meeting (regardless of
whether the unanimous recommendation of the board of directors shall have been
withdrawn, amended or modified).
43
5.4 Regulatory Approvals. CPI and Target shall use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any Governmental
Body with respect to the Mergers and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. CPI and Target shall (1) give the other Party prompt
notice of the commencement of any Legal Proceeding by or before any Governmental
Body with respect to the Merger or any of the other transactions contemplated by
this Agreement, (2) keep the other Party informed as to the status of any such
Legal Proceeding, and (3) promptly inform the other Party of any communication
to or from any Governmental Body regarding the Mergers. CPI and Target will
consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any Legal Proceeding under or relating to any other federal or state
antitrust or fair trade law. In addition, except as may be prohibited by any
Governmental Body or by any Legal Requirement, in connection with any Legal
Proceeding under or relating to any federal or state antitrust or fair trade law
or any other similar Legal Proceeding, CPI and Target will permit authorized
Representatives of the other Party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding.
5.5 Continuation of Target D&O Insurance. Target and T-Sub shall
provide for the continuance of current Target directors and officers insurance
in respect of acts prior to the Effective Date for the benefit of Target
officers and directors for a period of five (5) years after the Effective Date.
5.6 Additional Agreements. Target and CPI shall use all reasonable
efforts to take, or cause to be taken, all actions necessary to consummate the
Mergers and make effective the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each Party to this
Agreement (i) shall make all filings (if any) and give all notices (if any)
required to be made and given by such Party in connection with the Mergers and
the other transactions contemplated by this Agreement, (ii) shall use all
reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
Party in connection with the Merger or any of the other transactions
contemplated by this Agreement, and (iii) shall use all reasonable efforts to
lift any restraint, injunction or other legal bar to the Mergers.
5.7 Disclosure. Target and CPI shall consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Merger or any of the other transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, neither CPI nor Target shall,
and neither shall permit any of its Representatives to, make any disclosure
regarding the Merger or any of the other transactions contemplated by this
Agreement unless (a) the other Party shall have approved such disclosure or (b)
the disclosing Party shall have been advised in writing by its outside legal
counsel that such disclosure is required by applicable law and shall have given
the other Party the opportunity, to the extent practicable, to review and
comment upon the disclosure.
44
5.8 Tax Matters. Each of Target and CPI acknowledge and agree that (i)
it intends the transactions contemplated by this Agreement to qualify as
transfers subject to the provisions of Section 351(a) of the Code, (ii) it will
report the Mergers as such transfers in any and all federal, state and local
income tax returns filed by it. At or prior to the filing of the S-4
Registration Statement with the SEC and, to the extent necessary, at the
Closing, CPI and Target shall execute and deliver to Cooley Godward LLP and to
Xxxxxx Xxxxx & Bockius LLP management tax representation letters in a form
agreed to by counsel to Target and CPI. Following delivery of the management tax
representations letters, each of CPI and Target shall use its reasonable efforts
to cause Xxxxxx Godward LLP and Xxxxxx, Xxxxx & Bockius LLP, respectively, to
deliver promptly to it a legal opinion satisfying the requirements of Item 601
of Regulation S-K promulgated under the Securities Act. In rendering such
opinion, each of such counsel shall be entitled to rely on the management tax
representation letters. Target and CPI shall use all reasonable efforts prior to
the Effective Time to cause the Mergers to qualify as tax free transfers under
Section 351(a) of the Code.
5.9 Resignation of Officers and Directors. Except as otherwise agreed
with CPI, Target shall use all reasonable efforts to obtain and deliver to CPI
prior to the Closing the resignation of each officer and director of Target
effective as of the Effective Time, except any directors identified in Section
5.12 below who are members of the Board of Directors of Target immediately prior
to the Effective Time.
5.10 FIRPTA Matters. At the Closing, (a) CPI shall deliver to Target a
statement (in such form as may be reasonably requested by counsel to Target)
conforming to the requirements of Xxxxxxx 0.000 - 0(x)(0)(x) xx xxx Xxxxxx
Xxxxxx Treasury Regulations, and (b) CPI shall deliver to the Internal Revenue
Service the notification required under Xxxxxxx 0.000 - 0(x)(0) xx xxx Xxxxxx
Xxxxxx Treasury Regulations.
5.11 Affiliate Agreements. No later than twenty (20) days in advance of
the Effective Time, each of the parties shall deliver to each other a list of
Persons who are "affiliates," as that term is used in Rule 145 under the
Securities Act (an "Affiliate List") of Target or CPI, as applicable. Prior to
the Effective Time, each of the parties shall deliver to each other an Affiliate
Agreement, in a mutually agreed form, duly executed by each Person on the
Affiliate List, and by each Person who becomes an affiliate after delivery of
the Affiliate List and prior to the date of delivery of the signed Affiliate
Agreements.
5.12 Post Merger Holdco Board of Directors. In addition to all of the
directors of CPI immediately prior to the Effective Time who shall serve as the
Board of Directors of Holdco effective immediately after the Effective Time, CPI
shall use all reasonable efforts to nominate and appoint two persons, designated
by Target in consultation with CPI, to join the Board of Directors of Holdco to
serve in such capacity until Holdco's 2000 annual stockholders meeting.
5.13 Registration Rights. Holdco shall assume CPI's obligations under
the CPI Fourth Amended and Restated Stockholders' Agreement dated as of April
1998, as amended (the "Stockholders' Agreement"); provided, however, that, CPI
shall use all reasonable efforts to provide that no Holder (as defined in the
Stockholders' Agreement) shall request registration or participation in a
registration of Holdco Common Stock until the earlier of (a) the date ninety
(90) days after the effective date of a registration statement for the first
public offering of Holdco's shares following the Effective Time, and (b) the
first anniversary of the Effective Time.
45
5.14 CPI Redeemable Preferred Stock. Prior to the Effective Time, CPI
shall redeem all outstanding shares of CPI Redeemable Preferred Stock in
accordance with the CPI Disclosure Schedule.
5.15 Market Stand-off Agreement. CPI shall use reasonable best efforts
to obtain the agreement of each director and executive officer of CPI that such
person shall not directly or indirectly sell, offer to sell, contract to sell
(including without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Holdco Common Stock beneficially owned by such person for one hundred
eighty (180) days from the Effective Time. Furthermore, CPI shall use reasonable
best efforts to obtain the agreement of each of the remaining holders of CPI
Common Stock and CPI Preferred Stock (each a "CPI Investor") that such CPI
Investor shall not directly or indirectly sell, offer to sell, contract to sell
(including without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Holdco Common Stock beneficially owned by such person for ninety (90)
days from the Effective Time.
5.16 Nasdaq Listing. Each of the parties shall use its best efforts to
obtain, prior to the Effective Time, the approval for listing on the Nasdaq
National Market, effective upon official notice of issuance, of the shares of
Holdco Common Stock issuable in connection with the Mergers and which will be
issuable upon exercise of options assumed pursuant to this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CPI
The obligations of CPI to effect the Mergers and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties of
Target contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) shall also be true
and correct on and as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date; provided, however, that for purposes of this
Section 6.1 only, such representations and warranties shall be deemed to be true
and correct unless the failure or failures of such representations and
warranties to be so true and correct (without regard to materiality qualifiers
contained therein), individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse Effect on Target.
6.2 Performance of Covenants. All of the covenants and obligations that
Target is required to comply with or to perform at or prior to the Closing shall
have been complied with and performed in all material respects.
46
6.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the Form S-4 Registration Statement.
6.4 Stockholder Approval. This Agreement and the Mergers shall have
been approved by the Required CPI Stockholder Vote and the Required Target
Stockholder Merger Vote. The CPI Charter Amendment shall have been approved by
the Required CPI Stockholder Vote.
6.5 Documents. CPI shall have received the following documents:
(a) a legal opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP, dated as
of the Closing Date, in a form reasonably satisfactory to CPI and its legal
counsel;
(b) a legal opinion of Xxxxxx Godward LLP, dated as of the
Closing Date, to the effect that the Mergers will qualify as transfers subject
to the provisions of Section 351(a) of the Code, it being understood that, in
rendering such opinion, Xxxxxx Godward LLP, may rely upon the tax representation
letters referred to in Section 5.8 and a copy of the legal opinions described in
Section 7.6(b) hereof. The opinions described in this Section 6.5(b) and in
Section 7.6(b) shall be substantially identical in form and substance; and
(c) a certificate executed on behalf of Target by its Chief
Executive Officer confirming that conditions set forth in Sections 6.1, 6.2,
6.4, 6.6 and 6.9 have been duly satisfied.
6.6 No Material Adverse Change. There shall have been no material
adverse change in Target's business, financial condition, assets, liabilities,
operations or financial performance since the date of this Agreement (it being
understood that a decline in Target's stock price shall not constitute, in and
of itself, a Material Adverse Change).
6.7 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of either of the
Mergers shall have been issued by any court of competent jurisdiction and remain
in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Mergers that makes consummation of either of the Mergers
illegal.
6.8 Delivery of Affiliates' Agreements. The Affiliate Agreements
referred to in Section 5.11 above shall have been executed by each Party therein
described and delivered to CPI.
6.9 Consents. All material Consents required to be obtained in
connection with either of the Mergers and the other transactions contemplated by
this Agreement (including the Consents identified in the Target Disclosure
Schedule) shall have been obtained and shall be in full force and effect.
6.10 Registration. All regulatory approvals needed to ensure that the
Holdco Common Stock to be issued in the Merger will be registered or qualified
under the securities law of every jurisdiction of the United States in which any
registered holder of CPI Common Stock, CPI Preferred Stock has an address of
record on the record date for determining the stockholders entitled to notice of
and to vote at the CPI Stockholders' Meeting shall have been obtained.
47
6.11 Nasdaq Listing. All regulatory approvals needed to ensure that the
Holdco Common Stock to be issued in the Merger will be approved for quotation at
the Effective Time on the Nasdaq National Market shall have been obtained.
6.12 No Governmental Litigation. There shall not be pending or
threatened any Legal Proceeding in which a Governmental Body is or is threatened
to become a party or is otherwise involved: (a) challenging or seeking to
restrain or prohibit the consummation of either of the Mergers or any of the
other transactions contemplated by this Agreement; (b) relating to either of the
Mergers and seeking to obtain from Target or any of its subsidiaries any damages
that may be material to Target; (c) seeking to prohibit or limit in any material
respect Holdco's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of either Surviving
Corporation; or (d) that would materially and adversely affect the right of
Holdco or either Surviving Corporation to own the assets or operate the business
of CPI.
6.13 No Other Litigation. There shall not be pending any Legal
Proceeding in which there is a reasonable probability of an outcome that would
have a Material Adverse Effect on Holdco, CPI or Target: (a) challenging or
seeking to restrain or prohibit the consummation of either of the Mergers or any
of the other transactions contemplated by this Agreement; (b) relating to the
Mergers and seeking to obtain from Target or any of its subsidiaries any damages
that may be material to Target; (c) seeking to prohibit or limit in any material
respect Holdco's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporations; or (d) resulting in Target as constituted after the Effective Time
not containing all of the assets and business of Target as constituted
immediately prior to the Effective Time.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TARGET
The obligations of Target to effect the Mergers and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
7.1 Accuracy of Representations
The representations and warranties of CPI contained in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) shall also be true and correct on and as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date and CPI shall, if requested by Target, provide assurances reasonably
satisfactory to Target in respect of Section 3.25(d); provided, however, that
for purposes of this Section 7.1 only, such representations and warranties shall
be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on CPI or Holdco.
48
7.2 Performance of Covenants. CPI shall have complied with and
performed in all material respects each covenant contained in this Agreement
that is required to be performed by CPI on or prior to the date of the Closing.
7.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the Form S-4 Registration Statement.
7.4 Stockholders Approval. This Agreement and the Merger shall have
been duly approved by the Required CPI Stockholder Vote and the Required Target
Stockholder Merger Vote. The CPI Charter Amendment shall have been approved by
the Required CPI Stockholder Vote.
7.5 Consents. All material Consents required to be obtained in
connection with the Merger and the other transactions contemplated by this
Agreement (including the Consents identified in the CPI Disclosure Schedule)
shall have been obtained and shall be in full force and effect.
7.6 Documents. Target shall have received the following legal
documents, each of which shall be in full force and effect:
(a) a legal opinion of Xxxxxx Godward LLP dated as of the
Closing Date, in a form reasonably satisfactory to Target and its legal counsel;
(b) a legal opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP dated as of
the Closing Date and addressed to Target, to the effect that the Mergers will
qualify as transfers subject to the provisions of Section 351(a) of the Code (it
being understood that, in rendering such opinion, Xxxxxx Xxxxx & Bockius LLP may
rely upon the tax representation letters referred to in Section 5.8 and a copy
of the legal opinion described in Section 6.5(b) hereof). The opinions described
in this Section 7.6(b) and in Section 6.5(b) shall be substantially identical in
form and substance; and
(c) a certificate executed on behalf of CPI by its Chief
Executive Officer confirming that the conditions set forth in Sections 7.1, 7.2,
7.4, 7.5 and 7.7 have been duly satisfied.
7.7 No Material Adverse Change. There shall have been no material
adverse change in the business, financial condition, capitalization, assets,
liabilities, operations or financial performance of CPI since the date of this
Agreement. For purposes of this Section 7.7, material adverse change shall be
deemed to include any event, circumstance or occurrence, individually or in the
aggregate, causing, resulting in or reasonably likely to have a material adverse
effect upon CPI's business, results of operations or financial condition (i)
arising from or relating to any clinical trials or studies conducted by CPI or
(ii) arising from or related to the development or commercialization of
technology, processes or products relating to adenomatous colonic polyps that
are (or may reasonably be expected to be) superior to CPI's technology,
processes or products. For purposes of this Section 7.7, a material adverse
change shall not include any event, circumstance or occurrence, individually or
in the aggregate, causing, resulting in, or reasonably likely to have a material
adverse effect upon CPI's business, results of operations or financial condition
(i) arising from or relating to general business or economic conditions, (ii)
relating to or affecting the biotechnology industry generally or (iii) relating
to or affecting the colonic cancer therapeutics industry generally.
49
7.8 Directors. The Parties shall have taken all actions necessary to
cause the Board of Directors of Holdco following the Effective Time to consist
of the individuals set forth in Section 5.12.
7.9 Registration. All regulatory approvals needed to ensure that the
Holdco Common Stock to be issued in the Merger will be registered or qualified
under the securities law of every jurisdiction of the United States in which any
registered holder of Target Common Stock has an address of record on the record
date for determining the stockholders entitled to notice of and to vote at the
Target Stockholders' Meeting shall have been obtained.
7.10 Nasdaq Listing. All regulatory approvals needed to ensure that the
Holdco Common Stock to be issued in the Merger will be approved for quotation at
the Effective Time on the Nasdaq National Market shall have been obtained.
7.11 Delivery of Affiliates' Agreements. The Affiliate Agreements
referred to in Section 5.11 above shall have been executed by each Party therein
described and delivered to CPI.
7.12 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Mergers
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Mergers that makes consummation of the Mergers illegal.
7.13 No Governmental Litigation. There shall not be pending or
threatened any Legal Proceeding in which a Governmental Body is or is threatened
to become a party or is otherwise involved: (a) challenging or seeking to
restrain or prohibit the consummation of either of the Mergers or any of the
other transactions contemplated by this Agreement; (b) relating to either of the
Mergers and seeking to obtain from Target or any of its subsidiaries any damages
that may be material to Target; (c) seeking to prohibit or limit in any material
respect Holdco's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of either Surviving
Corporation; or (d) that would materially and adversely affect the right of
Holdco or either Surviving Corporation to own the assets or operate the business
of CPI.
50
7.14 No Other Litigation. There shall not be pending any Legal
Proceeding in which there is a reasonable probability of an outcome that would
have a Material Adverse Effect on Holdco, CPI or Target: (a) challenging or
seeking to restrain or prohibit the consummation of either of the Mergers or any
of the other transactions contemplated by this Agreement; (b) relating to either
of the Mergers and seeking to obtain from Holdco or Target or any of its
subsidiaries any damages that may be material to Target; (c) seeking to prohibit
or limit in any material respect Holdco's ability to vote, receive dividends
with respect to or otherwise exercise ownership rights with respect to the stock
of the Surviving Corporations; or (d) that would affect adversely the right of
Holdco or the Surviving Corporations to own the assets or operate the business
of CPI.
7.15 Market Stand-Off Agreements. Each of CPI's directors and executive
officers shall have executed and delivered the market stand-off agreements
referred to in Section 5.12 hereof.
8. TERMINATION
8.1 Termination. This Agreement may be terminated prior to the
Effective Time (whether before or after approval of this Agreement and the
Mergers by the Required CPI Stockholder Vote and the Required Target Stockholder
Vote):
(a) by mutual written consent of Target and CPI;
(b) by either Target or CPI if the Mergers shall not have been
consummated by November 30, 1998 (unless the failure to consummate either Merger
is attributable to a failure on the part of the Party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
Party at or prior to the Effective Time);
(c) by either Target or CPI if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Mergers;
(d) by either Target or CPI if (i) the CPI Stockholders'
Meeting shall have been held and completed and (ii) the CPI Charter Amendment,
this Agreement and the Mergers shall not have been approved at such meeting by
the Required CPI Stockholder Vote;
(e) by either Target or CPI if (i) the Target Stockholders'
Meeting shall have been held and completed and (ii) this Agreement and the
Mergers shall not have been approved at such meeting by the Required Target
Stockholder Merger Vote;
(f) by Target (at any time prior to the approval of this
Agreement and the Mergers) if a CPI Triggering Event shall have occurred;
(g) by CPI (at any time prior to the approval of the issuance
of Holdco Common Stock in the Mergers by the Required Target Stockholder Merger
Vote) if a Target Triggering Event shall have occurred;
51
(h) by Target if any of CPI's representations and warranties
contained in this Agreement shall be or shall have become materially inaccurate,
or if any of CPI's covenants contained in this Agreement shall have been
breached, and such inaccuracy or breach would cause the condition set forth in
Sections 7.1 or 7.2, respectively, to not be satisfied; provided, however, that
if an inaccuracy in CPI's representations and warranties or a breach of a
covenant by CPI is curable by CPI and CPI is continuing to exercise all
reasonable efforts to cure such inaccuracy or breach, then Target may not
terminate this Agreement under this Section 8.1(h) on account of such inaccuracy
or breach until twenty (20) days after delivery of written notice of the
inaccuracy or breach to CPI by Target; or
(i) by CPI if any of Target's representations and warranties
contained in this Agreement shall be or shall have become materially inaccurate,
or if any of Target's covenants contained in this Agreement shall have been
breached, and such inaccuracy or breach would cause the condition set forth in
Sections 6.1 or 6.2, respectively, to not be satisfied; provided, however, that
if an inaccuracy in Target's representations and warranties or a breach of a
covenant by Target is curable by Target and Target is continuing to exercise all
reasonable efforts to cure such inaccuracy or breach, then CPI may not terminate
this Agreement under this Section 8.1(i) on account of such inaccuracy or breach
until twenty (20) days after delivery of written notice of the breach or
inaccuracy to Target by CPI.
8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement and shall remain in
full force and effect, (ii) the Nondisclosure Agreements shall remain in full
force and effect to the extent provided therein, and (iii) the termination of
this Agreement shall not relieve any Party from any liability for any breach of
any representation, warranty or covenant contained in this Agreement occurring
prior to the date of such termination if such Party is not obligated to pay a
termination fee pursuant to Section 8.3 hereof.
8.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the Party incurring such
expenses, whether or not the Mergers are consummated; provided, however, that
Target and CPI shall share equally all fees and expenses, other than attorneys'
fees, incurred in connection with the filing, printing and mailing of the Form
S-4 Registration Statement and the Joint Proxy Statement and any amendments or
supplements thereto.
(b) If this Agreement is terminated by Target pursuant to
Section 8.1(f) or by Target or CPI pursuant to Section 8.1(d) hereof, CPI shall
pay Target a termination fee equal to (i) one million five hundred thousand
dollars ($1,500,000) plus (ii) reimbursement of the amount of the professional
fees and expenses that Target incurred in connection with the Merger, up to two
hundred fifty thousand dollars ($250,000).
52
(c) If this Agreement is terminated by CPI pursuant to Section
8.1(g) or by CPI or Target pursuant to Section 8.1(e) hereof, Target shall pay
CPI a termination fee equal to (i) one million five hundred thousand dollars
($1,500,000) plus (ii) reimbursement of the amount of the professional fees and
expenses that CPI incurred in connection with the Merger, up to two hundred
fifty thousand dollars ($250,000).
(d) Any termination fees and expenses payable under Section
8.3(b) or 8.3(c) above shall be paid in cash, via wire transfer of immediately
available funds no later than the close of business on the second business day
following the date on which the termination giving rise to such payment occurs.
(e) Target and CPI agree that the agreements contained in
Sections 8.3(b) and (c) above are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages and not a
penalty. If one Party fails to promptly pay to the other any fee due under such
Sections 8.3(b) and (c), the defaulting Party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of Citibank, N.A. from the date such fee was required to be paid.
9. MISCELLANEOUS PROVISIONS
9.1 Amendment. This Agreement may be amended with the approval of the
respective boards of directors of CPI and Target at any time (whether before or
after approval of this Agreement and the Mergers by the respective stockholders
of CPI and Target); provided, however, that after any such approval of this
Agreement and the Mergers by, respectively, CPI's stockholders and Target's
stockholders, no amendment shall be made that by law or NASD regulation requires
further approval of the respective stockholders of CPI or Target without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
9.2 Waiver.
(a) No failure on the part of any Party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Party shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
53
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Mergers.
9.4 Entire Agreement; Counterparts; Applicable Law. This Agreement and
the other agreements and schedules referred to herein and therein and the
Non-Disclosure Agreements constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among or between any
of the parties with respect to the subject matter hereof and thereof. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same instrument, and
shall be governed in all respects by the laws of the State of Delaware as
applied to contracts entered into and to be performed entirely within Delaware.
9.5 Jury Waiver. The parties hereto hereby agree to waive their
respective rights to a trial by jury of any claim or cause of action based upon
or arising out of or related to this Agreement or the transactions contemplated
thereby in any action, proceeding or other litigation of any type brought by any
Party against any other Party with respect to contracts, claims, tort claims or
otherwise. The scope of this waiver is intended to be as broad as permitted by
law, covering all disputes that may be filed in any court that relate to the
subject matter of this Agreement, including tort claims, contract claims, claims
under common law, statutory claims and any action, counterclaim or other
proceeding that seeks in whole or in part to challenge the validity or
enforceability of this Agreement or the transactions contemplated thereby. This
waiver is irrevocable.
9.6 Attorneys' Fees. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
Party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.7 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the rights hereunder may be assigned by any Party without
the prior written consent of the other Party, and any attempted assignment of
this Agreement or any of such rights by a Party without such consent shall be
void and of no effect. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any person except the parties hereto and their
respective successors any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
9.8 Notices. Any notice or other communication required or permitted to
be delivered to any Party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such Party
below (or to such other address or facsimile telephone number as such Party
shall have specified in a written notice given to the other parties hereto):
54
if to Target or Merger Sub:
Target, Inc.
00 X. Xxxx Xxxxxx
Suite 000
Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Phone: 610/000-0000
Fax: 610/000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Phone: 215/000-0000
Fax: 215/000-0000
if to CPI :
Cell Pathways, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Phone: 215/000-0000
Fax: 215/000-0000
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx C.T. Linfield
Phone: 303/000-0000
Fax: 303/000-0000
9.9 Cooperation. Each Party agrees to cooperate fully with the other
Party and to execute and deliver such further documents, certificates,
agreements and instruments and to take such other actions as may be reasonably
requested by the other Party to evidence or reflect the transactions
contemplated by this Agreement and to carry out the intent and purposes of this
Agreement.
55
9.10 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
TARGET
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Xxxx X. Xxxxxxx
President/Chief Executive Officer
CELL PATHWAYS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxxx
President/ Chief Executive Officer
56
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Proposal. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal between Target and CPI) contemplating
or otherwise relating to any Acquisition Transaction in substitution for the
transactions provided in the Agreement.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business
combination, tender offer, exchange offer or other similar transaction in which
a Person or "group" (as defined in the Exchange Act and the rules promulgated
thereunder) of Persons directly or indirectly acquires Target or CPI or more
than 50% of Target's business or CPI's business;
(b) any sale, lease, exchange, transfer, license, acquisition
or disposition of more than 50% of the assets of CPI or Target; or
(c) any offering of CPI capital stock that is registered under
Section 5 of the Securities Act;
(d) any liquidation or dissolution of CPI or Target.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
Best of Knowledge; Knowledge. Information shall be deemed to be known
to the "best of knowledge" or to the "knowledge" of a Party if that information
was actually known or reasonably should have been known by an executive officer
of such Party.
CPI Common Stock. "CPI Common Stock" shall mean the Common Stock, $.01
par value, of CPI.
CPI Contract. "CPI Contract" shall mean any Contract: (a) to which CPI
is a party; (b) by which CPI or any asset of CPI is or may become bound or under
which CPI has, or may become subject to, any obligation; or (c) under which CPI
has or may acquire any right or interest.
CPI Disclosure Schedule. "CPI Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by CPI in conjunction with Section 3
and that has been delivered by CPI to Target on the date of this Agreement and
signed by the President of CPI.
A-1
CPI Options. "CPI Options" shall mean each unexpired and unexercised
option to purchase shares of CPI Common Stock granted under the 1997 Equity
Incentive Plan or under the 1997 Non-Employee Director Stock Option Plan or
outside such plans and outstanding immediately prior to the Effective Time.
CPI Proprietary Asset. "CPI Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to CPI or otherwise used by CPI.
CPI Preferred Stock. "CPI Preferred Stock" shall mean the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock and Series G
Convertible Preferred Stock of CPI.
CPI Record Date. "CPI Record Date" shall mean the record date for the
CPI Stockholders Meeting.
CPI Triggering Event. A "CPI Triggering Event" shall be deemed to have
occurred if: (i) the board of directors of CPI shall have failed to recommend,
or shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Target its unanimous recommendation in favor of, the CPI
Charter Amendment, the Mergers or approval of this Agreement; (ii) CPI shall
have failed to include in the Joint Proxy Statement the unanimous recommendation
of the board of directors of CPI in favor of approval of the CPI Charter
Amendment, this Agreement and the Merger; (iii) the board of directors of CPI
fails to unanimously reaffirm its recommendation in favor of approval of the CPI
Charter Amendment, this Agreement and the Merger within five (5) business days
after the Target requests in writing that such recommendation be reaffirmed;
(iv) the board of directors of CPI shall have approved, endorsed or recommended
any Acquisition Proposal; (v) CPI shall have entered into any letter of intent
or similar document or any Contract relating to any Acquisition Proposal; (vi)
CPI shall have failed to hold CPI Stockholders' Meeting as promptly as
practicable and in any event within forty-five (45) days after the Form S-4
Registration Statement is declared effective under the Securities Act; (vii) a
tender or exchange offer relating to securities of CPI shall have been commenced
and CPI shall not have sent to its security holders, within five (5) business
days after the commencement of such tender or exchange offer, a statement
disclosing that CPI recommends rejection of such tender or exchange offer; or
(viii) an Acquisition Proposal is publicly announced, and CPI (A) fails to issue
a press release announcing its opposition to such Acquisition Proposal within
five (5) business days after such Acquisition Proposal is announced or (B)
otherwise fails to actively oppose such Acquisition Proposal.
CPI Warrants. CPI Warrants shall mean the outstanding warrants of CPI
to purchase Series E Preferred Stock, Series F Preferred Stock Series G
Preferred Stock or Common Stock.
Code. "Code" shall mean the Internal Revenue Code of 1986, as amended.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
A-2
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Environmental Law. "Environmental Law" means any federal, state, local
or foreign Legal Requirement relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Form S-4 Registration Statement. "Form S-4 Registration Statement"
shall mean the registration statement on Form S-4 to be filed with the SEC by
Holdco in connection with issuance of Holdco Common Stock in the Mergers, as
said registration statement may be amended prior to the time it is declared
effective by the SEC.
Governmental Authorization. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, variance,
clearance, registration, qualification or authorization issued, granted, given
or otherwise made available by or under the authority of any Governmental Body
or pursuant to any Legal Requirement; or (b) right under any Contract with any
Governmental Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
A-3
Joint Proxy Statement. "Joint Proxy Statement" shall mean the joint
proxy statement/prospectus to be sent to CPI's stockholders in connection with
the CPI Stockholder's Meeting and to Target's stockholders in connection with
the Target Stockholders' Meeting.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. An event, violation, inaccuracy, circumstance
or other matter will be deemed to have a "Material Adverse Effect" on CPI if
such event, violation, inaccuracy, circumstance or other matter would have a
material adverse effect on (i) the business, financial condition,
capitalization, assets, liabilities, operations or financial performance of CPI
or (ii) the ability of the company to consummate the Merger or any of the other
transactions contemplated by this Agreement or to perform obligations under this
Agreement. An event, violation, inaccuracy, circumstance or other matter will be
deemed to have a "Material Adverse Effect" on Target if such event, violation,
inaccuracy, circumstance or other matter would have a material adverse effect on
(i) the business, financial condition, assets, liabilities, operations or
financial performance of the Target Corporations taken as a whole or (ii) the
ability of Target to consummate the Merger or any of the other transactions
contemplated by this Agreement or to perform its obligations under this
Agreement.
Materials of Environmental Concern. "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.
Pension Plan. "Pension Plan" shall mean any employee pension benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether or not excluded from coverage under
specific Titles or Subtitles of ERISA).
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Proprietary Asset. "Proprietary Asset" shall mean any material: (a)
patent, patent application, trademark (whether registered or unregistered),
trademark application, trade name, fictitious business name, service xxxx
(whether registered or unregistered), service xxxx application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
A-4
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Subsidiary. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record, an
amount of voting securities or other interests in such Entity that is sufficient
to enable such Person to elect at least a majority of the members of such
Entity's board of directors or other governing body.
Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written Acquisition Proposal on terms that the board of directors of CPI or
Target, as the case may be, determines in its reasonable judgment, after
consultation with its financial advisor, to be more favorable to CPI's
stockholders or Target's stockholders, as the case may be, than the terms of the
Mergers.
Target Common Stock. "Target Common Stock" shall mean the Common Stock,
$0.005 par value per share, of Target.
Target Contract. "Target Contract" shall mean any Contract: (a) to
which any of the Target Corporations is a party; (b) by which any Target
Corporation or any asset of a Target Corporation may become bound or under which
any Target Corporation has, or may become subject to, any obligation; or (c)
under which any Target Corporation has or may acquire any right or interest.
Target Corporation. "Target Corporation," or "Target Corporations" in
the plural, shall mean Target and any Target subsidiary.
Target Disclosure Schedule. "Target Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by Target in conjunction with Section
2 and that has been delivered by Target to CPI on the date of this Agreement and
signed by the President of Target.
Target Options. "Target Options" shall mean stock options granted by
Target pursuant to the Target's 1991 Stock Option Plan, Target's 1995 Stock
Option Plan and Target's 1991 Special Directors' Stock Option Plan.
Target Proprietary Asset. "Target Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to any of the Target Corporations or
otherwise used by any of the Target Corporations.
Target Record Date. "Target Record Date" shall mean the record date for
the Target Stockholders Meeting.
A-5
Target Triggering Event. A "Target Triggering Event" shall be deemed to
have occurred if: (i) the board of directors of the Target shall have failed to
recommend, or shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to CPI its unanimous recommendation in favor of,
the Merger or approval of this Agreement; (ii) Target shall have failed to
include in the Joint Proxy Statement the unanimous recommendation of the board
of directors of Target in favor of approval of this Agreement and the Merger;
(iii) the board of directors of Target fails to unanimously reaffirm its
recommendation in favor of approval of this Agreement and the Merger within five
(5) business days after CPI requests in writing that such recommendation be
reaffirmed; (iv) the board of directors of Target shall have approved, endorsed
or recommended any Acquisition Proposal; (v) Target shall have entered into any
letter of intent or similar document or any Contract relating to any Acquisition
Proposal; (vi) Target shall have failed to hold the Target Stockholders' Meeting
as promptly as practicable and in any event within forty-five (45) days after
the Form S-4 Registration Statement is declared effective under the Securities
Act; (vii) a tender or exchange offer relating to securities of Target shall
have been commenced and Target shall not have sent to its security holders,
within five (5) business days after the commencement of such tender or exchange
offer, a statement disclosing that Target recommends rejection of such tender or
exchange offer; or (viii) an Acquisition Proposal is publicly announced, and
Target (A) fails to issue a press release announcing its opposition to such
Acquisition Proposal within five (5) business days after such Acquisition
Proposal is announced or (B) otherwise fails to actively oppose such Acquisition
Proposal.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Welfare Plan. "Welfare Plan" shall mean an employee welfare benefit
plan (as defined in Section 3(1) of ERISA, whether or not excluded from coverage
under specific Titles or Subtitles of ERISA).
A-6
EXHIBIT B
FORM OF CERTIFICATE OF INCORPORATION
OF
HOLDCO COMPANY
I.
The name of the corporation is Holdco Company (the "Corporation").
II.
The address of the registered office of the Corporation in the State of
Delaware is 0000 Xxxxxx Xxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of New Castle, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is Corporation Service Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. The Corporation shall be authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock". The total
number of shares that the Corporation shall be authorized to issue is
seventy-five million (75,000,000) shares. Seventy million (70,000,000) shares
shall be Common Stock, each having a par value of One Cent ($.01). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of One Cent
($.01).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to provide for such issuance, and to fix or alter from time to time the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions of any wholly unissued
series of Preferred Stock, and to establish from time to time the number of
shares constituting any such series or any of them; and to increase or decrease
the number of shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be decreased in accordance with
the foregoing sentence, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
C. Subject to the rights of any Preferred Stock then outstanding, each
issued and outstanding share of Common Stock shall entitle the Holder thereof to
receive such dividends as may be declared from time to time by the Board of
Directors of the Corporation out of funds legally available therefor, and shall
entitle the Holder thereof to share ratably with other Holders of Common Stock
in all assets available for distribution in the event of any liquidation,
dissolution or winding up of the Corporation. Each issued and outstanding share
of Common Stock shall be identical to all other shares of that class, and shall
entitle the Holder thereof to cast one vote on each matter submitted to a vote
of the Corporation's stockholders. No Holder of Common Stock shall be entitled
to any cumulative voting rights or to any preemptive rights upon the issuance or
sale of any Securities.
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V.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. 1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. The number of
directors that shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the filing of this
Certificate of Incorporation, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years. At
the second annual meeting of stockholders following the filing of this
Certificate of Incorporation, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the filing of this
Certificate of Incorporation, the term of office of the Class III directors
shall expire and Class III directors shall be elected for a full term of three
years. At each succeeding annual meeting of stockholders, directors shall be
elected for a full term of three years to succeed the directors of the class
whose terms expire at such annual meeting.
Each director shall serve beyond the term specified until his
successor is duly elected and qualified or until his death, resignation or
removal. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
3. Subject to the rights of the holders of any series of
Preferred Stock, a director may be removed only for cause and only by the
affirmative vote of the holders of a majority of the voting power of all the
then-outstanding shares of voting stock of the Corporation, entitled to vote at
an election of directors (the "Voting Stock").
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4. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, be filled
only by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred and until such director's successor shall
have been elected and qualified.
5. The Board of Directors shall designate and empower
committees of the Board of Directors, shall elect and empower the officers of
the Corporation, may appoint and empower other officers and agents of the
Corporation, and shall determine the time, place and notice of Board meetings,
quorum and voting requirements, and the manner of taking Board action. Subject
to the other provisions of this Article V, the Board of Directors shall
determine the rights, powers, duties, rules and procedures that shall affect the
directors' power to manage and direct the business and affairs of the
Corporation. Notwithstanding any other provision of this Certificate of
Incorporation, the powers specified in this Article V shall be exercised only by
or under the direction of the Board of Directors and may be exercised or
expressed in the form of resolution, Bylaw or other form of determination or
exercise; and the form of the exercise of the power shall not derogate the
status of the power exercised or imply that such exercise by the Board of
Directors may be altered or superseded by any person, group or entity other than
the Board of Directors.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the Voting Stock. The Board of Directors
shall also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by unanimous written consent of the stockholders.
4. Special meetings of the stockholders of the Corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix.
B-2
5. Advance notice of stockholder nominations for the election
of directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in Section B of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law that might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
B-4
EXHIBIT C
FORM OF CPI CHARTER AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
CELL PATHWAYS, INC.
Cell Pathways, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is Cell Pathways, Inc.
SECOND: The original Certificate of Incorporation of the Corporation
was (i) filed with the Secretary of State of Delaware on November 24, 1992.
THIRD: The Board of Directors of the Corporation, acting in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware, has adopted resolutions to amend the Sixth Amended and Restated
Certificate of Incorporation of the Corporation.
FOURTH: The Sixth Amended and Restated Certificate of Incorporation
shall be amended as follows:
1. Subsection E.3(e) of Article IV is amended to add the following
sentence:
"In addition, the Excluded Merger (as defined in Subsection E.7
below), shall not be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of any of the
provisions of this Section E.3."
2. Subsection E.5(f) of Article IV is amended to add the following
sentence:
"Notwithstanding the foregoing, in the event of the Excluded
Merger, no conversion price adjustment shall be made and no holder
of Designated Preferred Stock or Common Stock of the Corporation
shall be entitled to receive, as consideration for any of such
holder's Preferred Stock or Common Stock, any payment,
consideration or exchange of cash, securities or other property
other than the consideration set forth in the Reorganization
Agreement."
3. The following new Subsection E.6(e) is added to Article IV,
immediately following Subsection E.6(d):
C-1
"(e) Notwithstanding any other provision of this Restated
Certificate, in the event of the Excluded Merger, no holder of
Designated Preferred Stock or Common Stock of the Corporation
shall be entitled to receive, as consideration for any of such
holder's Preferred Stock or Common Stock, any payment,
consideration or exchange of cash, securities or other property
other than the consideration set forth in the Reorganization
Agreement."
4. The following definition is inserted Subsection E.7 of Article IV,
immediately following the definition of "Designated Preferred
Stock":
"Excluded Merger" shall mean the transactions contemplated by
that certain Agreement and Plan of Reorganization, dated
June __, 1998, by and between Cell Pathways, Inc. and Target."
FIFTH: Thereafter, pursuant to a resolution of the Board of Directors
of the Corporation, this Certificate of Amendment was submitted to the
stockholders of the Corporation for their approval in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be signed by its duly authorized officer this ___ day of _________, 1998.
Cell Pathways, Inc.
By:
---------------------------------------
Xxxxxx X. Xxxxxxxxxx
President/Chief Executive Officer
C-2
