1
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG:
CORTECH, INC.,
A DELAWARE CORPORATION,
CORTECH MERGER SUB, INC.
A DELAWARE CORPORATION,
AND
BIOSTAR, INC.,
A DELAWARE CORPORATION
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DATED AS OF DECEMBER 22, 1997
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TABLE OF CONTENTS
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1. DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger of Merger Sub into BioStar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing; Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Stock; Options and Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Closing of BioStar's Transfer Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10 Accounting Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.12 Cortech Charter Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.13 BioStar Charter Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. REPRESENTATIONS AND WARRANTIES OF BIOSTAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Due Organization; Subsidiaries; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.12 Certain Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.18 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.19 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.20 Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.21 No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.22 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.23 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.24 Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.25 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3. REPRESENTATIONS AND WARRANTIES OF CORTECH AND MERGER SUB . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1 Due Organization, Subsidiaries, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Certificate/Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.4 SEC Filings; Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.5 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.7 Real Property; Equipment; Leasehold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.8 Proprietary Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.9 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.10 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.11 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.12 Certain Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.18 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.19 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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3.20 Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.21 No Existing Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.22 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.23 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.24 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.25 Valid Issuance; Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.26 Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.27 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.28 Cash Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4. CERTAIN COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1 Access and Investigation; Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.2 Operation of BioStar's Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.3 Operation of Cortech's Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.4 No Solicitation by BioStar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.5 No Solicitation by Cortech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.1 Registration Statement; Joint Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 BioStar Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Cortech Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.4 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.5 ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.6 Indemnification Continuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.7 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.8 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.9 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.10 Resignation of Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.11 FIRPTA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.12 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.13 Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.14 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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5.15 Market Stand-off Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CORTECH AND MERGER SUB . . . . . . . . . . . . . . . . . . . . . . . 50
6.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.3 Effectiveness of Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.4 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.6 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.7 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.8 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.9 No Governmental Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.10 No Other Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.11 Delivery of Affiliates Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIOSTAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.3 Effectiveness of Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.4 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.5 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.7 No Restraints. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.8 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.10 No Governmental Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.11 No Other Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.3 Expenses; Termination Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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9.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.3 No Survival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4 Entire Agreement; Counterparts; Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.5 Jury Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.6 Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.7 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.8 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.10 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
v.
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EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Form of BioStar Charter Amendment
Exhibit C - Forms of Affiliate Agreement
vi.
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("AGREEMENT") is
made and entered into as of December 22, 1997, by and among CORTECH, INC., a
Delaware corporation ("CORTECH"); CORTECH MERGER SUB, INC., a Delaware
corporation and a wholly-owned subsidiary of Cortech ("MERGER SUB"); and
BIOSTAR, INC., a Delaware corporation ("BIOSTAR"). Certain capitalized terms
used in this Agreement are defined in Exhibit A.
RECITALS
A. Cortech, Merger Sub and BioStar intend to effect a merger of
Merger Sub into BioStar in accordance with this Agreement and the Delaware
General Corporation Law (the "MERGER"). Upon consummation of the Merger,
Merger Sub will cease to exist, and BioStar will become a wholly-owned
subsidiary of Cortech.
B. It is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended. For financial reporting purposes, it is intended
that the Merger be accounted for as a purchase.
C. The respective boards of directors of Cortech, Merger Sub and
BioStar adopted this Agreement and approved the Merger.
D. Certain stockholders of Cortech and BioStar have executed
Voting Agreements in connection with the Merger obligating them to vote to
approve the Merger when it is presented for approval at a meeting of
stockholders of Cortech and BioStar, respectively.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO BIOSTAR. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3), Merger Sub shall be merged with and into BioStar, and
the separate existence of Merger Sub shall cease. BioStar will continue as the
surviving corporation in the Merger (the "SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the Delaware
General Corporation Law ("DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Xxxxxx Godward LLP, 0000 Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx at
10:00 a.m. on a date to be agreed by Cortech and BioStar (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
1.
9
as promptly as practicable after the Closing, a properly executed certificate
of merger conforming to the requirements of Section 251 of the DGCL shall be
filed with the Secretary of State of the State of Delaware. The Merger shall
take effect at the time such certificate of merger is filed with the Secretary
of State of the State of Delaware (the "EFFECTIVE TIME").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Certificate of Incorporation of Merger Sub shall
be the Certificate of Incorporation of the Surviving Corporation.
(b) The Bylaws of Merger Sub shall be the Bylaws of the
Surviving Corporation.
(c) The officers of BioStar immediately prior to the
Effective Time shall be the officers of the Surviving Corporation. The persons
identified in Section 5.13 below shall be the directors of the Surviving
Corporation.
1.5 CONVERSION OF STOCK; OPTIONS AND WARRANTS.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of Cortech, Merger Sub, BioStar or any stockholder
of Cortech, Merger Sub or BioStar:
(i) any shares of BioStar Common Stock or BioStar
Preferred Stock then held by BioStar, if any, shall be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor;
(ii) any shares of BioStar Common Stock or BioStar
Preferred Stock then held by Cortech or any other subsidiary of Cortech, if
any, shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
(iii) except as provided in clauses "(i)" and
"(ii)" above and subject to Sections 1.5(b), 1.5(d) and 1.8, each share of
BioStar Common Stock and BioStar Preferred Stock then outstanding shall be
converted into the right to receive the number of fully paid and nonassessable
shares of Cortech Common Stock equal to a fraction the numerator of which is
28,500,000 and the denominator of which is the number of shares of BioStar
Common Stock and BioStar Preferred Stock outstanding plus the number of shares
of BioStar Common Stock and BioStar Preferred Stock issuable upon exercise of
all (x) the outstanding BioStar Warrants and (y) outstanding BioStar Options,
in each case as of the Effective Time, and upon surrender of the certificate
representing such share of BioStar Common Stock and BioStar Preferred Stock in
the manner provided in Section 1.7 below.
(iv) each share of the common stock, $.001 par
value, of Merger Sub then outstanding shall be converted into one share of
common stock of the Surviving Corporation. Each stock certificate representing
shares of common stock of Merger Sub prior to the Effective Time shall
represent an equal number of shares of common stock of the Surviving
Corporation from and after the Effective Time.
2.
10
(b) At the Effective Time of the Merger and without any further
action on the part of Cortech, Merger Sub, BioStar or any stockholder of
Cortech, Merger Sub or of BioStar:
(i) each BioStar Option shall be assumed by
Cortech (an "ASSUMED BIOSTAR OPTION") (the aggregate number of shares of
BioStar Common Stock issuable upon the exercise of all outstanding BioStar
Options immediately prior to the Effective Time is referred to herein as the
"OUTSTANDING OPTION AMOUNT"). Each BioStar Option so assumed by Cortech will
continue to have, and be subject to, substantially the same terms and
conditions set forth in the documents governing such BioStar Options
immediately prior to the Effective Time, except that (A) such Assumed BioStar
Option will be exercisable for that number of whole shares of Cortech Common
Stock equal to the product of the number of shares of BioStar Common Stock
subject to such Assumed BioStar Option immediately prior to the Effective Time
multiplied by the Exchange Ratio (as defined in Section 1.5(d)), rounded down
to the nearest whole number of shares of Cortech Common Stock and (B) the per
share exercise price for the shares of Cortech Common Stock issuable upon
exercise of such Assumed BioStar Option will be equal to the quotient obtained
by dividing the exercise price per share under which such BioStar Option,
determined immediately prior to the Effective Time, by the Exchange Ratio,
rounded up to the nearest whole cent. The parties intend that the assumption
of the BioStar Options hereunder will constitute a transaction to which Section
424(a) of the Code applies and this Section shall be interpreted consistent
with such intention. Consistent with the terms of the BioStar Options and the
documents governing such BioStar Options, except as set forth in the BioStar
Disclosure Schedule, the Merger will not terminate or accelerate any Assumed
BioStar Option or any right of exercise, vesting or repurchase relating thereto
with respect to shares of Cortech Common Stock acquired upon exercise of such
BioStar Option.
(ii) Holders of vested BioStar Options may elect
to exercise such options prior to the Effective Time and receive Cortech Common
Stock by providing notice of such exercise and payment of the exercise price
thereof to BioStar at any time prior to the Effective Time. In the event that
any holder of BioStar Options does not exercise such BioStar Options prior to
the Effective Time, such BioStar Options shall become Assumed BioStar Options.
(iii) As soon as practicable after the Effective
Time, Cortech shall issue to each holder of an Assumed BioStar Option a
document evidencing the stock option assumption by Cortech. The right to
receive an Assumed BioStar Option may not be assigned or transferred except as
permitted by the BioStar Stock Option Plans. Any attempted assignment contrary
to this Section 1.5(b)(iii) shall be null and void.
(c) Each warrant to purchase shares of BioStar Common Stock or
BioStar Preferred Stock remaining outstanding (other than those which will
expire if they remain unexercised as of the Effective Time) at the Effective
Time shall be, in connection with the Merger, assumed by Cortech. Each warrant
so assumed by Cortech under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the respective warrant
agreements governing such warrant immediately prior to the Effective Time,
except that each such warrant shall, following the Effective Time, be
exercisable only for shares of Cortech Common Stock in such number, and at such
exercise price as is determined by applying the Exchange Ratio in accordance
with the terms of the applicable warrant agreement.
3.
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(d) The fraction of a share of Cortech Common Stock
determined in accordance with Section 1.5(a)(iii) with regard to the BioStar
Common Stock and BioStar Preferred Stock (as such fraction may be adjusted in
accordance with this Section 1.5(d)) is hereinafter referred to as the
"EXCHANGE RATIO." If, between the date of this Agreement and the Effective
Time, the outstanding shares of BioStar Common Stock or Cortech Common Stock
are changed into a different number or class of shares by reason of any stock
split, stock dividend, reverse stock split (including, without limitation, the
reverse stock split contemplated by Section 1.12 of this Agreement if effected
prior to the Effective Time), reclassification, recapitalization, exchange of
shares or other similar transaction, or if Cortech or BioStar pays an
extraordinary dividend or makes an extraordinary distribution, then such event
shall be reflected in the calculation of the Exchange Ratio as of the Effective
Time.
(e) Except as set forth in the BioStar Disclosure
Schedule, if any shares of BioStar Common Stock or BioStar Preferred Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with BioStar
or under which BioStar has any rights, then the shares of Cortech Common Stock
issued in exchange for such shares of BioStar Common Stock or BioStar Preferred
Stock will also be unvested or subject to the same repurchase option, risk of
forfeiture or other condition, as the case may be, and the certificates
representing such shares of Cortech Common Stock may accordingly be marked with
appropriate legends. BioStar shall take all action that may be necessary to
ensure that, from and after the Effective Time, Cortech is entitled to exercise
any such repurchase option or other right set forth in any such restricted
stock purchase agreement or other agreement.
(f) No fractional shares of Cortech Common Stock shall be
issued in connection with the Merger, and no certificates or scrip for any such
fractional shares shall be issued. Any holder of BioStar Common Stock who
would otherwise be entitled to receive a fraction of a share of Cortech Common
Stock (after aggregating all fractional shares of Cortech Common Stock issuable
to such holder) shall, in lieu of such fraction of a share and, upon surrender
of such holder's BioStar Stock Certificate(s) (as defined in Section 1.6), be
paid in cash the dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the closing price
(adjusted, if necessary, to reflect the reverse stock split referenced in
Section 1.12 below) of a share of Cortech Common Stock on the Nasdaq National
Market on the date the Merger becomes effective.
1.6 CLOSING OF BIOSTAR'S TRANSFER BOOKS. At the Effective Time:
(a) all shares of BioStar Common Stock and BioStar Preferred Stock outstanding
immediately prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and all holders of certificates representing
shares of BioStar Common Stock or BioStar Preferred Stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
stockholders of BioStar except the right to receive (i) certificates
representing the number of fully paid and nonassessable shares of Cortech
Common Stock into which such shares of BioStar Common Stock or BioStar
Preferred Stock were converted at the Effective Time and (ii) any cash in lieu
of fractional shares of Cortech Common Stock, to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 1.7; and (b) the stock transfer books of BioStar shall be closed with
respect to all shares of BioStar Common Stock and
4.
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BioStar Preferred Stock outstanding immediately prior to the Effective Time.
No further transfer of any such shares of BioStar Common Stock or BioStar
Preferred Stock shall be made on such stock transfer books after the Effective
Time. If, after the Effective Time, a valid certificate previously
representing any of such shares of BioStar Common Stock or BioStar Preferred
Stock (a "BIOSTAR STOCK CERTIFICATE") is presented to the Exchange Agent (as
defined in Section 1.7) or to the Surviving Corporation, such BioStar Stock
Certificate shall be canceled and shall be exchanged as provided in Section
1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) On or prior to the Effective Time, Cortech shall
select a reputable bank or trust company reasonably acceptable to BioStar to
act as exchange agent in the Merger (the "EXCHANGE AGENT"). As of the
Effective Time, Cortech shall deposit with the Exchange Agent (i) certificates
representing the shares of Cortech Common Stock issuable pursuant to this
Section 1, and (ii) cash sufficient to make payments in lieu of fractional
shares in accordance with Section 1.5(f). The shares of Cortech Common Stock
and cash amounts so deposited with the Exchange Agent, together with any
dividends or distributions with respect to such shares with a record date on or
after the Effective Time, are referred to collectively as the "EXCHANGE FUND."
(b) As soon as reasonably practicable after the Effective
Time, and in any event within five (5) business days, the Exchange Agent will
mail to the holders of BioStar Stock Certificates (i) a letter of transmittal
in customary form and containing such provisions as Cortech may reasonably
specify (including a provision confirming that delivery of BioStar Stock
Certificates shall be effected, and risk of loss and title to BioStar Stock
Certificates shall pass, only upon delivery of such BioStar Stock Certificates
to the Exchange Agent), and (ii) instructions for use in effecting the
surrender of BioStar Stock Certificates in exchange for certificates
representing the Cortech Common Stock. Upon surrender of a BioStar Stock
Certificate to the Exchange Agent for exchange, together with a duly executed
letter of transmittal and such other documents as may be reasonably required by
the Exchange Agent or Cortech, (1) the holder of such BioStar Stock Certificate
shall be entitled to receive in exchange therefore a certificate representing
the number of whole shares of Cortech Common Stock that such holder has the
right to receive pursuant to the provisions of Section 1.5, any cash in lieu of
any fractional share(s) of Cortech Common Stock, and any dividends or other
distributions to which such holder is entitled, and (2) the BioStar Stock
Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.7, each BioStar Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right, upon
surrender as provided in this Section 1.7, to receive shares of Cortech Common
Stock, any cash in lieu of any fractional share(s) of Cortech Common Stock, and
any dividends or other distributions to which such holder is entitled, each as
contemplated by Section 1. If any BioStar Stock Certificate shall have been
lost, stolen or destroyed, Cortech may, in its discretion and as a condition
precedent to the issuance of any certificate representing Cortech Common Stock,
require the owner of such lost, stolen or destroyed BioStar Stock Certificate
to provide an appropriate affidavit and to deliver a bond (in such sum as
Cortech may reasonably direct) as indemnity against any claim that may be made
against the Exchange Agent, the Surviving Corporation or Cortech with respect
to such BioStar Stock Certificate. In the event of a transfer of ownership of
BioStar Common Stock or BioStar Preferred Stock which is not registered in the
transfer records of
5.
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BioStar, a certificate representing the proper number of shares of Cortech
Common Stock may be issued to a Person other than the Person in whose name the
certificate so surrendered is registered, if, upon presentation to the Exchange
Agent, such certificate shall be properly endorsed or otherwise be in proper
form for transfer and the Person requesting such issuance shall pay any
transfer or other taxes required by reason of the issuance of shares of Cortech
Common Stock to a Person other than the registered holder of such certificate
or establish to the satisfaction of Cortech that such tax has been paid or is
not applicable.
(c) No dividends or other distributions declared or made
with respect to Cortech Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered BioStar Stock Certificate
with respect to the shares of Cortech Common Stock represented thereby, and no
cash payment in lieu of any fractional share nor any other cash payment shall
be paid to any such holder, until such holder surrenders such BioStar Stock
Certificate in accordance with this Section 1.7 (at which time such holder
shall be entitled, subject to the effect of applicable escheat or similar laws,
to receive all such dividends, distributions and cash payments, without
interest).
(d) Any portion of the Exchange Fund that remains
undistributed to holders of BioStar Stock Certificates as of the date 180 days
after the date on which the Merger becomes effective shall be delivered to
Cortech upon demand, and any holders of BioStar Stock Certificates who have not
theretofore surrendered their BioStar Stock Certificates in accordance with
this Section 1.7 shall thereafter look only to Cortech for satisfaction of
their claims for Cortech Common Stock, cash in lieu of fractional shares of
Cortech Common Stock and any dividends or distributions with respect to Cortech
Common Stock.
(e) Each of the Exchange Agent, the Surviving Corporation
and Cortech shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to any holder or
former holder of BioStar Common Stock or BioStar Preferred Stock such amounts
as may be required to be deducted or withheld therefrom under the Code or any
provision of state, local or foreign tax law or under any other applicable
Legal Requirement. To the extent such amounts are so deducted or withheld,
such amounts shall be treated for all purposes under this Agreement as having
been paid to the Person to whom such amounts would otherwise have been paid.
(f) Neither Cortech, the Surviving Corporation nor the
Exchange Agent shall be liable to any holder or former holder of BioStar Common
Stock or BioStar Preferred Stock or to any other Person with respect to any
shares of Cortech Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public official pursuant to
any applicable abandoned property law, escheat law or similar Legal
Requirement.
1.8 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in
this Agreement, any shares of BioStar Common Stock or BioStar Preferred Stock
outstanding immediately prior to the Effective Time held by a holder who has
demanded and perfected appraisal or dissenters' rights for such shares in
accordance with the DGCL and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal or dissenters' rights, shall not be converted
into or
6.
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represent a right to receive Cortech Common Stock pursuant to Section 1.5, but
the holder thereof shall only be entitled to such rights as are granted by the
DGCL.
(b) Notwithstanding the provisions of subsection (a), if
any holder of shares of BioStar Common Stock or BioStar Preferred Stock who
demands appraisal of such shares under the DGCL shall effectively withdraw or
lose (through failure to perfect or otherwise) the right to appraisal, then, as
of the later of the Effective Time and the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive Cortech Common Stock and cash in lieu of fractional shares as
provided in Section 1.5, without interest thereon, upon surrender of the
certificate representing such shares.
(c) BioStar shall give Cortech (i) prompt notice of any
written demands for appraisal of any shares of BioStar Common Stock or BioStar
Preferred Stock, withdrawals of such demands, and any other instruments served
pursuant to the DGCL and received by BioStar and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under the DGCL. BioStar shall not, except with the prior written
consent of Cortech, voluntarily make any payment with respect to any demands
for appraisal of capital stock of BioStar or offer to settle or settle any such
demands.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.10 ACCOUNTING CONSEQUENCES. For financial reporting purposes, the
Merger is intended to be accounted for as a purchase.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Cortech to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession of and to all rights and property of Merger
Sub and BioStar, the officers and directors of the Surviving Corporation and
Cortech shall be fully authorized (in the names of Merger Sub, BioStar and
otherwise) to take such action.
1.12 CORTECH CHARTER AMENDMENT. The board of directors of Cortech will
approve and submit for approval of Cortech's stockholders an amendment to
Cortech's Certificate of Incorporation (the "CORTECH CHARTER AMENDMENT") to (i)
change the name of Cortech to a new name mutually acceptable to Cortech and
BioStar and (ii) effectuate a one-for-four reverse stock split of Cortech's
Common Stock (the "REVERSE STOCK SPLIT"). If approved by Cortech's
stockholders, the Cortech Charter Amendment will be filed immediately prior to
the Effective Time. The approval and effectuation of the Cortech Charter
Amendment are not a condition of the parties' obligation to consummate the
Merger.
1.13 BIOSTAR CHARTER AMENDMENT. The board of directors of BioStar has
approved an amendment to BioStar's Restated Certificate of Incorporation
attached hereto as Exhibit B (the "BIOSTAR CHARTER AMENDMENT"), in order to
effectuate the consummation of the Merger. If approved by the BioStar
stockholders, the BioStar Charter Amendment will be filed
7.
15
immediately prior to the Effective Time. The approval and effectuation of the
BioStar Charter Amendment is a condition to the parties' obligations to
consummate the Merger.
2. REPRESENTATIONS AND WARRANTIES OF BIOSTAR
BioStar represents and warrants to Cortech and Merger Sub, except as set
forth in the BioStar Disclosure Schedule as follows:
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) BioStar 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 BioStar Contracts by which it is bound. BioStar 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.
(b) BioStar 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 BioStar Disclosure Schedule. Except
as set forth in the BioStar Disclosure Schedule, BioStar 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 BioStar Disclosure Schedule, BioStar
has not, at any time, been a general partner of any general partnership,
limited partnership or other Entity.
(c) BioStar has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the name BioStar, Inc. and
BioStar Medical Products, Inc.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. BioStar has delivered to
Cortech accurate and complete copies of the Certificate of Incorporation,
Bylaws and other charter and organizational documents of BioStar, including all
amendments thereto.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of BioStar consists of:
(i) 41,644,443 shares of BioStar Common Stock, $0.0001 par value, of which, as
of November 30, 1997, 1,961,208 shares were issued and outstanding and (ii)
20,327,784 shares of BioStar Preferred Stock, $0.0001 par value, of which, as
of the date hereof, (A) 3,500,000 shares are designated Series A Preferred
Stock of which 3,500,000 are issued and outstanding; (B) 5,060,750 shares are
designated Series B Preferred Stock of which 5,000,000 are issued and
outstanding; (C) 1,691,786 shares are designated Series C Preferred Stock, none
of which are issued and outstanding; (D) 2,908,889 shares are designated Series
D Preferred Stock, all of which are issued and outstanding; (E) 4,928,359
shares are designated Series E Preferred Stock, of which 4,196,431 are issued
and outstanding; and (F) 2,238,000 shares are designated Series F Preferred
8.
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Stock, none of which is issued and outstanding. All of the outstanding shares
of BioStar Common Stock and BioStar Preferred Stock have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as set forth
in the BioStar Disclosure Schedule: (i) none of the outstanding shares of
BioStar Common Stock or BioStar 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 BioStar Common Stock or BioStar Preferred Stock is
subject to any right of first refusal in favor of BioStar; 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 BioStar
Common Stock or BioStar Preferred Stock. Except as set forth in the BioStar
Disclosure Schedule, BioStar 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 BioStar Common Stock or BioStar
Preferred Stock.
(b) As of November 30, 1997, 3,618,823 shares of BioStar
Common Stock are reserved for future issuance pursuant to BioStar Options and
1,300,231 shares remain available for grant under the BioStar Option Plan
(defined below). The BioStar Disclosure Schedule sets forth the following
information with respect to each BioStar Option outstanding as of the date of
this Agreement: (i) the name of the optionee; (ii) the number of shares of
BioStar Common Stock subject to such BioStar Option; (iii) whether the BioStar
Option was granted pursuant to the 1995 Equity Incentive Plan (the "BIOSTAR
OPTION PLAN") or was granted outside of the BioStar Option Plan; (iv) the
exercise price of such BioStar Option; (v) the date on which such BioStar
Option was granted; and (vi) the extent to which such BioStar Option is vested
and exercisable as of November 30, 1997. BioStar has delivered to Cortech
accurate and complete copies of all stock option plans and forms of option
grant pursuant to which BioStar has granted any outstanding stock options.
Except as set forth in the BioStar Disclosure Schedule, BioStar did not grant
any new BioStar Options between November 30, 1997 and the date hereof. BioStar
has reserved 2,606,426 shares of BioStar Common Stock for issuance upon the
exercise of certain warrants to purchase Common Stock, 60,750 shares of Series
B Preferred Stock for issuance upon the exercise of certain warrants to
purchase Series B Preferred Stock, 731,928 shares of Series E Preferred Stock
for issuance upon the exercise of certain warrants to purchase Series E
Preferred Stock, and 1,778,465 shares of Series F Preferred Stock for issuance
upon the conversion of certain warrants to purchase Series F Preferred Stock.
The BioStar Disclosure Schedule sets forth the following information with
respect to each outstanding warrant to purchase BioStar Common Stock and
BioStar Preferred Stock: (i) the name of the holder of such warrant; (ii) the
number of shares of BioStar Common Stock or BioStar 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.
BioStar has delivered to Cortech an accurate and complete copy of each such
warrant. BioStar has reserved 1,600,000 shares of Series C Preferred Stock for
issuance upon the conversion of a convertible contingent payment instrument
(the "CONTINGENT INSTRUMENT"). BioStar has delivered to Cortech an accurate
and complete copy of such instrument. BioStar issued notes which are
convertible into either Series E Preferred Stock or any subsequent series of
preferred stock sold by BioStar at a price per share less than $1.75 (the "NEXT
ROUND PREFERRED")(the "CONVERTIBLE NOTES"). BioStar and the BioStar
stockholders have undertaken to amend its Certificate of Incorporation
immediately
9.
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prior to the conversion of the Convertible Notes in order to provide for the
Next Round Preferred.
(c) Except as set forth in the BioStar 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 BioStar; (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 BioStar; (iii)
stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which BioStar 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 BioStar. Except as set forth on the BioStar Disclosure Schedule,
or elsewhere in this Section 2.3, there are no bonds, debentures, notes or
other indebtedness of BioStar outstanding having the right to vote (or
convertible into securities having the right to vote) on any matters on which
the stockholders of BioStar have the right to vote. BioStar has reserved
1,600,000 shares of Series C Preferred Stock for issuance upon the conversion
of the Contingent Instrument.
(d) All outstanding securities of BioStar, including
shares of BioStar Common Stock and BioStar Preferred Stock, all outstanding
BioStar Options, all outstanding warrants to purchase BioStar Common Stock or
BioStar Preferred Stock, and all outstanding notes convertible into BioStar
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.
2.4 FINANCIAL STATEMENTS.
(a) The BioStar Disclosure Schedule sets forth BioStar's
audited balance sheets as of December 31, 1995 and December 31, 1996 and
related audited statements of operations, stockholders' equity and cash flows
for the three years then ended (collectively, the "AUDITED FINANCIALS") and
BioStar's unaudited balance sheets as of September 30, 1997 (the "BALANCE
SHEET") and the related unaudited statements of operations and cash flows for
the nine-month period then ended (collectively, the "UNAUDITED FINANCIALS")(the
Audited Financials and the Unaudited Financials are collectively referred to
herein as the "BIOSTAR FINANCIALS"). The BioStar Financials were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered. The BioStar Financials
present fairly in all material respects the financial condition and operating
results of BioStar as of the dates and during the periods indicated therein,
subject, in the case of the Unaudited Financials, to normal year- end
adjustments, which will not be material in amount or significance, and the
absence of footnotes.
(b) Since September 30, 1997, BioStar 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.
10.
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2.5 ABSENCE OF CHANGES. Since September 30, 1997:
(a) there has not been any Material Adverse Change in the
business, condition, capitalization, assets, liabilities, operations or
financial performance of BioStar taken as a whole, and no event has occurred
that could reasonably be expected to have a Material Adverse Effect on BioStar;
(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 BioStar (whether or not covered by insurance);
(c) there has not been any transaction, commitment, or
other event or condition (financial or otherwise) which would be prohibited by
Section 4.2(b)(i), (iii), (xi), (xii), or (xiii) 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 BioStar Disclosure
Schedule, BioStar owns, and has good, valid and marketable title to, all assets
purported to be owned by it, including all assets reflected in BioStar's books
and records as being owned by BioStar. All of said assets are owned by BioStar
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 BioStar, and (c) liens described in the BioStar Disclosure
Schedule.
2.7 REAL PROPERTY; EQUIPMENT; LEASEHOLD.
(a) BioStar 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 BioStar Disclosure Schedule. Complete and
correct copies of such lease(s) have previously been delivered to Cortech by
BioStar.
(b) All material items of equipment and other tangible
assets owned by or leased to BioStar 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 BioStar'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
BioStar Contracts and which are in effect on the date hereof.
2.8 PROPRIETARY ASSETS.
(a) The BioStar Disclosure Schedule describes each
Proprietary Asset owned by BioStar and deemed by BioStar to have material value
to BioStar. Except as disclosed in the BioStar Disclosure Schedule, BioStar
has good title to such Proprietary Assets and has no obligation to make any
material ongoing royalty or other payment to any Person in respect thereto.
Any limitation on the right of BioStar to use or exploit a BioStar Proprietary
Asset deemed by BioStar to have material value to BioStar has been disclosed in
the BioStar Disclosure Schedule.
11.
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(b) BioStar has taken reasonable measures and precautions
to protect and maintain the confidentiality, secrecy and value of all material
BioStar Proprietary Assets (except BioStar Proprietary Assets whose value would
not be impaired materially by disclosure). Except where the failure to obtain
such agreements would not impair the value of any BioStar Proprietary Asset in
a material respect, BioStar has obtained, from all current and former employees
of BioStar and from all current and former consultants and independent
contractors to BioStar, signed agreements appropriately restricting the use and
disclosure of BioStar Proprietary Assets, and providing for assignment to
BioStar of BioStar Proprietary Assets developed by such employees and
consultants.
(c) To the best of the knowledge of BioStar: (i) all
patents, patent applications, registered trademarks, registered service marks
and registered copyrights held by BioStar and deemed by BioStar to have a
material value to BioStar were filed and were and have been prosecuted in good
faith and in compliance with all applicable Legal Requirements; and (ii) there
has not been any claim, action or proceeding, and there is no pending or
threatened claim, action or proceeding related to any registration or filing of
a BioStar Proprietary Asset; (iii) none of the BioStar Proprietary Assets
infringes, misappropriates or conflicts with any Proprietary Asset owned or
used by any other Person; (iv) none of the products that are or have been
designed, created, developed, assembled, manufactured or sold by BioStar is
infringing, misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person, and none of such products
has at any time infringed, misappropriated or made any unlawful or unauthorized
use of, and BioStar 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; (v) no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any material BioStar Proprietary Asset.
(d) The BioStar Proprietary Assets constitute all the
Proprietary Assets reasonably necessary to enable BioStar to conduct its
business in the manner in which such business is being conducted and in the
manner in which such business is required to be conducted pursuant to the
BioStar Contracts which are in effect on the date hereof. Except as set forth
in the BioStar Disclosure Schedule, BioStar has not (i) licensed any of the
material BioStar Proprietary Assets to any Person on an exclusive basis, or
(ii) entered into any covenant not to compete or Contract limiting its ability
to exploit fully any material BioStar Proprietary Assets or to transact
business in any market or geographical area or with any Person.
2.9 MATERIAL CONTRACTS.
(a) The BioStar Disclosure Schedule identifies each BioStar Contract
that constitutes a "BIOSTAR MATERIAL CONTRACT." For purposes of this
Agreement, each of the following shall be deemed to constitute a BioStar
Material Contract:
(i) any Contract relating to the employment of,
or the performance of services by, any officer or consultant, and any Contract
pursuant to which BioStar 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);
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(ii) any Contract relating to the acquisition,
transfer, development, sharing or license of any BioStar Proprietary Asset
deemed by BioStar to have material value to BioStar (except for any Contract
pursuant to which any Proprietary Asset is licensed to BioStar under any third
party software license generally available to the public);
(iii) any Contract which provides for
indemnification of any officer, director, employee or agent;
(iv) any Contract imposing any restriction on the
right or ability of BioStar (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person, or
(C) to develop or distribute any technology, in each case where breach thereof
by BioStar would have a Material Adverse Effect on BioStar;
(v) 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 BioStar with any right of first refusal with respect to, or right to
repurchase or redeem, any securities;
(vi) any Contract requiring that BioStar give any
notice, obtain any consent or provide any information to any Person prior to
accepting any Acquisition Proposal;
(vii) any Contract (not otherwise identified in
this Section) that (A) has a term of more than 60 days or that may not be
terminated by BioStar (without penalty) within 60 days after the delivery of a
termination notice by BioStar 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;
(viii) 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 BioStar 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 $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;
(ix) any open purchase order placed by BioStar
requiring future aggregate payments in excess of $100,000; and
(x) any Contract (not otherwise identified in
this Section), if a breach of such Contract could reasonably be expected to
have a Material Adverse Effect on BioStar.
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(b) Each BioStar 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, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. Except as set forth in the
BioStar Disclosure Schedule, the aggregate amount payable by BioStar under
Contracts that would be BioStar Material Contracts but for the limitations of
Sections 2.9(a)(vii)(B) or 2.9(a)(viii)(B) do not exceed $500,000. The
aggregate amount payable by BioStar under purchase orders not listed on the
BioStar Disclosure Schedule does not exceed $500,000.
(c) Except as set forth in the BioStar Disclosure
Schedule: (i) BioStar has not materially violated or breached, or committed any
material default under, any BioStar Material Contract, and, to the best of the
knowledge of BioStar, no other Person has materially violated or breached, or
committed any material default under, any BioStar Material Contract; (ii) to
the best of the knowledge of BioStar, 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 BioStar Material Contract, (B) give any
Person the right to declare a default or exercise any remedy under any BioStar
Material Contract, (C) give any Person the right to a rebate, charge- back,
penalty or change in delivery schedule under any BioStar Material Contract, (D)
give any Person the right to accelerate the maturity or performance of any
BioStar Material Contract, or (E) give any Person the right to cancel,
terminate or materially modify any BioStar Material Contract; (iii) since
September 30, 1997, BioStar 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 BioStar Contract except for
communication (A) that has subsequently been revoked; or (B) has been received
from a complaining party that has not contacted BioStar or otherwise, to the
knowledge of BioStar, 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) BioStar has not waived any of its material rights under any BioStar
Material Contract, in each case where such breach, default, violation or waiver
would have a Material Adverse Effect on BioStar.
(d) To the best of the knowledge of BioStar, no Person is
renegotiating, or has the right to renegotiate, any material amount paid or
payable to BioStar under any BioStar Material Contract, or any other material
term or provision of any BioStar Material Contract, including termination
provisions.
(e) The BioStar Contracts collectively constitute all of
the Contracts necessary to enable BioStar to conduct its business in the manner
in which its business is currently being conducted and in the manner in which
its business is required to be conducted pursuant to Contracts to which BioStar
is a party and which are in effect on the date hereof.
(f) The BioStar Disclosure Schedule sets forth a list of
all claims made under any BioStar Material Contract which are disputed in any
material respect or, to BioStar's knowledge, where a dispute as to any material
matter has been threatened.
2.10 LIABILITIES. BioStar has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with GAAP, and whether
due or to become due), except for: (a) liabilities identified
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as such in the BioStar Financials; (b) normal and recurring liabilities that
have been incurred by BioStar since September 30, 1997 in the ordinary course
of business and consistent with past practices; and (c) other liabilities which
have not had and could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect on BioStar.
2.11 COMPLIANCE WITH LEGAL REQUIREMENTS. BioStar is, and to the best
knowledge of BioStar 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 BioStar. Since inception, BioStar has not received
any notice or other communication 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. Neither BioStar nor any director,
officer, agent or employee of BioStar 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. BioStar holds all material Governmental
Authorizations necessary to enable BioStar 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. BioStar
is, and to the best knowledge of BioStar, at all times since inception has
been, in substantial compliance with the terms and requirements of such
Governmental Authorizations. Since inception, BioStar 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 BioStar, in each
case where such violation, revocation, suspension, cancellation, termination or
modification would have a Material Adverse Effect on BioStar.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of BioStar with any Governmental Body with respect to any taxable period ending
on or before the Closing Date (the "BIOSTAR 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 BioStar Returns to be due on or before the
Closing Date have been or will be paid on or before the Closing Date.
(b) The BioStar 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. BioStar
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
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periods from December 31, 1996 through the Closing Date. Since January 1,
1997, no material Tax liability has been incurred other than in the ordinary
course of business.
(c) Except as set forth in the BioStar Disclosure
Schedule, no BioStar Return has ever been examined or audited by any
Governmental Body. No extension or waiver of the limitation period applicable
to any of the BioStar Returns has been granted (by BioStar or any other
Person), and no such extension or waiver has been requested from BioStar.
(d) No claim or Legal Proceeding is pending or, to the
best of the knowledge of BioStar, has been threatened in writing against or
with respect to BioStar 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 BioStar (other than liabilities for
Taxes asserted under any such notice of deficiency or similar document which
are being contested in good faith by BioStar and with respect to which adequate
reserves for payment have been established). There are no liens for Taxes upon
any of the assets of BioStar except liens for current Taxes not yet due and
payable. BioStar has not entered into nor has it become bound by any agreement
or consent pursuant to Section 341(f) of the Code. BioStar 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. BioStar is not nor has it been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code. BioStar has
no liability for the taxes of any other Person.
(e) Except as set forth in the BioStar Disclosure
Schedule, there is no agreement, plan, arrangement or other Contract covering
any employee or independent contractor or former employee or independent
contractor of BioStar 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. BioStar 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).
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) The BioStar 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 "BIOSTAR PLANS") sponsored,
maintained, contributed to or required to be contributed to by BioStar for the
benefit of any current or former employee of BioStar.
(b) No BioStar Plan is subject to Title IV of ERISA, Part
3 of Title I of ERISA or Section 412 of the Code, and no BioStar Plan
constitutes a "multi-employer plan" (as defined in Section 3(37) of ERISA).
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(c) With respect to each BioStar Plan, BioStar has made
available to Cortech: (i) an accurate and complete copy of each such BioStar
Plan (including all amendments thereto); (ii) an accurate and complete copy of
the annual report, if required under ERISA, with respect to such BioStar 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 BioStar
Plans, (iv) if such BioStar 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 BioStar 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 BioStar Plans
(if such BioStar Plans are intended to be qualified under Section 401(a) of the
Code).
(d) BioStar 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
BioStar.
(e) No BioStar Plan provides death, medical or health
benefits coverage (whether or not insured) with respect to any current or
former employee of BioStar 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 BioStar Financials, and
(iii) benefits the full costs of which are borne by current or former employees
of BioStar (or the employees' beneficiaries)).
(f) With respect to any BioStar 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
BioStar Disclosure Schedule lists all qualified beneficiaries under COBRA with
respect to all such BioStar Plans.
(g) Each of the BioStar 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 BioStar to (or under) any BioStar Plan have been fully paid
or adequately provided for on the books and financial statements of BioStar.
(i) Each of the BioStar 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
BioStar is not aware of any reason why any such letter should be revoked.
(j) Except as set forth in the BioStar Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or
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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 BioStar (whether or not under any
BioStar Plan), or materially increase the benefits payable under any BioStar
Plan, or result in any acceleration of the time of payment or vesting of any
such benefits.
(k) The BioStar Disclosure Schedule contains a list of
the ten employees with the highest salaries of BioStar as of the date of this
Agreement, and correctly reflects, in all material respects, their salaries,
any other compensation payable to them (including compensation payable pursuant
to bonus, deferred compensation or commission arrangements), their dates of
employment and their positions. BioStar is not a party to any collective
bargaining contract or other Contract with a labor union involving any of its
employees. To the best knowledge of BioStar, all of the employees of BioStar
are "at will" employees.
(l) The BioStar 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) BioStar 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. BioStar is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by BioStar of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. BioStar 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 BioStar is not in compliance with any
Environmental Law. To the knowledge of BioStar without further inquiry, no
current or prior owner of any property leased or controlled by BioStar 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 BioStar is not in compliance with any
Environmental Law. To the best knowledge of BioStar, all property that is
leased to, controlled by or used by BioStar, 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 BioStar, BioStar 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.
2.17 INSURANCE. BioStar has delivered to Cortech a summary of all
material insurance policies and all material self-insurance programs relating
to the business, assets and operations of BioStar and has made available to
Cortech copies of the policies. Each of such insurance policies is in full
force and effect. Since September 30, 1997, BioStar has not received any
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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 BioStar Disclosure Schedule, there is no
pending claim (including any workers' compensation claim) other than routine
claims for benefits under any BioStar Plan under or based upon any insurance
policy of BioStar.
2.18 TRANSACTIONS WITH AFFILIATES.
(a) Since December 31, 1996, except as set forth in the
BioStar Disclosure Schedule, no event has occurred that would be required to be
reported by BioStar pursuant to Item 404 of Regulation S-K promulgated by the
SEC if BioStar was a reporting company. The BioStar Disclosure Schedule
identifies each Person who is an "affiliate" (as that term is used in Rule 145
under the Securities Act) of BioStar as of the date of this Agreement.
(b) The BioStar Disclosure Schedule contains an accurate
and complete list as of the date of this Agreement of all outstanding loans and
advances made by BioStar 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) There is no pending Legal Proceeding, and (to the
best of the knowledge of BioStar ) no Person has threatened to commence any
Legal Proceeding: (i) that involves BioStar or any of the assets owned or used
by BioStar; 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 BioStar, 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 BioStar.
(b) There is no material order, writ, injunction,
judgment or decree to which BioStar, or any of the assets owned or used by
BioStar, is subject. To the best of the knowledge of BioStar, no officer or
key employee of BioStar 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
BioStar.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. BioStar 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 BioStar (at a
meeting duly called and held) has unanimously (a) determined that the Merger is
advisable and fair and in the best interests of BioStar and its stockholders,
(b) authorized and approved the execution, delivery and performance of this
Agreement by BioStar and unanimously approved the Merger, and (c) recommended
the approval of this Agreement and the Merger by the holders of BioStar Common
Stock and BioStar Preferred Stock and directed that this Agreement and the
Merger be submitted for consideration by the BioStar stockholders at a BioStar
Stockholders' Meeting (as defined in
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Section 5.2). This Agreement constitutes the legal, valid and binding
obligation of BioStar, enforceable against BioStar 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. BioStar has terminated any existing
discussions with any Person that relate to any Acquisition Proposal. Neither
BioStar, nor any Representative of BioStar, is currently engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating
to any Acquisition Proposal.
2.22 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the shares of BioStar Common Stock and BioStar Preferred Stock (voting on an
as-converted basis) outstanding on the BioStar Record Date, voting together as
a single class, and the affirmative vote of the holders of a majority of the
shares of each series of BioStar Preferred Stock outstanding on the BioStar
Record Date, voting as separate classes (the "REQUIRED BIOSTAR STOCKHOLDER
VOTE") are the only votes of the holders of any class or series of BioStar's
capital stock necessary to approve this Agreement, the Merger, the BioStar
Charter Amendment, and the other transactions contemplated by this Agreement.
2.23 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):
(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 BioStar, or (ii) any resolution adopted
by the stockholders, the board of directors or any committee of the board of
directors of BioStar;
(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 BioStar, or any of the
assets owned or used by BioStar, is subject, if the result would have a
Material Adverse Effect on BioStar;
(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 BioStar or that otherwise relates to the business
of BioStar or to any of the assets owned or used by BioStar, if the result
would have a Material Adverse Effect on BioStar;
(d) contravene, conflict with or result in a violation or
material breach of, or result in a default (or an event which with notice or
lapse of time or both would become a default) under, any provision of any
BioStar Material Contract, or give any Person the right to (i) declare a
default or exercise any remedy under any such BioStar Material Contract, (ii) a
rebate, charge-back, penalty or change in delivery schedule under any such
BioStar Material Contract,
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(iii) accelerate the maturity or performance of any such BioStar Material
Contract, or (iv) cancel, terminate or materially modify any term of such
BioStar Material Contract, if the result would have a Material Adverse Effect
on BioStar; or
(e) result in the imposition or creation of any
Encumbrance upon or with respect to any asset owned or used by BioStar (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 BioStar).
Except as may be set forth in the BioStar 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) BioStar 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.
2.24 FINANCIAL ADVISOR. Except for Xxxxxx Brothers, 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
BioStar. BioStar has furnished to Cortech 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 Brothers.
2.25 FULL DISCLOSURE. This Agreement (including the BioStar Disclosure
Schedule) does not, and the certificate referred to in Section 6.6(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.
3. REPRESENTATIONS AND WARRANTIES OF CORTECH AND MERGER SUB
Cortech and Merger Sub represent and warrant to BioStar, except as set
forth in the Cortech Disclosure Schedule or the Cortech SEC Documents (as
defined in Section 3.4 below) as follows (and notwithstanding any particular
reference in a representation or warranty to the Cortech SEC Documents or
Cortech Disclosure Schedule):
3.1 DUE ORGANIZATION, SUBSIDIARIES, ETC.
(a) Each of Cortech and its Subsidiaries (collectively,
the "CORTECH CORPORATIONS"), 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. Each of the Cortech
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Corporations is qualified to do business as 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.
(b) Cortech has no Subsidiaries, except for the
corporation identified in the Cortech Disclosure Schedule; and neither Cortech
nor the corporation identified in the Cortech 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 Cortech Disclosure Schedule. None of
the Cortech Corporations has agreed or is obligated to make or is bound by any
Contract under which it is obligated to make, any future investment in or
capital contribution to any other Entity. None of the Cortech Corporations
has, at any time, been a general partner of any general partnership, limited
partnership, or other Entity.
3.2 CERTIFICATE/CERTIFICATE OF INCORPORATION AND BYLAWS. Cortech
has delivered to BioStar complete and accurate copies of the Certificate of
Incorporation, Bylaws, and other charter and organizational documents of the
respective Cortech Corporations, including all amendments thereto.
3.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of Cortech consists of:
(i) 50,000,000 shares of Cortech Common Stock, par value $0.002, of which, as
of November 30, 1997 18,523,918 shares were issued and outstanding and no
shares were held in its treasury, and (ii) 2,000,000 shares of Cortech
Preferred Stock, par value $0.002, none of which were issued and outstanding or
held in its treasury as of November 30, 1997. All of the outstanding shares of
Cortech Common Stock have been duly authorized and validly issued, and are
fully paid and nonassessable. Except as set forth in the Cortech Disclosure
Schedule: (i) none of the outstanding shares of Cortech 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 Cortech Common Stock is subject
to any right of first refusal in favor of Cortech; and (iii) there is no
Cortech 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 Cortech
Common Stock. None of the Cortech Corporations is under any obligation, or is
bound by any Contract pursuant to which it may become obligated, to repurchase,
redeem or otherwise acquire any outstanding shares of Cortech Common Stock or
any other securities of any Cortech Corporation, other than the stockholder
rights plan disclosed pursuant to Section 3.3(c) hereof. The authorized
capital of Merger Sub consists of 100 shares of Common Stock, par value $.001
per share, 10 shares of which are issued and outstanding and are held
beneficially, and of record, by Cortech.
(b) As of November 30, 1997: (i) 376,662 shares of
Cortech Common Stock are reserved for future issuance pursuant to stock options
granted and outstanding under Cortech's Amended and Restated 1986 Incentive
Stock Option Plan, (ii) no shares of Cortech Common Stock are reserved for
future issuance pursuant to stock options granted and outstanding under
Cortech's 1991 Non-employee Directors' Stock Option Plan, (iii) 207,815
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shares of Cortech Common Stock are reserved for future issuance pursuant to
stock options granted and outstanding under Cortech's Amended and Restated 1992
Non-employee Directors' Stock Option Plan, (iv) 333,682 shares of Cortech
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under Cortech's 1993 Equity Incentive Plan, and (v) 108,236
shares of Cortech Common Stock are reserved for future issuance under Cortech's
1993 Employee Stock Purchase Plan (the "CORTECH ESPP"). The Cortech Disclosure
Schedule sets forth the following information with respect to each Cortech
Option outstanding as of the date of this Agreement: (i) the particular plan
pursuant to which such Cortech Option was granted; (ii) the name of the
optionee; (iii) the number of shares of Cortech Common Stock subject to such
Cortech Option; (iv) the exercise price of such Cortech Option; (v) the date on
which such Cortech Option was granted; and (vi) the extent to which such
Cortech Option is vested and exercisable as of November 30, 1997. Cortech has
delivered to BioStar accurate and complete copies of all stock option plans and
forms of option grant pursuant to which Cortech has granted any outstanding
stock options. Cortech has reserved 709,688 shares of Cortech Common Stock for
issuance upon exercise of warrants. The Cortech Disclosure Schedule sets forth
the following information with respect to the outstanding warrant to purchase
Cortech Common Stock: (1) the name of the holder of such warrant; (2) the
number of shares of Cortech Common Stock subject to such warrant; (3) the
exercise price of such warrant; (4) the date on which such warrant was issued;
and (5) the date on which such warrant expires. Cortech has delivered to
BioStar an accurate and complete copy of such warrant.
(c) Except as set forth in the Cortech 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 Cortech or any other Cortech Corporation;
(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 Cortech or any other Cortech Corporation; (iii) stockholder
rights plan (or similar plan commonly referred to as a "poison pill") or
Contract under which Cortech or any other Cortech Corporation 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 Cortech or any other Cortech Corporation. There
are no bonds, debentures, notes or other indebtedness of Cortech outstanding
having the right to vote (or convertible into securities having the right to
vote) on any matters on which the stockholders of the Cortech have the right to
vote.
(d) All outstanding securities of all of the Cortech
Corporations, including shares of Cortech Common Stock, all outstanding Cortech
Options, all outstanding warrants to purchase Cortech Common Stock, all
outstanding rights under the Cortech ESPP and all outstanding shares of capital
stock of each subsidiary of Cortech 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.
(e) All of the outstanding shares of capital stock of
Merger Sub have been duly authorized and are validly issued, are fully paid and
nonassessable and (other than the capital stock of Cortech) are owned
beneficially and of record by Cortech, free and clear of any Encumbrances.
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3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Cortech has made available to BioStar 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 Cortech with the SEC since September 30, 1993 (the "CORTECH
SEC DOCUMENTS"). All statements, reports, schedules, forms and other documents
required to have been filed by Cortech with the SEC have been so filed by
Cortech on a timely basis with the exception of the 1997 Annual Meeting Proxy
Statement. 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 Cortech 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 Cortech 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) The consolidated financial statements (including any
related notes) contained in the Cortech SEC Documents (the "CORTECH 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 which will not, individually or in the
aggregate, be material in amount); and (iii) fairly present the financial
position of Cortech as of the respective dates thereof and the results of
operations and cash flows of Cortech for the periods covered thereby.
(c) Since September 30, 1997, Cortech 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.
3.5 ABSENCE OF CHANGES. Since September 30, 1997:
(a) there has not been any Material Adverse Effect on the
business, condition, capitalization, assets, liabilities, operations or
financial performance of the Cortech Corporations, and no event has occurred
that could reasonably be expected to have a Material Adverse Effect on the
Cortech Corporations;
(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 the Cortech Corporations which are necessary for the conduct of Cortech'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) which would be prohibited by
Section 4.3(b)(i), (iv), (ix), (x)
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or (xi) if it were to be effected, accepted or were to take place between the
date hereof and the Effective Time.
3.6 TITLE TO ASSETS. Except as set forth in the Cortech Disclosure
Schedule or the Cortech SEC Documents, the Cortech Corporations own, and have
good, valid and marketable title to, all assets purported to be owned by them,
including: all assets reflected in their books and records as being owned by
the Cortech Corporations. All of said assets are owned by the Cortech
Corporations 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 any of the Cortech Corporations, and (c) liens
described in the Cortech Disclosure Schedule.
3.7 REAL PROPERTY; EQUIPMENT; LEASEHOLD. Except as described in the
Cortech Disclosure Schedule or the Cortech SEC Documents:
(a) None of the Cortech Corporations owns any real
property or any material interest in real property, except for the leasehold
created under real property leases set forth in the Cortech Disclosure
Schedule. Complete and correct copies of such leases have previously been
delivered to BioStar by Cortech.
(b) All material items of equipment and other tangible
assets owned by or leased to the Cortech Corporations 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 the Cortech Corporations 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 Cortech Contracts and which are in
effect on the date hereof.
3.8 PROPRIETARY ASSETS.
(a) The Cortech SEC Documents describe each Proprietary
Asset owned by Cortech and deemed by Cortech to have material value to Cortech.
Except as disclosed in the Cortech SEC Documents, Cortech has good title to
such Proprietary Assets and has no obligation to make any material ongoing
royalty or other payment to any Person in respect thereto. Any limitation on
the right of Cortech to use or exploit a Cortech Proprietary Asset deemed by
Cortech to have material value to Cortech has been disclosed in the Cortech SEC
Documents.
(b) The Cortech Corporations have taken reasonable
measures and precautions to protect and maintain the confidentiality, secrecy
and value of all Cortech Proprietary Assets (except Cortech Proprietary Assets
whose value would be unimpaired by disclosure). Except where the failure to
obtain such agreements would not impair the value of any Cortech Proprietary
Asset, the Cortech Corporations have obtained, from all current and former
employees of the Cortech Corporations and from all current and former
consultants and independent contractors to the Cortech Corporations, signed
agreements appropriately restricting the use and disclosure of the Cortech
Proprietary Assets, and providing for assignment to the Cortech Corporations of
the Cortech Proprietary Assets developed by such employees and consultants.
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(c) To the best of the knowledge of Cortech: (i) all
patents, patent applications, registered trademarks, registered service marks
and registered copyrights held by any of the Cortech Corporations and deemed by
Cortech to have material value to Cortech were filed and were and have been
prosecuted in good faith and in compliance with all applicable Legal
Requirements; (ii) there has not been any claim, action or proceeding, and
there is no pending or threatened claim, action or proceeding relating to any
registration or filing of a Cortech Proprietary Asset; (iii) none of the
Cortech Proprietary Assets infringes, misappropriates or conflicts with any
Proprietary Asset owned or used by any other Person; (iv) no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any material Cortech Proprietary Asset.
(d) The Cortech Proprietary Assets constitute all of the
Proprietary Assets reasonably necessary to enable the Cortech Corporations to
conduct their businesses in the manner in which such businesses are being
conducted and in the manner in which such businesses are required to be
conducted pursuant to Contracts to which Cortech is a party and which are in
effect on the date hereof. Except as set forth in the Cortech Disclosure
Schedule or the Cortech SEC Documents, none of the Cortech Corporations has (i)
licensed any of the material Cortech Proprietary Assets to any Person on an
exclusive basis, or (ii) entered into any covenant not to compete or Contract
limiting its ability to exploit fully any material Cortech Proprietary Assets
or to transact business in any market or geographical area or with any Person.
3.9 MATERIAL CONTRACTS.
(a) The Cortech Disclosure Schedule identifies each Cortech
Corporation Contract that constitutes a "CORTECH MATERIAL CONTRACT." For
purposes of this Agreement, each of the following shall be deemed to constitute
a Cortech Material Contract:
(i) any Contract relating to the employment of,
or the performance of services by, any officer or consultant, and any Contract
pursuant to which any of the Cortech Corporations 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 relating to the acquisition,
transfer, development, sharing or license of any Proprietary Asset deemed by
Cortech to have material value to Cortech (except for any Contract pursuant to
which any Proprietary Asset is licensed to the Cortech Corporations under any
third party software license generally available to the public);
(iii) any Contract which provides for
indemnification of any officer, director, employee or agent;
(iv) any Contract imposing any restriction on the
right or ability of Cortech (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person, or
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(C) to develop or distribute any technology, in each case where breach thereof
by Cortech would have a Material Adverse Effect on Cortech;
(v) 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 Cortech with any right of first refusal with respect to, or right to
repurchase or redeem, any securities;
(vi) any Contract requiring that Cortech give any
notice, obtain any consent or provide any information to any Person prior to
accepting any Acquisition Proposal;
(vii) any Contract (not otherwise identified in
this Section) that (A) has a term of more than 60 days or that may not be
terminated by a Cortech Corporation (without penalty) within 60 days after the
delivery of a termination notice by such Cortech Corporation 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;
(viii) 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 BioStar 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;
(ix) any open purchase order placed by a Cortech
Corporation requiring future aggregate payments in excess of $100,000;
(x) any other Contract (not otherwise identified
in this Section), if a breach of such Contract could reasonably be expected to
have a Material Adverse Effect on any of the Cortech Corporations.
(b) Each Cortech 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, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. The aggregate amount payable
by the Cortech Corporations under Contracts that would be Cortech Material
Contracts but for the limitations of Sections 3.9(a)(vii)(B) or 3.9(a)(viii)(B)
do not exceed $50,000. The aggregate amount payable by the Cortech
Corporations under purchase orders not listed on the Cortech Disclosure
Schedule does not exceed $50,000.
(c) Except as set forth in the Cortech Disclosure
Schedule: (i) none of the Cortech Corporations has materially violated or
breached, or committed any material default under, any Cortech Material
Contract, and, to the best of the knowledge of Cortech, no other
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Person has materially violated or breached, or committed any material default
under, any Cortech Material Contract; (ii) to the best of the knowledge of
Cortech, 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
Cortech Material Contract, (B) give any Person the right to declare a default
or exercise any remedy under any Cortech Material Contract, (C) give any Person
the right to a rebate, charge-back, penalty or change in delivery schedule
under any Cortech Material Contract, (D) give any Person the right to
accelerate the maturity or performance of any Cortech Material Contract, or (E)
give any Person the right to cancel, terminate or materially modify any Cortech
Material Contract; (iii) since September 30, 1997, none of the Cortech
Corporations 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 Cortech Contract, except for communication (A) that
has subsequently been revoked; or (B) has been received from a complaining
party that has not contacted Cortech or otherwise, to Cortech'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) none of the
Cortech Corporations has waived any of its material rights under any Cortech
Material Contract, in each case where such breach, default, violation or waiver
would have a Material Adverse Effect on Cortech.
(d) To the best of the knowledge of Cortech, no Person is
renegotiating, or has the right to renegotiate, any material amount paid or
payable to the Cortech Corporations under any Cortech Material Contract, or any
other material term or provision of any Cortech Material Contract, including
termination provisions.
(e) The Cortech Material Contracts and other Contracts of
the Cortech Corporations collectively constitute all of the Contracts necessary
to enable the Cortech Corporations to conduct their respective businesses in
the manner in which their businesses are currently being conducted and in the
manner in which such businesses are required to be conducted pursuant to
Contracts to which Cortech is a party and which are in effect on the date
hereof.
(f) The Cortech Disclosure Schedule sets forth a list of
all claims made under any Cortech Material Contract which are disputed in any
material respect or, to Cortech's knowledge, where a dispute as to any material
matter has been threatened.
3.10 LIABILITIES. None of the Cortech Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in financial statements in accordance
with GAAP, and whether due or to become due), except for: (a) liabilities
identified as such in the Cortech Financial Statements; (b) normal and
recurring liabilities that have been incurred by the Cortech Corporations since
September 30, 1997 in the ordinary course of business and consistent with past
practices; and (c) other liabilities which have not had and could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on the Cortech Corporations.
3.11 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Cortech
Corporations is, and, to the best knowledge of Cortech, has at all times since
inception been, in compliance with all applicable Legal Requirements, except
where the failure to comply with such Legal
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Requirements has not had and could not reasonably be expected to have, a
Material Adverse Effect on the Cortech Corporations. Since inception, none of
the Cortech Corporations has received any notice or other communication from
any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any material Legal Requirement.
3.12 CERTAIN BUSINESS PRACTICES. None of the Cortech Corporations nor
any director, officer, agent or employee of any of the Cortech Corporations 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.
3.13 GOVERNMENTAL AUTHORIZATIONS. The Cortech Corporations hold 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. Each Cortech Corporation is, and to the best knowledge of
Cortech, at all times since inception has been, in substantial compliance with
the terms and requirements of such Governmental Authorizations. To the best
knowledge of Cortech, since inception, none of the Cortech Corporations 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 Cortech, in each
case where such violation, revocation, suspension, cancellation, termination or
modification would have a Material Adverse Effect on Cortech.
3.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of the respective Cortech Corporations with any Governmental Body with respect
to any taxable period ending on or before the Closing Date (the "CORTECH
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 Cortech
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date.
(b) The Cortech Financial Statements fully accrue all
actual and contingent liabilities for Taxes with respect to all periods through
the dates thereof in accordance with GAAP. Each Cortech Corporation 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, 1996 through the Closing Date. Since
January 1, 1997 no material Tax liability has been incurred other than in the
ordinary course of business.
(c) Except as set forth in the Cortech Disclosure
Schedule, no Cortech Return has ever been examined or audited by any
Governmental Body. No extension or waiver of the
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limitation period applicable to any of the Cortech Returns has been granted (by
Cortech or any other Person), and no such extension or waiver has been
requested by the Cortech Corporations.
(d) No claim or Legal Proceeding is pending or, to the
best of the knowledge of Cortech, has been threatened in writing against or
with respect to any Cortech Corporation 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 any Cortech
Corporation (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Cortech Corporation 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 the Cortech Corporations except liens for current Taxes not yet due and
payable. None of the Cortech Corporations has entered into or become bound by
any agreement or consent pursuant to Section 341(f) of the Code. None of the
Cortech Corporations has been, and none of the Cortech Corporations 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 the
Cortech Corporations is nor has been a United States real property holding
corporation within the meaning of Section 847(c)(2) of the Code. No Cortech
Corporation has liabilities for the Taxes of any other Person.
(e) Except as set forth in the Cortech Disclosure
Schedule or the Cortech 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 the Cortech Corporations 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. None of the Cortech Corporations
is, or 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).
3.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) The Cortech Disclosure Schedule or the Cortech 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
(collectively, the "CORTECH PLANS") sponsored, maintained, contributed to or
required to be contributed to by any of the Cortech Corporations for the
benefit of any current of former employee of each Cortech Corporation.
(b) No Cortech plan is subject to Title IV of ERISA, Part
3 of Title I of ERISA or Section 412 of the Code, and no Cortech Plan
constitutes a "multi-employer plan" (as defined in Section 3(37) of ERISA).
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(c) With respect to each Cortech Plan, Cortech has made
available to BioStar: (i) an accurate and complete copy of each such Cortech
Plan (including all amendments thereto); (ii) an accurate and complete copy of
the annual report, if required under ERISA, with respect to such Cortech 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 Cortech
Plans; (iv) if such Cortech 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 Cortech 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 Cortech Plans
(if such Cortech Plans are intended to be qualified under Section 401(a) of the
Code).
(d) Cortech 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 the Cortech Corporations.
(e) No Cortech 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, (ii) deferred compensation
benefits accrued as liabilities on the most recent financial statements
included in the Cortech 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 Cortech 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 Cortech Disclosure Schedule
lists all qualified beneficiaries under COBRA with respect to all such Cortech
Plans.
(g) Each of the Cortech 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 any of the Cortech Corporations to (or under) any Cortech
Plan have been fully paid or adequately provided for on the books and financial
statements of the Cortech Corporations.
(i) Each of the Cortech 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
Cortech is not aware of any reason why any such letter should be revoked.
(j) Except as set forth in the Cortech Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or
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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 Cortech's current or former employees or directors (whether or not under any
Cortech Plan), or materially increase the benefits payable under any Cortech
Plan, or result in any acceleration of the time of payment or vesting of any
such benefits.
(k) Cortech is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its employees.
To the best knowledge of Cortech, all of Cortech's employees are "at will"
employees.
(l) Each Cortech Corporation 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.
3.16 ENVIRONMENTAL MATTERS. Each of the Cortech Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Cortech Corporations of
all permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. None
of the Cortech Corporations has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Cortech Corporations is not
in compliance with any Environmental Law, and, to the best of the knowledge of
Cortech, there are no circumstances that may prevent or interfere with the
compliance by any of the Cortech Corporations with any Environmental Law in the
future. To the knowledge of Cortech without further inquiry, no current or
prior owner of any property leased or controlled by any of the Cortech
Corporations 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 any of the Cortech
Corporations is not in compliance with any Environmental Law. To the best of
the knowledge of Cortech, all property that is leased to, controlled by or used
by Cortech, 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 Cortech, none of the Cortech Corporations has 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.
3.17 INSURANCE. Cortech has delivered to BioStar a summary of all
material insurance policies and all material self-insurance programs relating
to the business, assets and operations of the respective Cortech Corporations
and has made available to BioStar copies of the polices. Each of such
insurance policies is in full force and effect. Since September 30, 1997, none
of the Cortech Corporations has 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
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Cortech Disclosure Schedule, there is no pending claim (including any workers'
compensation claim) other than routine claims for benefits under any Cortech
Plan, under or based upon any insurance policy of any of the Cortech
Corporations.
3.18 TRANSACTIONS WITH AFFILIATES.
(a) Except as set forth in the Cortech SEC Reports, since
the date of Cortech's last proxy statement filed with the SEC, no event has
occurred that would be required to be reported by Cortech pursuant to Item 404
of Regulation S-K promulgated by the SEC. The Cortech Disclosure Schedule
identifies each Person who is an "affiliate" (as that term is used in Rule 145
under the Securities Act) of Cortech and who beneficially owns more than one
percent of the outstanding voting capital stock of Cortech as of the date of
this Agreement.
(b) The Cortech Disclosure Schedule contains an accurate
and complete list as of the date of this Agreement of all outstanding loans and
advances made by any of the Cortech Corporations 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.
3.19 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the
best of the knowledge of Cortech) no Person has threatened to commence any
Legal Proceeding: (i) that involves Cortech or any of the assets owned or used
by Cortech or any of the Cortech Corporations; 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 Cortech, 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 the Cortech Corporations.
(b) There is no material order, writ, injunction,
judgment or decree to which any of the Cortech Corporations, or any of the
assets owned or used by any of the Cortech Corporations, is subject. To the
best of the knowledge of Cortech, no officer or key employee of the Cortech
Corporations 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 any of the Cortech
Corporations.
3.20 AUTHORITY; BINDING NATURE OF AGREEMENT. Cortech and Merger Sub have
the absolute and unrestricted right, power and authority to enter into and to
perform their obligations under this Agreement. The board of directors of
Cortech (at a meeting duly called and held) has unanimously (a) determined that
the Merger is advisable and fair and in the best interests of Cortech and its
stockholders, (b) authorized and approved the execution, delivery and
performance of this Agreement by Cortech and approved the Merger as sole
stockholder of Merger Sub, (c) recommended the approval of the issuance of
Cortech Common Stock in the Merger by the holders of Cortech Common Stock, and
directed that such issuance be submitted for consideration by Cortech's
stockholders at the Cortech Stockholders' Meeting (as defined in
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Section 5.3) and the board of directors of Merger Sub has duly authorized by
all necessary action the execution, delivery and performance by Merger Sub of
this Agreement. This Agreement constitutes the legal, valid and binding
obligation of Cortech and Merger Sub, enforceable against Cortech and Merger
Sub 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.
3.21 NO EXISTING DISCUSSIONS. Cortech has terminated any existing
discussions with any Person that relate to any Acquisition Proposal. None of
the Cortech Corporations, and no Representative of any of the Cortech
Corporations, is currently engaged, directly or indirectly, in any discussions
or negotiations with any Person (other than BioStar) relating to any
Acquisition Proposal.
3.22 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the total votes cast at a meeting of the Cortech stockholders at which a
quorum is present (the "REQUIRED CORTECH STOCKHOLDER MERGER VOTE"), is the only
vote of the holders of any class or series of Cortech's capital stock necessary
to approve the issuance of Cortech Common Stock in the Merger. The affirmative
vote of the holders of a majority of the outstanding shares of Cortech Common
Stock entitled to vote at the Cortech Stockholders Meeting is the only vote of
the holder of any class or series of Cortech's capital stock necessary to
approve the Cortech Charter Amendment (the "REQUIRED CORTECH STOCKHOLDER
CHARTER VOTE).
3.23 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 Merger 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 Cortech's Certificate of Incorporation, Bylaws or
other charter or organizational documents of any of the Cortech Corporations,
or (ii) any resolution adopted by the stockholders, the board of directors or
any committee of the board of directors of any of the Cortech Corporations;
(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 any of the Cortech
Corporations, or any of the assets owned or used by any of the Cortech
Corporations, is subject, if the result would have a Material Adverse Effect on
Cortech;
(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 Cortech or that otherwise relates to Cortech's
business or to any of the assets owned or used by any of the Cortech
Corporations, if the result would have a Material Adverse Effect on Cortech;
(d) contravene, conflict with or result in a violation or
material breach of, or result in a default (or an event which with notice or
lapse of time or both would become a
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default) under, any provision of any Cortech Contract that is or would
constitute a Cortech Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Cortech Material
Contract, (ii) a rebate, charge-back, penalty or change in delivery schedule
under any such Cortech Material Contract, (iii) accelerate the maturity or
performance of any such Cortech Material Contract, or (iv) cancel, terminate or
materially modify any term of such Cortech Material Contract, if the result
would have a Material Adverse Effect on Cortech; or
(e) result in the imposition or creation of any
Encumbrance upon or with respect to any asset owned or used by any of the
Cortech Corporations (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 the Cortech Corporations).
Except as may be 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) none of the Cortech Corporations was, is or will 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.
3.24 FAIRNESS OPINION. Cortech's board of directors has received the
written opinion of Cowen, financial advisor to Cortech, dated as of the date of
this Agreement, to the effect that the terms of the Merger are fair to Cortech
from a financial point of view.
3.25 VALID ISSUANCE; RESERVATION OF SHARES. The Cortech Common Stock to
be issued in the Merger in exchange for BioStar Common Stock and BioStar
Preferred Stock and to be issued upon exercise or conversion of all BioStar
Options, BioStar Warrants, the Contingent Instrument and the Convertible Notes
will, when issued in accordance with the provisions of this Agreement and the
terms of such BioStar Options, BioStar Warrants, Contingent Instrument and
Convertible Notes, be validly issued, fully paid and nonassessable. Cortech's
board of directors has duly reserved by all necessary action the Cortech Common
Stock issuable upon exercise or conversion of such BioStar Options, BioStar
Warrants, Contingent Instrument and Convertible Notes.
3.26 FINANCIAL ADVISOR. Except for Cowen, 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
the Cortech Corporations. Cortech has furnished to BioStar 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 Cowen.
3.27 FULL DISCLOSURE. This Agreement (including the Cortech Disclosure
Schedule) does not, and the certificate referred to in Section 7.5(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
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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.
3.28 CASH POSITION. The Cortech Disclosure Schedule sets forth the
projected cash position of Cortech as of December 31, 1997 and March 31, 1998
and, if the Closing shall not have theretofore occurred, projected expenses for
the months of April and May 1998 (the "CORTECH CASH PROJECTION").
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"), BioStar and Cortech each
shall, and BioStar and Cortech shall cause the respective Representatives of
BioStar and the Cortech Corporations to: (a) provide each other and their
respective Representatives with reasonable access to each others' and their
Subsidiaries' respective Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to each other and to their Subsidiaries; and (b) provide
each other and their respective Representatives with such copies of the
existing books, records, Tax Returns, work papers and other documents and
information relating to each other and their Subsidiaries, and with such
additional financial, operating and other data and information regarding each
other and their Subsidiaries, as Cortech and BioStar may reasonably request.
(b) Each of the parties hereto hereby agrees to and
reaffirms the terms and provisions of the Mutual Nondisclosure Agreement
between Cortech and BioStar executed as of October 31, 1997 (the "NONDISCLOSURE
AGREEMENT").
4.2 OPERATION OF BIOSTAR'S BUSINESS.
(a) During the Pre-Closing Period: (i) BioStar shall
conduct its business and operations (A) in the ordinary course and in
accordance with past practices or the operating plan previously delivered by
BioStar to Cortech and (B) in compliance with all applicable Legal Requirements
and the requirements of all BioStar Material Contracts; (ii) BioStar shall use
reasonable efforts to ensure that BioStar 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 BioStar; (iii) BioStar shall keep in
full force all insurance policies referred to in Section 2.17 or replace any
such policies that terminate with comparable or superior policies; (iv) BioStar
shall provide all notices, assurances and support required by any BioStar
Contract relating to any BioStar Proprietary Asset in order to ensure that no
condition under such BioStar Contract occurs which could result in, or could
increase the likelihood of, any transfer or public disclosure by BioStar of any
BioStar Proprietary Asset; and (v) BioStar shall (to the extent requested by
Cortech) cause its officers to report regularly to Cortech concerning the
status of BioStar's business.
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(b) During the Pre-Closing Period, BioStar shall not (without the
prior written consent of Cortech):
(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) sell, issue, grant or authorize the issuance
or grant of (A) any capital stock or other security (except BioStar Common
Stock upon the valid exercise of BioStar Options or BioStar warrants
outstanding on the date of this Agreement or pursuant to equipment lease
financings, in connection with BioStar's line of credit with Venture Lending
and similar transactions or otherwise in the ordinary course of business), (B)
any option, call, warrant or right to acquire any capital stock or other
security, or (C) any instrument convertible into or exchangeable for any
capital stock or other security; provided, however, that notwithstanding the
foregoing, BioStar may grant up to 800,000 options to employees following the
date of this Agreement under its existing stock option plans.
(iii) except as contemplated by this Agreement,
amend or waive any of its rights under, or accelerate the vesting under, any
provision of the BioStar Option Plan, 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;
(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;
(v) form any Subsidiary or acquire any equity
interest or other interest in any other Entity;
(vi) make any capital expenditure, except capital
expenditures through December 31, 1997 in an aggregate amount of no more than
the amount provided for in the capital budget previously provided to Cortech
for such period, and thereafter in an aggregate amount of no more than a
pro-rata portion of the amount that is provided for in a 1998 capital budget
which shall be provided to and approved by Cortech (such approval not to be
unreasonably withheld) prior to January 1, 1998;
(vii) except as set forth in the operating plan
previously provided to Cortech, enter into or become bound by, or permit any of
the assets owned or used by it to become bound by, any BioStar Material
Contract, or amend or terminate, or waive or exercise any material right or
remedy under, any BioStar Material Contract;
(viii) acquire, lease or license any right or other
asset from any other Person or sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person (except in each case for
(A) assets not constituting BioStar Proprietary Assets and
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acquired, leased, licensed or disposed of by BioStar in the ordinary course of
business; (B) consistent with past practices and except in the case of the
in-licensing of Proprietary Assets, for agreements involving the payment of
less than $25,000 per year and a royalty of less than 0.75% and (C) rights
granted to academic institutions and researchers for research purposes, or
waive or relinquish any material right;
(ix) lend money to any Person, except travel
advances and loans related to relocation, education and immigration-related
expenses made in the ordinary course of business, and loans in connection with
employee stock purchases as provided for in agreements in effect on the date
hereof, or incur or guarantee any indebtedness or pledge or encumber any
material assets (except that BioStar may make routine borrowings in the
ordinary course of business and in accordance with past practices under its
line of credit with Venture Lending);
(x) except as set forth in the BioStar Disclosure
Schedule, establish, adopt or amend any employee benefit plan, pay any bonus or
make any profit-sharing or similar payment to, 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;
(xi) change any of its methods of accounting or
accounting practices in any respect;
(xii) make any material Tax election;
(xiii) commence or settle any Legal Proceeding
except in the ordinary course of business;
(xiv) materially amend or otherwise modify any of
the terms of its engagement of the financial advisor referenced in Section 2.24
above;
(xv) amend or otherwise modify any of the terms of
any BioStar Warrants, except to the extent necessary to terminate such
Warrants or reduce the number of shares issuable upon exercise thereunder;
(xvi) enter into any material transaction or take
any other material action in each case not specifically provided for in the
operating plan previously provided by BioStar to Cortech, or outside the
ordinary course of business or inconsistent with past practices; or
(xvii) agree or commit to take any of the actions
described in clauses "(i)" through "(xvi)" of this Section 4.2(b).
(c) During the Pre-Closing Period, BioStar shall promptly
notify Cortech in writing of: (i) the discovery by BioStar 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 BioStar 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 BioStar 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
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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 BioStar; 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
BioStar. No notification given to Cortech pursuant to this Section 4.2(c)
shall limit or otherwise affect any of the representations, warranties,
covenants or obligations of BioStar contained in this Agreement.
4.3 OPERATION OF CORTECH'S BUSINESS.
(a) During the Pre-Closing Period: (i) Cortech shall
ensure that each of the Cortech Corporations conducts its business and
operations (A) in the ordinary course and in accordance with the operating plan
previously discussed among Cortech and BioStar and (B) in compliance with all
applicable Legal Requirements and the requirements of all Cortech Material
Contracts; (ii) Cortech shall use reasonable efforts to ensure that each of the
Cortech 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 Cortech Corporations; and (iii) Cortech shall keep in full
force all insurance policies referred to in Section 3.17 or replace such
policies with comparable or superior policies; and (iv) Cortech shall provide
all notices, assurances and support required by any Cortech Contract relating
to any Proprietary Asset in order to ensure that no condition under such
Cortech Contract occurs which could result in, or could increase the likelihood
of, any transfer or public disclosure by any Cortech Corporation of any
Proprietary Asset.
(b) During the Pre-Closing Period, Cortech shall not (without the
prior written consent of BioStar ), and shall not permit any of the other
Cortech 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, excluding those
persons hired to replace employees who terminate their employment with a
Cortech 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 Cortech Common
Stock upon the valid exercise of Cortech Options or Cortech warrants
outstanding on the date of this Agreement or the exercise of rights under the
Cortech ESPP or pursuant to equipment lease financings and similar transactions
or otherwise in the ordinary course of business), (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;
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(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 Cortech 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) 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;
(vi) except as contemplated by this Agreement and
except as previously disclosed to BioStar, form any Subsidiary or acquire any
equity interest or other interest in any other Entity;
(vii) make any capital expenditure, except capital
expenditures in an aggregate amount of no more than $25,000;
(viii) establish, adopt or amend any employee
benefit plan or pay any bonus or make any profit sharing or similar payment to,
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, except as disclosed to BioStar;
(ix) change any of its methods of accounting or
accounting practices in any respect;
(x) make any material Tax election;
(xi) commence or settle any Legal Proceeding
except in the ordinary course of business;
(xii) materially amend or otherwise modify any of
the terms of its engagement of the financial advisor referenced in Section 3.26
above;
(xiii) enter into any material transaction or take
any other material action in each case either inconsistent with the operating
plan previously provided by Cortech to BioStar, or outside the ordinary course
of business;
(xiv) except as previously disclosed to BioStar,
sell or otherwise dispose of, or grant an exclusive license or any other
exclusive right to utilize Cortech Proprietary Assets which individually or in
the aggregate constitute core technology material to the business of Cortech,
or grant to any third party a right of first refusal, first offer, or first
negotiation with regard to material products or such core technology; or
(xv) make any expenditure, singly or in the
aggregate, that exceeds the aggregate expenditures set forth in the Cortech
Cash Projection during the period ended March 31, 1998 by more than a net
$350,000 or make any expenditure, singly or in the aggregate, that
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exceeds the aggregate expenditures set forth in the Cash Projections by more
than a net $100,000 for the months of April 1998 or May 1998; or
(xvi) agree or commit to take any of the actions
described in clause "(i)" through "(xv)" of this Section 4.3(b).
(c) During the Pre-Closing Period, Cortech shall promptly
notify BioStar in writing of: (i) the discovery by Cortech 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 Cortech 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 Cortech 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 Cortech; 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 Cortech
Corporations. No notification given to BioStar pursuant to this Section 4.3(c)
shall limit or otherwise affect any of the representations, warranties,
covenants or obligations of Cortech contained in this Agreement.
4.4 NO SOLICITATION BY BIOSTAR.
(a) BioStar shall not directly or indirectly, and shall
not authorize or permit any Representative of BioStar 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 BioStar 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, BioStar acknowledges and agrees that
any violation of any of the restrictions set forth in the preceding sentence by
any Representative of BioStar, whether or not such Representative is purporting
to act on behalf of BioStar, shall be deemed to constitute a breach of this
Section 4.4 by BioStar.
(b) Nothing contained in this Agreement shall prevent
BioStar or its board of directors from (i) furnishing information regarding
BioStar (including a 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 BioStar 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
BioStar 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
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law, (C) the Person who has requested such information has executed and
delivered to BioStar a non-disclosure agreement that is not less restrictive
than the non-disclosure agreement in effect between BioStar and Cortech, and
(D) BioStar 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 BioStar from
recommending a Superior Offer to its stockholders, if the Board 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 BioStar's stockholders under
applicable law (which determination shall be made in light of a revised
proposal, if any, made by the Cortech prior to the date of such determination);
provided however that BioStar (i) shall provide Cortech with at least 48 hours
prior written notice of its intention to hold any meeting at which BioStar'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 in relation to
such meeting, and (ii) shall not recommend to its stockholders a Superior Offer
for at least two business days after BioStar has provided Cortech with the
material terms of such Superior Offer.
(c) BioStar shall promptly advise Cortech 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. BioStar shall
keep Cortech informed with respect to material changes to the terms of any such
Acquisition Proposal and any material modification or proposed modifications
thereto.
(d) BioStar 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 CORTECH.
(a) Cortech shall not directly or indirectly, and shall
not authorize or permit any of the other Cortech Corporations or any
Representative of any of the Cortech 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 Cortech 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, Cortech acknowledges and
agrees that any violation of any of the restrictions set forth in the preceding
sentence by any Representative of any of the Cortech Corporations, whether or
not such Representative is purporting to act on behalf of Cortech, shall be
deemed to constitute a breach of this Section 4.5 by Cortech.
(b) Nothing contained in this Agreement shall prevent
Cortech or its board of directors from (i) furnishing information regarding any
of the Cortech Corporations (including copy of this Section 4.5) to any Person
in connection with or in response to a bona fide,
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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 Cortech 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 Cortech 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 Cortech a non-disclosure agreement that is not less
restrictive than the non-disclosure agreement in effect between Cortech and
BioStar, and (D) Cortech 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 Cortech from recommending a Superior Offer to its stockholders, if the Board
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 Cortech's stockholders
under applicable law (which determination shall be made in light of a revised
proposal, if any, made by BioStar prior to the date of such determination);
provided however that Cortech (i) shall provide BioStar with at least 48 hours
prior written notice of its intentions to hold any meeting at which Cortech'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 in relation to
such meeting, and (ii) Cortech shall not recommend to its stockholders a
Superior Offer for at least two business days after Cortech has provided
BioStar with the material terms of such Superior Offer.
(c) Cortech shall promptly advise BioStar 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. Cortech shall
keep BioStar informed with respect to material changes to the terms of any such
Acquisition Proposal and any material modification or proposed modifications
thereto.
(d) Cortech 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.
5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) As promptly as practicable after the date of this
Agreement, Cortech and BioStar shall prepare and cause to be filed with the SEC
the Joint Proxy Statement and simultaneously or thereafter Cortech 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
Cortech and BioStar 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
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after it is filed with the SEC. Cortech will use all reasonable efforts to
cause the Joint Proxy Statement to be mailed to Cortech's stockholders, and
BioStar will use all reasonable efforts to cause the Joint Proxy Statement to
be mailed to the BioStar's stockholders, as promptly as practicable after the
Form S-4 Registration Statement is declared effective under the Securities Act.
BioStar and Cortech shall promptly furnish to the other all information
concerning BioStar and the BioStar's stockholders and the Cortech Corporations,
respectively, that may be required or reasonably requested in connection with
any action contemplated by this Section 5.1. BioStar and Cortech 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 Cortech and BioStar 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 Cortech
and BioStar, respectively, (iii) at the time of the BioStar Stockholders'
Meeting and at the time of the Cortech 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 Cortech or BioStar 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 Cortech or
BioStar, 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 BioStar or the stockholders of Cortech.
(b) Prior to the Effective Time, Cortech shall use
reasonable efforts to obtain all regulatory approvals needed to ensure that the
Cortech 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 BioStar Common Stock has an address of record
on the record date for determining the stockholders entitled to notice of and
to vote at BioStar Stockholders' Meeting; and (ii) will be approved for
quotation at the Effective Time on the Nasdaq National Market; provided,
however, that Cortech shall not be required (i) to qualify to do business as a
foreign corporation in any jurisdiction in which it is not now qualified or
(ii) to file a general consent to service of process in any jurisdiction.
5.2 BIOSTAR STOCKHOLDERS' MEETING.
(a) BioStar shall take all action necessary under all
applicable Legal Requirements to call, give notice of, convene and hold a
meeting of the holders of BioStar Common Stock and BioStar Preferred Stock to
consider, act upon and vote upon the BioStar Charter Amendment and the approval
of this Agreement and of the Merger (the "BIOSTAR STOCKHOLDERS' MEETING"). The
BioStar Stockholders' Meeting will be held as promptly as practicable and in
any event within 45 days after the Form S-4 Registration Statement is declared
effective under the Securities Act. BioStar shall ensure that the BioStar
Stockholders' Meeting is called, noticed, convened, held and conducted, and
that all proxies solicited in connection with the BioStar Stockholders' Meeting
are solicited, in compliance with all applicable Legal
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Requirements. BioStar's obligation to call, give notice of, convene and hold
the BioStar 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 BioStar 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 BioStar shall unanimously recommend that the BioStar stockholders
vote in favor of and approve this Agreement, the Merger and the BioStar Charter
Amendment at the BioStar Stockholders' Meeting; (ii) the Joint Proxy Statement
shall include a statement to the effect that the board of directors of BioStar
has unanimously recommended that the BioStar's stockholders vote in favor of
and approve this Agreement, the Merger and the BioStar Charter Amendment at the
BioStar Stockholders' Meeting; and (iii) neither the board of directors of
BioStar nor any committee thereof shall withdraw, amend or modify, or propose
or resolve to withdraw, amend or modify, in a manner adverse to Cortech, the
unanimous recommendation of the board of directors of BioStar that the
BioStar's stockholders vote in favor of and approve this Agreement, the Merger
and the BioStar Charter Amendment. For purposes of this Agreement, said
recommendation of the board of directors of BioStar shall be deemed to have
been modified in a manner adverse to Cortech if said recommendation shall no
longer be unanimous.
(c) Nothing in Section 5.2(b) shall prevent the board of
directors of BioStar 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 BioStar Stockholder Vote if (i) a Superior Offer is
made to BioStar and is not withdrawn, (ii) neither BioStar nor any of its
Representatives shall have violated any of the restrictions set forth in
Section 4.4, and (iii) the board of directors of BioStar 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 BioStar to comply with its
fiduciary obligations to the BioStar's stockholders under applicable law.
Except as may be limited by applicable law, nothing contained in this Section
5.2 shall limit BioStar's obligation to call, give notice of, convene and hold
the BioStar Stockholders' Meeting (regardless of whether the unanimous
recommendation of the board of directors of BioStar shall have been withdrawn,
amended or modified).
5.3 CORTECH STOCKHOLDERS' MEETING.
(a) Cortech shall take all action necessary under all
applicable Legal Requirements to call, give notice of, convene and hold a
meeting of the holders of Cortech Common Stock to consider, act upon and vote
upon the issuance of Cortech Common Stock in the Merger (the "CORTECH
STOCKHOLDERS' MEETING"). The Cortech Stockholders' Meeting will be held as
promptly as practicable and in any event within 45 days after the Form S-4
Registration Statement is declared effective under the Securities Act. Cortech
shall ensure that the Cortech Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited in connection with
the Cortech Stockholders' Meeting are solicited in compliance with all
applicable Legal Requirements. Cortech's obligation to call, give notice of,
convene and hold the Cortech 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
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recommendation of the board of directors of Cortech 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 Cortech shall unanimously recommend that Cortech's stockholders
vote in favor of and approve the issuance of Cortech Common Stock in the Merger
and the Cortech Charter Amendment; (ii) the Joint Proxy Statement shall include
a statement to the effect that the board of directors of Cortech has
unanimously recommended that Cortech's stockholders vote in favor of and
approve the issuance of Cortech Common Stock in the Merger and the Cortech
Charter Amendment at the Cortech Stockholders' Meeting; and (iii) neither the
board of directors of Cortech nor any committee thereof shall withdraw, amend
or modify, or propose or resolve to withdraw, amend or modify, in a manner
adverse to BioStar, the unanimous recommendation of the board of directors of
Cortech that Cortech's stockholders vote in favor of and approve the issuance
of Cortech Common Stock in the Merger and the Cortech Charter Amendment. For
purposes of this Agreement, said recommendation of the board of directors of
Cortech shall be deemed to have been modified in a manner adverse to BioStar if
said recommendation shall no longer be unanimous. Approval of Cortech's
Stockholders of the Cortech Charter Amendment shall not be a condition to the
consummation of the Merger.
(c) Nothing in Section 5.3(b) shall prevent the board of
directors of Cortech 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 Cortech Stockholder Vote if (i) a Superior Offer is
made to Cortech and is not withdrawn, (ii) neither Cortech nor any of its
Representatives shall have violated any of the restrictions set forth in
Section 4.5, and (ii) the board of directors of Cortech 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 Cortech to comply with its fiduciary obligations to Cortech's
stockholders under applicable law. Except as may be limited by applicable law,
nothing contained in this Section 5.3 shall limit Cortech's obligation to call,
give notice of, convene and hold the Cortech Stockholders' Meeting (regardless
of whether the unanimous recommendation of the board of directors shall have
been withdrawn, amended or modified).
5.4 REGULATORY APPROVALS. BioStar and Cortech 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 Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. BioStar and Cortech 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 Merger.
BioStar and Cortech 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
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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, BioStar and Cortech 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 ESPP. Subject to the terms of Cortech's ESPP and applicable
law, Cortech shall take all reasonable actions to ensure that from and after
the Effective Time all employees of BioStar shall be entitled to participate in
the ESPP of Cortech.
5.6 INDEMNIFICATION CONTINUATION.
(a) For Purposes of this Section 5.6: (i) "INDEMNIFIED
PERSON" means any person who is now, or has been at any time prior to the
Effective Time, an officer or director of Cortech or BioStar or who was serving
at the request of Cortech or BioStar as an officer or director of another
corporation, joint venture or other enterprise, or a general partner of any
partnership, or trustee of any trust and (ii) "PROCEEDING" means any claim,
action, suit, proceeding or investigation.
(b) From and after the Effective Time, Cortech shall and
shall cause the Surviving Corporation, to the fullest extent permitted under
applicable law, indemnify, defend and hold harmless each Indemnified Person
against and from (i) any losses, claims damages, expenses (including reasonable
attorneys' fees and court costs), liabilities or judgements, and (ii) any
amounts that are paid in settlement with the consent of Cortech (which consent
will not be unreasonably withheld) of or in connection with any Proceeding
based directly or indirectly (in whole or in part) on, or arising directly or
indirectly (in whole or in part) out of, the fact that such Indemnified Person
is or was an officer or director of Cortech or BioStar or is or was serving at
the request of Cortech or BioStar as an officer or director of another
corporation, joint venture or other enterprise or general partner of any
partnership or a trustee of any trust, whether pertaining to any matter arising
before or after the Effective Time. Cortech shall use all reasonable efforts
to assist in the vigorous defense of every matter asserted in such Proceeding
for which such Indemnified Person is entitled to indemnification under
applicable law. In the event of any Proceeding, any Indemnified Person wishing
to claim indemnification will promptly notify Cortech thereof (provided that
failure to so notify Cortech will not affect the obligations of Cortech to
provide indemnification except to the extent that Cortech shall have been
prejudiced as a result of such failure). With respect to any Proceeding for
which indemnification is requested, Cortech will be entitled to participate
therein at its own expense and, except as otherwise provided below, to the
extent that it may wish, Cortech may assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Person. After notice from Cortech
to the Indemnified Person of its election to assume the defense of a
Proceeding, neither Cortech nor the Surviving Corporation will be liable to the
Indemnified Person for any legal or other expenses subsequently incurred by the
Indemnified Person in connection with the defense thereof, other than as
provided below. Cortech will not settle any Proceeding without the consent of
the Indemnified Person unless such settlement includes a full release of the
Indemnified Person, does not impose any injunctive or equitable remedy upon the
Indemnified Person, does not include any admission of civil or criminal
liability on behalf of an officer or
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director and does not require any payment to be made by the Indemnified Person.
The Indemnified Person will have the right to employ counsel in any Proceeding,
but the fees and expenses of such counsel incurred after notice from Cortech of
its assumption of the defense thereof will be a the expense of the Indemnified
Person, unless, (i) the employment of counsel by the Indemnified Person has
been authorized by Cortech, (ii) the Indemnified Person shall have reasonably
concluded upon the advice of counsel that there may be a conflict of interest
between the Indemnified Person, Cortech and the Surviving Corporation in the
conduct of the defense of a Proceeding, or (iii) Cortech shall not in fact have
employed counsel to assume the defense of a Proceeding, in each of which cases
the reasonable fees and expenses of counsel selected by the Indemnified Person
will be at the expense of Cortech, and Cortech, to the fullest extent permitted
under applicable law, shall in such event pay expenses in advance of the final
disposition of any such Proceeding upon the receipt from the Indemnified Person
to whom such expenses are advanced of an undertaking to repay such advances if
it is ultimately determined that such Indemnified Person is not entitled to be
indemnified by Cortech or the Surviving Corporation. Notwithstanding the
foregoing, neither Cortech nor the Surviving Corporation will be liable for any
settlement effected without its written consent and neither Cortech nor the
Surviving Corporation will be obligated pursuant to this Section 5.6 to pay the
fees and disbursement of more than one counsel for all Indemnified Persons in
any single Proceeding, except to the extent two or more of such Indemnified
Persons have conflicting interests in the outcome of such action.
(c) In addition to the foregoing, Cortech and the
Surviving Corporation shall continue in full force provisions in Cortech's and
the Surviving Corporation's Certificate of Incorporation and Bylaws in effect
on the date of this Agreement providing for indemnification of Indemnified
Persons to the fullest extent now or hereafter permitted under Delaware Law,
which provisions shall not be amended except as required by applicable law or
except to make changes permitted by law that would enlarge the Indemnified
Persons' right of indemnification.
(d) Cortech shall pay all expenses, including attorneys'
fees, that may be incurred by any Indemnified Person in enforcing the indemnity
and other obligations provided for in this Section 5.6.
(e) The rights of each Indemnified Person hereunder shall
be in addition to any other rights such Indemnified Person may have under
Delaware Law, Cortech's and the Surviving Corporation's Certificate of
Incorporation or bylaws in effect prior to the Effective Time, any agreement or
otherwise. The provisions of this Section 5.6 shall survive the consummation
of the Merger for a period of six years and are expressly intended to benefit
and may be relied upon each of the Indemnified Persons; provided, however, that
in the event that any claim or claims for indemnification are asserted or made
within such six-year period, all rights to indemnification in respect to any
such claim or claims shall continue until the disposition of any and all such
claims.
(f) In the event Cortech, the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or a substantial portion of their properties or assets to any
person or entity, then, and in each such case, to the extent necessary to
effectuate the purposes of the
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Section 5.6 proper provision shall be made so that the successors and assigns
of Cortech or the Surviving Corporation assume the obligations set forth in
this Section 5.6.
5.7 ADDITIONAL AGREEMENTS. Cortech and BioStar shall use all reasonable
efforts to take, or cause to be taken, all actions necessary to consummate the
Merger 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 Merger
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 Merger. BioStar shall
promptly deliver to Cortech a copy of each such filing made, each such notice
given and each such Consent obtained by BioStar during the Pre-Closing Period.
5.8 DISCLOSURE. Cortech and BioStar 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 BioStar
nor Cortech 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.
5.9 TAX MATTERS. Each of Cortech and BioStar acknowledge and agree that
(i) it intends the Merger to constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) it will report the Merger as such a
reorganization in any and all federal, state and local income tax returns filed
by it. BioStar and Cortech shall each use all reasonable efforts to obtain and
deliver to Cooley Godward LLP and to Pillsbury Madison & Sutro LLP, as soon as
practicable after the date of this Agreement, Continuity of Interest
Certificates (in a form agreed to by counsel to Cortech and the BioStar )
signed by those persons mutually agreed to by Xxxxxx Godward LLP and Pillsbury
Madison & Sutro LLP. At or prior to the filing of the S-4 Registration
Statement with the SEC and, to the extent necessary, at the Closing, BioStar
and Cortech shall execute and deliver to Cooley Godward LLP and to Pillsbury
Madison & Sutro LLP management tax representation letters in a form agreed to
by counsel to Cortech and BioStar. Cortech and BioStar shall use all
reasonable efforts prior to the Effective Time to cause the Merger to qualify
as a tax free reorganization under Section 368(a)(1) of the Code. In the event
of the issuance of final or temporary Treasury regulations relating to the
continuity of stockholder interest (proposed regulations on the topic were
issued in the Federal Register on December 23, 1996 (Reg-252231-96); these
regulations would, among other things, add a new section 1.368-1(a) to existing
regulations), the parties agree to use their reasonable best efforts to take
advantage of, and comply with, any provisions therein (such as an election
and/or reporting requirements) to the extent necessary to cause such
regulations to apply to the Merger.
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5.10 RESIGNATION OF OFFICERS AND DIRECTORS. Cortech shall use all
reasonable efforts to obtain and deliver to BioStar prior to the Closing the
resignation of each officer and director of Cortech effective as of the
Effective Time, except any directors identified in Section 5.13 below who are
members of the board of directors of Cortech immediately prior to the Effective
Time.
5.11 FIRPTA MATTERS. At the Closing, (a) BioStar shall deliver to
Cortech a statement (in such form as may be reasonably requested by counsel to
Cortech) conforming to the requirements of Xxxxxxx 0.000 - 0(x)(0)(x) xx xxx
Xxxxxx Xxxxxx Treasury Regulations, and (b) BioStar shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 -
0(x)(0) xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.12 AFFILIATE AGREEMENTS. BioStar shall, no later than twenty
days in advance of the Cortech Stockholders' Meeting, deliver to Cortech a list
(the "AFFILIATE LIST") of Persons who are "affiliates" (as that term is used in
Rule 145 under the Securities Act). Prior to the date of the Cortech
Stockholders' Meeting, BioStar shall deliver to Cortech an Affiliate Agreement
in the form of Exhibit C 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.
5.13 ELECTION OF DIRECTORS. Cortech shall use all reasonable
efforts to nominate and appoint Xxxxxx X. Xxxxx, Xxxxxxxxx X. Xxxxxx, Ph.D.,
Xxxxxx X. Xxxxxxx, and two directors designated by Cortech in consultation with
BioStar as the board of directors of Cortech and the Surviving Corporation
effective immediately after the Effective Time.
5.14 REGISTRATION RIGHTS. Cortech shall assume BioStar's
obligations under the BioStar Restated Investors' Rights Agreement dated as of
June 27, 1994, as amended (the "INVESTORS' RIGHTS AGREEMENT"); provided,
however, that, BioStar shall use all reasonable efforts to cause the Investors'
Rights Agreement to be amended to remove Sections 2, 3, and 4 and to provide
that no Holder (as defined in the Investors' Rights Agreement) shall request
registration or participation in a registration of Cortech Common Stock
pursuant to Sections 1.2, 1.3, or 1.12 thereunder until the earlier of (a) the
date 90 days after the effective date of a registration statement for the first
public offering of Cortech's shares following the Effective Time, and (b) the
first anniversary of the Effective Time.
5.15 MARKET STAND-OFF AGREEMENT. BioStar shall obtain the
agreement of each of the holders of BioStar Common Stock and BioStar Preferred
Stock listed on Schedule A attached hereto (each a "BIOSTAR INVESTOR") that
such BioStar 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 Cortech Common Stock issued to such
BioStar Investor in connection with the Merger for 180 days from the Effective
Time.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CORTECH AND MERGER SUB
The obligations of Cortech and Merger Sub to effect the Merger 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:
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6.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties of BioStar contained in this
Agreement shall be accurate in all material respects as of the date hereof and
shall be accurate as of the Closing Date as if made on and as of the Closing
Date (except representations and warranties that refer specifically to "the
date of this Agreement" or a specific date prior to the date of this Agreement)
except that any inaccuracies in such representations and warranties shall be
disregarded if the circumstances giving rise to such inaccuracies (individually
and collectively) do not constitute a Material Adverse Effect on BioStar (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect"
qualifications and other materiality qualifications contained in such
representations and warranties shall be disregarded and (ii) any update of or
modification to the BioStar Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that BioStar
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.
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, the Merger and the BioStar
Charter Amendment shall have been duly approved by the Required BioStar
Stockholder Vote, and the issuance of Cortech Common Stock in the Merger shall
have been approved by the Required Cortech Stockholder Merger Vote. The number
of shares of BioStar Common Stock and BioStar Preferred Stock as to which
written notices from stockholders of BioStar to dissent from the Merger shall
have been received shall be less than 10% of the then outstanding shares of
BioStar Common Stock and BioStar Preferred Stock as of the BioStar Record Date.
6.5 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 BioStar Disclosure
Schedule) shall have been obtained and shall be in full force and effect.
6.6 DOCUMENTS. Cortech 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 Cortech and its legal
counsel;
(b) a legal opinion of Pillsbury Madison & Sutro LLP
dated as of the Closing Date and addressed to Cortech, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of
the Code (it being understood that, in rendering such opinion, Pillsbury
Madison & Sutro LLP may rely upon the Continuity of Interest Certificates and
tax representation letters referred to in Section 5.9 and a copy of the legal
opinion described in Section 7.5(b) hereof). The opinions described in this
Section 6.6(b) and in Section 7.5(b) shall be substantially identical in form
and substance; and
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(c) a certificate executed on behalf of BioStar by its
Chief Executive Officer confirming that the conditions set forth in Sections
6.1, 6.2, 6.4, 6.5 and 6.7 have been duly satisfied.
6.7 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 BioStar since the date of
this Agreement.
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
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 Merger that makes consummation of the Merger illegal.
6.9 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 the Merger or any of the
other transactions contemplated by this Agreement; (b) relating to the Merger
and seeking to obtain from Cortech or any of its subsidiaries any damages that
may be material to Cortech; or (c) which would materially and adversely affect
the right of Cortech to own the assets or operate the business of BioStar.
6.10 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 BioStar or on Cortech: (a) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement; (b) relating to the Merger
and seeking to obtain from Cortech or any of its subsidiaries any damages that
may be material to Cortech; (c) seeking to prohibit or limit in any material
respect Cortech's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would affect adversely the right of Cortech to own
the assets or operate the business of BioStar.
6.11 DELIVERY OF AFFILIATES AGREEMENTS. BioStar shall have delivered
the Affiliate Agreements referred to in Section 5.12 above.
6.12 DELIVERY OF FAIRNESS OPINION. Cortech's board of directors has
received the written opinion of Xxxxx, dated as of the date of this Agreement,
to the effect that the terms of the Merger are fair to Cortech from a financial
point of view and the same has not been withdrawn as of the date of the mailing
of the Joint Proxy Statement to the Cortech stockholders for any reason,
including but not limited to a material change in the underlying assumptions of
the financial projections provided to Xxxxx by BioStar.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BIOSTAR
The obligations of BioStar to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
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7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Cortech contained in this Agreement shall have been accurate in all material
respects as of the date of this Agreement and shall be accurate as of the
Closing Date as if made on and as of the Closing Date except that any
inaccuracies in such representations and warranties shall be disregarded if the
circumstances giving rise to such inaccuracies (individually and collectively)
do not constitute a Material Adverse Effect on Cortech (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect" qualifications and other
materiality qualifications contained in such representations and warranties
shall be disregarded and (ii) any update of or modification to the Cortech
Disclosure Schedule made or purported to have been made after the date of this
Agreement shall be disregarded).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Cortech 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.
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 STOCKHOLDER APPROVAL. This Agreement, the Merger and the BioStar
Charter Amendment shall have been approved by the Required BioStar Stockholder
Vote, and the issuance of Cortech Common Stock in the Merger shall have been
approved by the Required Cortech Stockholder Merger Vote. The number of shares
of BioStar Common Stock and BioStar Preferred Stock as to which written notices
from stockholders of BioStar to dissent from the Merger shall have been
received shall be less than 10% of the then outstanding shares of BioStar
Common Stock and BioStar Preferred Stock as of the BioStar Record Date.
7.5 DOCUMENTS. BioStar shall have received the following documents:
(a) a legal opinion of Pillsbury Madison & Sutro LLP,
dated as of the Closing Date, a form reasonably satisfactory to BioStar and its
legal counsel;
(b) a legal opinion of Xxxxxx Godward LLP, dated as of
the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Xxxxxx Godward LLP, may rely upon
the Continuity of Interest Certificates and tax representation letters referred
to in Section 5.9 and a copy of the legal opinions described in Section 6.6(b)
hereof. The opinions described in this Section 7.5(b) and in Section 6.6(b)
shall be substantially identical in form and substance; and
(c) a certificate executed on behalf of Cortech by an
executive officer of Cortech, confirming that conditions set forth in Sections
7.1, 7.2, 7.4, 7.6 and 7.10 have been duly satisfied.
7.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in Cortech's business, financial condition, assets, liabilities,
operations or financial performance since the date of this Agreement (it being
understood that a decline in Cortech's
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stock price or the delisting of Cortech's stock shall not constitute, in and of
itself, a Material Adverse Change).
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
by BioStar 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 Merger that makes consummation of the Merger by
BioStar illegal.
7.8 DIRECTORS. Cortech shall have taken all actions necessary to cause
the board of directors of Cortech and the Surviving Corporation following the
Effective Time to consist of the individuals set forth in Section 5.13.
7.9 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 Cortech Disclosure
Schedule) shall have been obtained and shall be in full force and effect.
7.10 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 the Merger or any of the
other transactions contemplated by this Agreement; (b) relating to the Merger
and seeking to obtain from BioStar or any of its subsidiaries any damages that
may be material to BioStar; or (c) which would materially and adversely affect
the right of BioStar to own the assets or operate the business of Cortech.
7.11 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 BioStar or on Cortech: (a) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement; (b) relating to the Merger
and seeking to obtain from BioStar or any of its subsidiaries any damages that
may be material to BioStar; (c) seeking to prohibit or limit in any material
respect BioStar's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) resulting in Cortech as constituted after the Effective
Time not containing all of the assets and business of Cortech as constituted
immediately prior to the Effective Time.
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
Merger by the Required BioStar Stockholder Vote and the Required Cortech
Stockholder Vote);
(a) by mutual written consent of Cortech and BioStar;
(b) by either Cortech or BioStar if the Merger shall not
have been consummated by May 31, 1998 (unless the failure to consummate the
Merger is attributable to a
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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 Cortech or BioStar 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 Merger;
(d) by either Cortech or BioStar if (i) the BioStar
Stockholders' Meeting shall have been held and completed and (ii) this
Agreement, the Merger and the BioStar Charter Amendment shall not have been
approved at such meeting by the Required BioStar Stockholder Vote;
(e) by either Cortech or BioStar if (i) the Cortech
Stockholders' Meeting shall have been held and completed and (ii) the issuance
of Cortech Common Stock in the Merger shall not have been approved at such
meeting by the Required Cortech Stockholder Merger Vote;
(f) by Cortech (at any time prior to the approval of this
Agreement, the Merger and the BioStar Charter Amendment by the Required BioStar
Stockholder Vote) if a BioStar Triggering Event shall have occurred;
(g) by BioStar (at any time prior to the approval of the
issuance of Common Stock in the Merger by the Required Cortech Stockholder
Merger Vote) if a Cortech Triggering Event shall have occurred;
(h) by Cortech if (i) any of BioStar's representations
and warranties contained in this Agreement shall be or shall have become
materially inaccurate, (ii) if any of BioStar'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, or (iii) if Xxxxx withdraws its fairness opinion as further provided
in Section 6.12 because of a material change in the underlying assumptions of
the financial projections provided to Xxxxx by BioStar; provided, however, that
if an inaccuracy in BioStar's representations and warranties or a breach of a
covenant by BioStar is curable by BioStar and BioStar is continuing to exercise
all reasonable efforts to cure such inaccuracy or breach, then Cortech may not
terminate this Agreement under this Section 8.1(h) on account of such
inaccuracy or breach until 20 days after delivery of written notice of the
inaccuracy or breach to BioStar by Cortech, if the inaccuracy or breach has not
at that time been cured or May 31, 1998, whichever shall first occur; or
(i) by BioStar if any of Cortech's representations and
warranties contained in this Agreement shall be or shall have become materially
inaccurate, or if any of Cortech'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 (except that
BioStar may consider any breach of the covenant set forth in Section 4.3(xv)
above to be a material breach); provided, however, that (except with respect to
a breach of the covenant set forth in Section 4.3(xv) which shall be considered
a breach incapable of cure) if an inaccuracy in Cortech's representations and
warranties or a breach of a covenant by Cortech is curable by Cortech and
Cortech is continuing to exercise all reasonable efforts to cure such
inaccuracy or
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breach, then BioStar may not terminate this Agreement under this Section 8.1(i)
on account of such inaccuracy or breach until 20 days after delivery of written
notice of the breach or inaccuracy to Cortech by BioStar, if the inaccuracy or
breach has not at that time been cured or May 31, 1998, whichever shall first
occur.
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 Agreement shall remain in full
force and effect to the extent provides 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 Merger is consummated; provided, however, that
Cortech and BioStar 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 Cortech pursuant
to Section 8.1(f) or 8.1(h) hereof, BioStar shall pay Cortech a termination fee
equal to (i) $500,000 plus (ii) if the preliminary Joint Proxy Statement has
been filed with the SEC, reimbursement of the amount of the professional fees
and expenses which Cortech incurred in connection with the Merger, up to
$150,000.
(c) If this Agreement is terminated by BioStar pursuant
to Section 8.1(g), or 8.1(i) hereof, Cortech shall pay BioStar a termination
fee equal to (i) $500,000 plus (ii) if the preliminary Joint Proxy Statement
has been filed with the SEC, reimbursement of the amount of the professional
fees and expenses which BioStar incurred in connection with the Merger, up to
$150,000.
(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) Cortech and BioStar 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
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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 BioStar and Cortech at any time (whether
before or after approval of this Agreement and the Merger by the stockholders
of BioStar; and whether before or after approval of the issuance of Cortech
Common Stock in the Merger by Cortech's stockholders) provided, however, that
(i) after any such approval of this Agreement and the Merger by BioStar's
stockholders, no amendment shall be made which by law or NASD regulation
requires further approval of the stockholders of BioStar without the further
approval of such stockholders, and (ii) after any such approval of the issuance
of Cortech Common Stock in the Merger by Cortech's stockholders, no amendment
shall be made which by law or NASD regulation requires further approval of
Cortech's stockholders 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.
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 Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements and schedules referred to herein and therein and the
Non-Disclosure Agreement 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
Colorado as applied to contracts entered into and to be performed entirely
within Colorado provided, however that matters of corporate governance
involving Cortech and BioStar shall be governed by the DGCL.
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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 which 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 DISCLOSURE SCHEDULE. The BioStar Disclosure Schedule and the
Cortech Disclosure Schedule shall be arranged in separate parts corresponding
to the numbered and lettered sections contained in Sections 2 and 3, and the
information disclosed in any numbered or lettered part shall, together with any
other information in any other part or parts of the relevant Disclosure
Schedule which a reasonable Person would relate to such numbered or lettered
part, be deemed to relate to and to qualify the representation or warranty set
forth in the corresponding numbered or lettered section and shall otherwise not
be deemed to relate to or to qualify any other representation or warranty.
9.7 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.
9.8 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. Except as set forth in Section 1.5
with respect to the stockholders of BioStar or the holders of BioStar Options
and BioStar Warrants, and Section 5.6 with respect to the persons identified
therein (with each of the foregoing intended as a third party beneficiary of
the corresponding referenced Section of this Agreement), nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any right, benefit or remedy of any nature whatsoever under or reason of this
Agreement.
9.9 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):
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if to Cortech or Merger Sub:
Cortech, Inc.
0000 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Phone: 303/000-0000
Fax: 303/000-0000
with a copy to:
Pillsbury Madison & Sutro LLP
000 X. Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Phone: 619/000-0000
Fax: 619/000-0000
if to BioStar :
BioStar, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Phone: 303/000-0000
Fax: 303/000-0000
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Phone: 303/000-0000
Fax: 303/000-0000
9.10 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.
9.11 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the
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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.
CORTECH, INC.
By: /s/ XXXXXXX X. XXXX
--------------------------------------
Xxxxxxx X. Xxxx
President/Chief Executive Officer
CORTECH MERGER SUB, INC.
By: /s/ XXXXXXX X. XXXX
--------------------------------------
Xxxxxxx X. Xxxx
President/Chief Executive Officer
BIOSTAR, INC.
By: /s/ XXXXXX X. XXXXX
--------------------------------------
Xxxxxx X. Xxxxx
President/ Chief Executive Officer
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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 Cortech and BioStar)
contemplating or otherwise relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of related transactions involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, acquisition of securities, tender offer,
exchange offer or other similar transaction (i) in which Cortech or BioStar is
a constituent corporation, (ii) in which a Person or "group" (as defined in the
Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires Cortech or BioStar or more than 50% of Cortech's business
or BioStar's business or directly or indirectly acquires beneficial or record
ownership of securities representing more than 20% of the outstanding
securities of any class of voting securities of Cortech or BioStar, or (iii) in
which any of BioStar or Cortech issues securities representing more than 20% of
the outstanding securities of any class of voting securities of BioStar or
Cortech, respectively;
(b) any sale, lease, exchange, transfer, license,
acquisition or disposition of more than 50% of the assets of BioStar or
Cortech; or
(c) any liquidation or dissolution of BioStar or Cortech.
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.
BIOSTAR COMMON STOCK. "BioStar Common Stock" shall mean the Common
Stock, $.0001 par value, of BioStar.
BIOSTAR CONTRACT. "BioStar Contract" shall mean any Contract: (a) to
which BioStar is a party; (b) by which BioStar or any asset of BioStar is or
may become bound or under which BioStar has, or may become subject to, any
obligation; or (c) under which BioStar has or may acquire any right or
interest.
BIOSTAR DISCLOSURE SCHEDULE. "BioStar Disclosure Schedule" shall mean
the disclosure schedule that has been prepared by BioStar in accordance with
the requirements of Section 9.6 and that has been delivered by BioStar to
Cortech on the date of this Agreement and signed by the President of BioStar.
A-1
69
BIOSTAR OPTIONS. "BioStar Options" shall mean each unexpired and
unexercised option to purchase shares of BioStar Common Stock granted under the
1995 Equity Incentive Plan and stock option agreements of BioStar outside of
the 1995 Equity Incentive Plan outstanding immediately prior to the Effective
Time.
BIOSTAR PROPRIETARY ASSET. "BioStar Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to BioStar or otherwise used by BioStar.
BIOSTAR PREFERRED STOCK. "BioStar Preferred Stock" shall mean the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock, $.0001 par value, of BioStar.
BIOSTAR RECORD DATE. "BioStar Record Date" shall mean the record date
for the BioStar Stockholders Meeting.
BIOSTAR TRIGGERING EVENT. A "BioStar Triggering Event" shall be
deemed to have occurred if: (i) the board of directors of BioStar shall have
failed to recommend, or shall for any reason have withdrawn or shall have
amended or modified in a manner adverse to Cortech its unanimous recommendation
in favor of, the Merger or approval of this Agreement; (ii) BioStar shall have
failed to include in the Joint Proxy Statement the unanimous recommendation of
the board of directors of BioStar in favor of approval of this Agreement and
the Merger; (iii) the board of directors of BioStar fails to unanimously
reaffirm its recommendation in favor of approval of this Agreement and the
Merger within five business days after the Cortech requests in writing that
such recommendation be reaffirmed; (iv) the board of directors of BioStar shall
have approved, endorsed or recommended any Acquisition Proposal; (v) BioStar
shall have entered into any letter of intent or similar document or any
Contract relating to any Acquisition Proposal; (vi) BioStar shall have failed
to hold BioStar Stockholders' Meeting as promptly as practicable and in any
event within 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 BioStar shall have been commenced and BioStar shall not have
sent to its security holders, within five business days after the commencement
of such tender or exchange offer, a statement disclosing that BioStar
recommends rejection of such tender or exchange offer; or (viii) an Acquisition
Proposal is publicly announced, and BioStar (A) fails to issue a press release
announcing its opposition to such Acquisition Proposal within five business
days after such Acquisition Proposal is announced or (B) otherwise fails to
actively oppose such Acquisition Proposal.
BIOSTAR WARRANTS. BioStar Warrants shall mean the outstanding warrants
of BioStar and the Contingent Instrument, as amended prior to the Effective
Time (other than those which expire as of the Effective Time if they remain
unexercised as of the Effective Time).
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).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option,
warranty, purchase order, license,
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sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
CORTECH COMMON STOCK. "Cortech Common Stock" shall mean the Common
Stock, $0.002 par value per share, of Cortech.
CORTECH CONTRACT. "Cortech Contract" shall mean any Contract: (a) to
which any of the Cortech Corporations is a party; (b) by which any Cortech
Corporation or any asset of a Cortech Corporation may become bound or under
which any Cortech Corporation has, or may become subject to, any obligation; or
(c) under which any Cortech Corporation has or may acquire any right or
interest.
CORTECH DISCLOSURE SCHEDULE. "Cortech Disclosure Schedule" shall mean
the disclosure schedule that has been prepared by Cortech in accordance with
the requirements of Section 9.6 and that has been delivered by Cortech to
BioStar on the date of this Agreement and signed by the President of Cortech.
CORTECH OPTIONS. "Cortech Options" shall mean stock options granted by
Cortech pursuant to the Amended and Restated 1986 Incentive Stock Option Plan,
1991 Non-employee Directors' Stock Option Plan, Amended and Restated 1992
Non-employee Directors' Stock Option Plan, and the 1993 Equity Incentive Plan
(collectively, the "Cortech Option Plans").
CORTECH PROPRIETARY ASSET. "Cortech Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to any of the Cortech Corporations or
otherwise used by any of the Cortech Corporations.
CORTECH RECORD DATE. "Cortech Record Date" shall mean the record date
for the Cortech Stockholders Meeting.
CORTECH TRIGGERING EVENT. A "Cortech Triggering Event" shall be
deemed to have occurred if: (i) the board of directors of the Cortech shall
have failed to recommend, or shall for any reason have withdrawn or shall have
amended or modified in a manner adverse to BioStar its unanimous recommendation
in favor of, the Merger or approval of this Agreement; (ii) Cortech shall have
failed to include in the Joint Proxy Statement the unanimous recommendation of
the board of directors of Cortech in favor of approval of this Agreement and
the Merger; (iii) the board of directors of Cortech fails to unanimously
reaffirm its recommendation in favor of approval of this Agreement and the
Merger within five business days after BioStar requests in writing that such
recommendation be reaffirmed; (iv) the board of directors of Cortech shall have
approved, endorsed or recommended any Acquisition Proposal; (v) Cortech shall
have entered into any letter of intent or similar document or any Contract
relating to any Acquisition Proposal; (vi) Cortech shall have failed to hold
the Cortech Stockholders' Meeting as promptly as practicable and in any event
within 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 Cortech shall have been commenced and Cortech shall not have sent
to its security holders, within five business days after the commencement of
such tender or exchange offer, a statement disclosing that Cortech recommends
rejection of such tender or exchange offer; or (viii) an Acquisition Proposal
is publicly announced, and Cortech (A) fails to issue a press release
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announcing its opposition to such Acquisition Proposal within five business
days after such Acquisition Proposal is announced or (B) otherwise fails to
actively oppose such Acquisition Proposal.
COWEN. "Cowen" shall mean Xxxxx & Company, financial advisor to
Cortech.
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
Cortech in connection with issuance of Cortech Common Stock in the Merger, 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).
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JOINT PROXY STATEMENT. "Joint Proxy Statement" shall mean the joint
proxy statement/prospectus to be sent to BioStar's stockholders in connection
with the BioStar Stockholder's Meeting and to Cortech's stockholders in
connection with the Cortech 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.
XXXXXX BROTHERS. "Xxxxxx Brothers" shall mean Xxxxxx Brothers Inc.,
financial advisor to BioStar.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance
or other matter will be deemed to have a "Material Adverse Effect" on BioStar
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
BioStar, (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, or (iii) Cortech's ability to vote, receive dividends
with respect to or otherwise exercise ownership rights with respect to the
stock of the Surviving Corporation. An event, violation, inaccuracy,
circumstance or other matter will be deemed to have a "Material Adverse Effect"
on Cortech 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 Cortech
Corporations taken as a whole, (ii) the ability of Cortech to consummate the
Merger or any of the other transactions contemplated by this Agreement or to
perform its obligations under this Agreement, or (iii) the ability of BioStar's
stockholders to vote, receive dividends with respect to, or otherwise exercise
ownership rights with respect to the stock of Cortech received by them.
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.
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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.
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 BioStar or
Cortech, as the case may be, determines in its reasonable judgment, after
consultation with its financial advisor, to be more favorable to BioStar's
stockholders or Cortech's stockholders, as the case may be, than the terms of
the Merger.
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).
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EXHIBIT B
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
BIOSTAR, INC.
BioStar, 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 BioStar, Inc.
SECOND: The original certificate of incorporation of the Corporation
was (i) filed with the Secretary of State of Delaware on May 21, 1992, and (ii)
a restated certificate of incorporation was filed on June 24, 1997 (the
"RESTATED CERTIFICATE").
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 Certificate of
Incorporation.
FOURTH: The Certificate of Incorporation shall be amended as follows:
1. Subsection 2(a) of Article IV shall be amended to read in
full as follows:
"a. In the event of a liquidation, dissolution or winding up of
this corporation, other than the Excluded Merger (as defined in
subsection 5(a)(iv) below), either voluntary or involuntary:"
2. The following proviso shall be inserted at the end of
subsection 5(a) of Article IV, immediately after subsection 5
(a) (iii)(D):
"(iv) This Section 5 shall not apply to a merger of Cortech
Merger Sub, Inc., a wholly-owned subsidiary of Cortech, Inc.,
with and into the Corporation (the "EXCLUDED MERGER") pursuant
to the Agreement and Plan of Merger and Reorganization dated
as of December 19, 1997 among Cortech, Inc., Cortech Merger
Sub, Inc. and the Corporation, as such agreement may be
amended from time to time in accordance with the provisions
thereof (the "REORGANIZATION AGREEMENT")."
3. The following subsection 5(g) shall be added to Article IV,
immediately following subsection 5(f):
"g. Notwithstanding any other provision of this Restated
Certificate, in the event of the Excluded Merger no holder of
Preferred Stock or Common Stock 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."
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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.
BioStar, Inc.
By:
-----------------------------------
Xxxxxx X. Xxxxx
President/Chief Executive Officer
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EXHIBIT C
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (this "Agreement") is made and entered into
as of _____________________, 199_, by and among Cortech, Inc., a Delaware
corporation ("Cortech"), BioStar, Inc., a Delaware corporation ("BioStar") and
the undersigned stockholder who may be deemed an affiliate ("Affiliate") of
BioStar. Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Reorganization Agreement (as defined
below).
RECITALS
A. BioStar, Cortech and Cortech Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Cortech ("Merger Sub"), have
entered into an Agreement and Plan of Reorganization (the "Reorganization
Agreement") which contemplates that BioStar and Merger Sub will execute a
Certificate of Merger, which Agreement and Certificate (collectively, the
"Merger Agreements") provide for the merger (the "Merger") of Merger Sub with
and into BioStar. Pursuant to the Merger, all outstanding capital stock of
BioStar will be converted into Common Stock of Cortech.
B. Affiliate is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act of 1934, as amended (the "Exchange Act")) of such number
of shares of the outstanding BioStar capital stock as is indicated on the final
page of this Agreement, which shares shall be exchanged for shares of Cortech
Common Stock as a result of the Merger (for purposes of this Agreement,
"Shares" means shares of BioStar capital stock and the shares of Cortech Common
Stock issued in exchange therefor as a result of the Merger).
C. Affiliate understands that, since the Affiliate may be deemed
to be an "affiliate" of BioStar (within the meaning of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "Securities Act")), the Shares may only
be disposed of in conformity with the limitations described herein. Affiliate
has been informed that the treatment of the Merger as a tax-free reorganization
under applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), is dependent upon the accuracy of certain of the representations
and warranties and the compliance with certain of the agreements set forth
herein. Affiliate further understands that the representations, warranties and
agreements set forth herein will be relied upon by Cortech, BioStar and their
respective counsel and independent auditors.
NOW THEREFORE, the parties agree as follows:
1) New Shares. Affiliate agrees that any shares of capital stock of
BioStar that Affiliate purchases or with respect to which Affiliate otherwise
acquires beneficial ownership after the date of this Agreement and prior to the
Effective Time of the Merger ("New Shares") shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares.
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2) Tax Treatment; Rule 145. Affiliate understands and agrees that it is
intended that the Merger qualify as a "reorganization" under Section 368 of the
Code. Affiliate further understands and agrees that Affiliate may be deemed to
be an "affiliate" of BioStar within the meaning of Rule 145, although nothing
contained herein should be construed as an admission of such fact.
3) Reliance Upon Representations, Warranties and Covenants. Affiliate
has been informed that the treatment of the Merger as a reorganization for
federal income tax purposes requires that a sufficient number of former
stockholders of BioStar maintain a meaningful continuing equity ownership
interest in Cortech after the Merger. Affiliate understands that the
representations, warranties and covenants of Affiliate set forth herein will be
relied upon by Cortech, BioStar and their respective counsel and independent
auditors.
4) Representations, Warranties and Covenants of Affiliate.
(a) Affiliate has full power and authority to execute this
Agreement, to make the representations, warranties and covenants herein
contained and to perform Affiliate's obligations hereunder.
(b) Set forth below the signatures below is the number of shares
of BioStar capital stock owned by Affiliate, including all BioStar capital
stock as to which Affiliate has sole or shared voting or investment power and
all rights, options and warrants to acquire BioStar capital stock owned or held
by Affiliate.
(c) Except as may be specifically required by court order,
Affiliate will not sell, transfer, exchange, pledge or otherwise dispose of, or
make any offer or agreement relating to the foregoing with respect to, any
shares of Cortech Common Stock that Affiliate may acquire in connection with
the Merger, or any securities that may be paid as a dividend or otherwise
distributed thereon or with respect thereto or issued or delivered in exchange
or substitution therefor (all such shares and other securities of Cortech are
sometimes collectively referred to as "Restricted Securities"), or any option,
right or other interest with respect to any Restricted Securities, unless: (i)
such transaction is permitted pursuant to Rule 145(d) under the Securities Act;
(ii) counsel representing Affiliate, which counsel is reasonably satisfactory
to Cortech, shall have advised Cortech in a written opinion letter satisfactory
to Cortech and Cortech's legal counsel, and upon which Cortech and its legal
counsel may rely, that no registration statement under the Securities Act would
be required in connection with the proposed sale, transfer or other
disposition; (iii) a registration statement under the Securities Act covering
the Cortech Common Stock proposed to be sold, transferred or otherwise disposed
of, describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, shall have been filed with
the SEC and made effective under the Securities Act; or (iv) an authorized
representative of the SEC shall have rendered written advice to Affiliate
(sought by Affiliate or counsel to Affiliate, with a copy thereof and all other
related communications delivered to Cortech) to the effect that the SEC would
take no action, or that the staff of the SEC would not recommend that the SEC
take any action, with respect to the proposed disposition if consummated.
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(d) Affiliate has, and as of the Effective Time of the Merger will
have, no present plan or intent to engage in a sale, exchange, transfer,
pledge, disposition or any other transaction that results in a reduction in the
risk of ownership (collectively, a "Sale") with respect to more than ___% of
the shares of Cortech Common Stock to be acquired by the undersigned Affiliate
upon consummation of the Merger. Affiliate is not aware of, or participating
in, any present plan or intention (a "Plan") on the part of BioStar
stockholders to engage in Sales of shares of Cortech Common Stock to be issued
in the Merger such that the aggregate fair market value, as of the Effective
Time of the Merger, of the shares subject to such Sales would exceed ___% of
the aggregate fair market value of all shares of outstanding BioStar capital
stock immediately prior to the Merger. For purposes of the preceding sentence,
shares of BioStar capital stock (i) that are exchanged for cash in lieu of
fractional shares of Cortech capital stock, or (ii) with respect to which a
pre-Merger sale occurs in a Related Transaction (as defined below), shall be
considered to be shares of BioStar capital stock that are exchanged for Cortech
Common Stock in the Merger and then disposed of pursuant to a Plan. A Sale of
Cortech Common Stock shall be considered to have occurred pursuant to a Plan
if, among other things, such Sale occurs in a Related Transaction. For
purposes of this Section 4(d), a "Related Transaction" shall mean a transaction
that is in contemplation of, or related or pursuant to, the Merger or the
Merger Agreements. If any of Affiliate's representations in this subsection
(d) cease to be true at any time prior to the Effective Time of the Merger,
Affiliate will deliver to each of BioStar and Cortech, prior to the Effective
Time of the Merger, a written statement to that effect, signed by Affiliate.
5) Rules 144 and 145. From and after the Effective Time of the Merger
and for so long as is necessary in order to permit Affiliate to sell the
Cortech Common Stock held by Affiliate pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Securities Act ("Rule 144"), Cortech will use
its best efforts to file on a timely basis all reports required to be filed by
it pursuant to Section 13 of the Exchange Act referred to in paragraph (c)(1)
of Rule 144 under the Securities Act (or if applicable, Cortech will use its
best efforts to make publicly available the information regarding itself
referred to in paragraph (c)(2) of Rule 144), in order to permit Affiliate to
sell the Cortech Common Stock held by it pursuant to the terms and conditions
of Rule 145 and the applicable provisions of Rule 144.
6) Limited Resales. Affiliate understands that, in addition to the
restrictions imposed under Section 4 of this Agreement, the provisions of Rule
145 currently limit Affiliate's public resales of Restricted Securities, in the
manner set forth in subsections (a), (b) and (c) below:
(a) Unless and until the restriction "Cut-off" provisions of Rule
145(d)(2) or Rule 145(d)(3) set forth below become available, public resales of
Restricted Securities may only be made by Affiliate in compliance with the
requirements of Rule 145(d)(1). Rule 145(d)(1) permits such resales only: (i)
while Cortech meets the public information requirements of Rule 144(c); (ii) in
brokers' transactions or in transactions with a market maker; and (iii) where
the aggregate number of Restricted Securities sold at any time, together with
all sales of Cortech Common Stock sold for Affiliate's account during the
preceding three-month period does not exceed the greater of (A) one percent
(1%) of the Cortech Common Stock outstanding or (B) the average weekly volume
of trading in Cortech Common Stock during the four (4) calendar weeks preceding
the date of receipt of the order to execute the sale.
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(b) Affiliate may make unrestricted sales of Restricted Securities
pursuant to Rule 145(d)(2) if: (i) Affiliate has beneficially owned (within
the meaning of Rule 144(d)) the Restricted Securities for at least one (1) year
after the Effective Time of the Merger; (ii) Affiliate is not an affiliate of
Cortech; and (iii) Cortech meets the public information requirements of Rule
144(c).
(c) Affiliate may make unrestricted sales of Restricted Securities
pursuant to Rule 145(d)(3) if: (i) Affiliate has beneficially owned (within
the meaning of Rule 144(d)) the Restricted Securities for at least two (2)
years and (ii) Affiliate is not, and has not been for at least three (3)
months, an affiliate of Cortech.
(d) Cortech acknowledges that the provisions of Section 4(c) of
this Agreement will be satisfied as to any sale by the undersigned of the
Restricted Securities pursuant to Rule 145(d), by a broker's letter and a
letter from the undersigned with respect to that sale stating that each of the
above-described requirements of Rule 145(d)(1) has been met or is inapplicable
by virtue of Rule 145(d)(2) or Rule 145(d)(3) (as such Rules may in effect at
such time); provided, however, that Cortech has no reasonable basis to believe
that such sales were not made in compliance with such provisions of Rule
145(d).
7. Legends. Affiliate also understands and agrees that there will be
placed on the certificates evidencing the Restricted Securities a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED,
EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH THE REQUIREMENTS OF THE SECURITIES ACT."
Cortech agrees to remove promptly such legend upon full compliance
with this Agreement by the undersigned, including, without limitation, a sale
or transfer of Cortech Common Stock permitted under Section 4(c) above.
8) Termination. This Agreement shall be terminated and shall be of no
further force or effect in the event of the termination of the Reorganization
Agreement pursuant to Article VIII of the Reorganization Agreement.
9) Partnership Distributions. Any other provisions of this Agreement
notwithstanding, if the undersigned Affiliate is organized as a partnership,
BioStar and Cortech hereby agree that such partnership shall be permitted to
make a distribution to its partners of shares of BioStar capital stock (if made
prior to the Effective Time of the Merger) or of shares of Cortech capital
stock received in the Merger so long as the undersigned Affiliate and its
partnership distributees provide assurances, acceptable to Cortech and BioStar
in their reasonable discretion, that such
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distributions (i) are permissible under Rule 145, and (ii) will not prevent the
Merger from being treated as a tax-free reorganization for federal income tax
purposes.
10) Miscellaneous.
(a) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(b) Binding Agreement. This Agreement will inure to the benefit
of and be binding upon and enforceable against the parties and their successors
and assigns, including administrators, executors, representatives, heirs,
legatees and devisees of Affiliate and pledgees holding Restricted Securities
as collateral.
(c) Waiver. No waiver by any party hereto of any condition or of
any breach of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto.
(d) Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of the
State of Delaware without giving effect to any choice or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
(e) Attorneys' Fees. In the event of any legal action or
proceeding to enforce or interpret the provisions hereof, the prevailing party
shall be entitled to reasonable attorneys' fees, whether or not the proceeding
results in a final judgment.
(f) Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
(g) Third Party Reliance. Counsel to and independent auditors for
the parties shall be entitled to rely upon this Affiliate Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement
to be duly executed on the day and year first above written.
CORTECH AFFILIATE
By: By:
---------------------- -----------------------------------
Name: Affiliate's address for notice:
----------------------
Title:
---------------------- --------------------------------------
--------------------------------------
BIOSTAR
Shares beneficially owned:
By: shares of BioStar Common Stock
---------------------- ------
Name: shares of BioStar Common Stock
---------------------- ------issuable upon exercise of
Title: outstanding options and warrants
----------------------
shares of BioStar Preferred Stock
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shares of BioStar Preferred Stock
------issuable upon exercise of
outstanding options and warrants
1.
