AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WEBTRONICS, INC.
CALLISTO PHARMACEUTICALS, INC.
CALLISTO ACQUISITION CORP.
SYNERGY PHARMACEUTICALS, INC.
AND
SYNERGY ACQUISITION CORP.
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of March 10, 2003, among Webtronics, Inc., a Florida corporation
("Parent"), Callisto Pharmaceuticals, Inc., a Delaware corporation ("Callisto"),
Callisto Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Callisto Merger Sub"), Synergy Pharmaceuticals, Inc., a Delaware
corporation ("Synergy") and Synergy Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Synergy Merger Sub").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Delaware General Corporation Law ("Delaware Law"),
Parent, Callisto, Callisto Merger Sub, Synergy and Synergy Merger Sub intend to
enter into a business combination transaction.
B. The Board of Directors of Callisto (i) has determined that the
Mergers (as defined in Section 1.2 below) are consistent with and in furtherance
of the long-term business strategy of Callisto and fair to, and in the best
interests of, Callisto and its stockholders, (ii) has approved this Agreement,
the Mergers and the other transactions contemplated by this Agreement, (iii) has
adopted a resolution declaring the Mergers advisable and (iv) has determined to
recommend that the stockholders of Callisto adopt this Agreement.
C. The Board of Directors of Parent (i) has determined that the Mergers
are consistent with and in furtherance of the long-term business strategy of
Parent and fair to, and in the best interests of, Parent and its stockholders,
(ii) has approved this Agreement, the Mergers and the other transactions
contemplated by this Agreement, (iii) has adopted a resolution declaring the
Mergers advisable and (iv) has determined to recommend that the stockholders of
Parent approve the issuance of shares of Parent Common Stock (as defined below)
pursuant to the Mergers (the "Share Issuance").
D. The Board of Directors of Synergy (i) has determined that the
Mergers are consistent with and in furtherance of the long-term business
strategy of Synergy and fair to, and in the best interests of, Synergy and its
stockholders, (ii) has approved this Agreement, the Mergers and the other
transactions contemplated by this Agreement, (iii) has adopted a resolution
declaring the Mergers advisable and (iv) has determined to recommend that the
stockholders of Synergy adopt this Agreement.
E. The Board of Directors of each of Callisto Merger Sub and Synergy
Merger Sub (i) has determined that the Mergers are consistent with and in
furtherance of the long-term business strategy of Callisto Merger Sub and
Synergy Merger Sub, respectively, and fair to and in the best interests of,
Callisto Merger Sub and Synergy Merger Sub, respectively, and their respective
stockholders, (ii) has approved this Agreement, the Mergers and the other
transactions contemplated by this Agreement; and (iii) has adopted a resolution
declaring the Mergers advisable.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGERS
1.1 The Callisto Merger. At the Effective Time (as defined in Section
1.3 hereof) and subject to and upon the terms and conditions of this Agreement
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Callisto Merger Sub shall be merged with and into Callisto (the "Callisto
Merger"), the separate corporate existence of Callisto Merger Sub shall cease
and Callisto shall continue as the surviving corporation and shall become a
wholly-owned subsidiary of Parent. The surviving corporation after the Callisto
Merger is sometimes referred to hereinafter as the "Callisto Surviving
Corporation."
1.2 The Synergy Merger. At the Effective Time and subject to the terms
and conditions of this Agreement and the applicable provisions of Delaware Law,
Synergy Merger Sub shall be merged with and into Synergy (the "Synergy Merger"),
the separate corporate existence of Synergy Merger Sub shall cease and Synergy
shall continue as the surviving corporation (the "Synergy Surviving
Corporation") and shall become a wholly-owned subsidiary of Parent. The
surviving corporation after the Synergy Merger is sometimes referred to
hereinafter as the "Synergy Surviving Corporation." The Callisto Merger and the
Synergy Merger are collectively referred to as the "Mergers."
1.3 Effective Time. Unless this Agreement is earlier terminated
pursuant to Article VII hereof, the closing of the Mergers and the other
transactions contemplated by this Agreement (the "Closing") will take place at
the offices of Xxxxx Xxxxxx Xxxxx Tischman Xxxxxxx & Xxxxx, Xxx Xxxxxxxxxx
Xxxxx, Xxxxxx, Xxx Xxxxxx 00000, at a time and date to be specified by the
parties, but in no event later than two (2) business days following satisfaction
or waiver of the conditions set forth in Article VI hereof. The date upon which
the Closing actually occurs is herein referred to as the "Closing Date." On the
Closing Date, the parties hereto shall cause each of the Mergers to be
consummated by filing a Certificate of Merger (or like instrument) (each, a
"Certificate of Merger" with respect to one of the Mergers, and collectively
with respect to both Mergers the "Certificates of Merger") with the Secretary of
State of the State of Delaware, in accordance with the relevant provisions of
Delaware Law (the times at which both Mergers have become fully effective (or
such later time as may be agreed in writing by Callisto and specified in the
Certificates of Merger) is referred to herein as the "Effective Time").
1.4 Effect of the Mergers. (a) At the Effective Time, the effect of the
Mergers shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as provided herein, (i) all the property, rights,
privileges, powers and franchises of Callisto and Callisto Merger Sub shall vest
in the Callisto Surviving Corporation, and all debts, liabilities and duties of
Callisto and Callisto Merger Sub shall become the debts, liabilities and duties
of the Callisto Surviving Corporation and (ii) all of the property, rights,
privileges, powers and franchises of Synergy and Synergy Merger Sub shall vest
in the Synergy Surviving Corporation, and all debts, liabilities and duties of
Synergy and Synergy Merger Sub shall become the debts, liabilities and duties of
the Synergy Surviving Corporation.
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(b) Prior to or at the Effective Time, the properties and
assets of Synergy and its Subsidiaries will be free and clear of any and all
encumbrances, charges, claims equitable interests, liens, options, pledges,
security interests, mortgages, rights of first refusal or restrictions of any
kind and nature (collectively the "Encumbrances"), except for such liabilities,
accounts payable, debts, adverse claims, duties, responsibilities and
obligations of every kind or nature, whether accrued or unaccrued, known or
unknown, direct or indirect, absolute, contingent, liquidated or unliquidated
and whether arising under, pursuant to or in connection with any contract, tort,
strict liability or otherwise (collectively the "Liabilities") of Synergy, that
the Synergy Surviving Corporation will assume, which Liabilities Synergy and
Callisto have jointly approved and which shall be set forth in Schedule 2.5.
Prior to or at the Effective Time, the properties and assets of Callisto and its
Subsidiaries will be free and clear of any and all Encumbrances, except for such
Liabilities of Callisto that the Synergy Surviving Corporation will assume which
Liabilities Synergy and Callisto have jointly approved and which shall be set
forth in Schedule 3.5.
(c) Immediately after the Effective Time of the Callisto
Merger, (i) Parent will organize a newly formed Delaware limited liability
company ("Newco") with Parent as the sole member thereof, (ii) Callisto will be
merged with and into Newco pursuant to Delaware statutes with Parent remaining
as the sole member of Newco, and (iii) all of the Parent capital stock then held
by Callisto will thereupon be cancelled and extinguished. The Certificate of
Formation of Newco will be in the form and substance approved by Synergy's
counsel and Callisto's counsel and shall be attached as Exhibit C to this
Agreement.
(d) Promptly following the Effective Time it is expected that,
(i) Parent will file an Amendment to its Articles of Incorporation changing its
name to "Callisto Pharmaceuticals, Inc." (the "Amendment Articles") and (ii)
Parent will change its state of incorporation to Delaware from Florida. The
Amended Articles will be substantially in the form and substance approved by
Synergy's counsel and Callisto's counsel and shall be attached as Exhibit D to
this Agreement.
1.5 Certificates of Incorporation; Bylaws. (a) Unless otherwise
determined by Callisto prior to the Effective Time, at the Effective Time, (i)
the Certificate of Incorporation of Callisto Merger Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Callisto Surviving Corporation at and after the Effective Time until thereafter
amended in accordance with the Delaware Law and the terms of such Certificate of
Incorporation; provided, however, that at the Effective Time, Article I of the
Certificate of Incorporation of the Callisto Surviving Corporation shall be
amended and restated in its entirety to read as follows: "The name of the
corporation is Callisto Pharmaceuticals, Inc." and (ii) the Certificate of
Incorporation of Synergy Merger Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Synergy
Surviving Corporation at and after the Effective Time until thereafter amended
in accordance with Delaware Law and the terms of such Certificate of
Incorporation; provided, however that at the Effective Time, Article I of the
Certificate of Incorporation of the Synergy Surviving Corporation shall be
amended and restated in its entirety to read as follows: "The name of the
Corporation is Synergy Pharmaceuticals, Inc." The Certificates of Incorporation
of the Callisto Surviving Corporation and the Synergy Surviving Corporation
shall be approved by Synergy's counsel and Callisto's counsel and shall be
attached as Exhibits E-1 and E-2 to this Agreement.
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(b) Unless otherwise determined by Callisto and Synergy,
respectively, prior to the Effective Time, (i) the Bylaws of Callisto Merger Sub
as in effect immediately prior to the Effective Time shall be the Bylaws of the
Callisto Surviving Corporation at and after the Effective Time, until thereafter
amended in accordance with Delaware Law and the terms of Certificate of
Incorporation of the Callisto Surviving Corporation and such By Laws and (ii)
the By Laws of Synergy Merger Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Synergy Surviving Corporation at and
after the Effective Time, until thereafter amended in accordance with Delaware
Law and the terms of the Certificate of Incorporation of the Synergy Surviving
Corporation and such Bylaws.
1.6 Callisto Directors and Officers. (a) Unless otherwise determined by
Callisto prior to the Effective Time, the directors of Callisto Merger Sub
immediately prior to the Effective Time shall be the directors of the Callisto
Surviving Corporation and at and after the Effective Time, each to hold the
office of a director of the Callisto Surviving Corporation in accordance with
the provisions of Delaware Law and the Certificate of Incorporation and Bylaws
of the Callisto Surviving Corporation until their successors are duly elected
and qualified.
(b) Unless otherwise determined by Callisto prior to the
Effective Time, the officers of Callisto Merger Sub immediately prior to the
Effective Time shall be the officers of the Callisto Surviving Corporation at
and after the Effective Time, each to hold office in accordance with the
provisions of the Bylaws of the Callisto Surviving Corporation.
1.7 Synergy Directors and Officers. (a) Unless otherwise determined by
Callisto prior to the Effective Time, the directors of Synergy Merger Sub
immediately prior to the Effective Time shall be the directors of the Synergy
Surviving Corporation at and after the Effective Time, each to hold the office
of a director of the Synergy Surviving Corporation in accordance with the
provisions of Delaware Law and the Certificate of Incorporation and Bylaws of
the Synergy Surviving Corporation until their successors are duly elected and
qualified.
(b) Unless otherwise determined by Callisto prior to the
Effective Time, the officers of Synergy Merger Sub immediately prior to the
Effective Time shall be the officers of the Synergy Surviving Corporation at and
after the Effective Time, each to hold office in accordance with the provisions
of the Bylaws of the Synergy Corporation.
1.8 Stock Split of Parent Common Stock. Prior to the Effective Time,
Parent will declare and effect a 475 for one common stock split, so that
approximately 95% of the Parent Common Stock will be owned by Callisto and
approximately 5% by minority shareholders. A Capitalization Table as of the
Effective Time is attached hereto as Schedule 1.8 to this Agreement.
1.9 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Mergers and without any
action on the part of Parent, Callisto, Synergy, Callisto Merger Sub, Synergy
Merger Sub or the holders of any of the following securities, the following
shall occur:
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(a) Conversion of Callisto Common Stock. Each share of Common
Stock, par value $0.001 per share of Callisto (the "Callisto Common Stock")
issued and outstanding immediately prior to the Effective Time (excluding any
share of Callisto Common Stock to be canceled and extinguished pursuant to
Section 1.9(b) will be automatically converted (subject to Sections 1.9(i) and
(j)) into .one share of Common Stock, par value $0.001 per share, of Parent (the
"Parent Common Stock"), such that he holders of Callisto Common Stock will, in
the aggregate, receive 17,318,994 shares of Parent Common Stock (such aggregate
shares of Parent Common Stock being referred to in this Agreement as the
"Callisto Merger Consideration"). If any shares of Callisto Common 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 Callisto,
then the shares of Parent Common Stock issued in exchange for such shares of
Callisto Common Stock will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Parent Common Stock may accordingly be marked with appropriate
legends.
(b) Cancellation of Callisto Stock. Each share of Callisto
Common Stock held by Callisto or any direct or indirect wholly-owned subsidiary
of Callisto immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof. Each share of Callisto Common Stock
held by Parent or any direct or indirect wholly-owned subsidiary of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Callisto Stock Options. At the Effective Time, all options
to purchase Callisto Common Stock then outstanding under Callisto's 1996
Incentive and Non-Qualified Stock Option Plan, as amended as of the date hereof
(the "Callisto Option Plan"), the Callisto Option Plan itself, shall be assumed
by Parent in accordance with Section 5.4.
(d) Capital Stock of Callisto Merger Sub. Each share of Common
Stock, $0.001 par value per share, of Callisto Merger Sub (the "Callisto Merger
Sub Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable
share of Common Stock, $0.001 par value per share, of the Callisto Surviving
Corporation. Each certificate evidencing ownership of shares of Callisto Merger
Sub Common Stock shall evidence ownership of such shares of capital stock of the
Callisto Surviving Corporation.
(e) Conversion of Synergy Common Stock. Each share of Common
Stock, par value $0.001 per share of Synergy (the "Synergy Common Stock") issued
and outstanding immediately prior to the Effective Time (excluding any share of
Synergy Common Stock to be canceled and extinguished pursuant to Section 1.9(f)
will be automatically converted (subject to Sections 1.9(i) and (j)) into Parent
Common Stock as set forth on Schedule 1.9(e) attached hereto, such that the
holders of Synergy Common Stock (including the holders of Synergy Stock Options
and Synergy Warrants) will, in the aggregate, receive 4,395,684 shares of Parent
Common Stock, (such aggregate shares of Parent Common Stock being referred to in
this Agreement as the "Synergy Merger Consideration"). If any shares of Synergy
Common 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
Synergy, then the shares of Parent Common Stock issued in exchange for such
shares of Synergy Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends.
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(f) Cancellation of Synergy Common Stock. Each share of
Synergy Common Stock held by Synergy or any direct or indirect wholly-owned
subsidiary of Synergy immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof. Each share of Synergy Common
Stock held by Parent or any direct or indirect wholly-owned subsidiary of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(g) Synergy Stock Options and Warrants. At the Effective Time,
all options to purchase Synergy Common Stock then outstanding under the Synergy
1993 Amended and Restated Stock Option Plan and 1998 Stock Option Plan, as
amended as of the date hereof (the "Synergy Option Plans"), the Synergy Option
Plans themselves, and all warrants to purchase Synergy Common Stock shall be
canceled.
(h) Capital Stock of Synergy Merger Sub. Each share of Common
Stock, $0.001 par value per share, of Synergy Merger Sub (the "Synergy Merger
Sub Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable
share of Common Stock, $0.001 par value per share, of the Synergy Surviving
Corporation. Each certificate evidencing ownership of shares of Synergy Merger
Sub Common Stock shall evidence ownership of such shares of capital stock of the
Synergy Surviving Corporation.
(i) Adjustments to Callisto and Synergy Merger Consideration.
Except as described in Section 1.8, each of the Callisto and Synergy Merger
Consideration shall be adjusted to reflect appropriately the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into or exercisable or exchangeable for
Parent Common Stock, Callisto Common Stock or Synergy Common Stock),
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Parent Common Stock, Callisto Common
Stock or Synergy Common Stock occurring or having a record date on or after the
date hereof and prior to the Effective Time.
(j) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Mergers. In lieu thereof any fractional
share will be rounded to the nearest whole share of Parent Common Stock (with .5
being rounded up).
1.10 Surrender of Certificates.(a) Parent to Provide Common Stock.
Promptly after the Effective Time, Parent shall make available in accordance
with this Article I, the shares of Parent Common Stock issuable pursuant to
Section 1.9(a) and (e) in exchange for outstanding shares of Callisto Common
Stock and Synergy Common Stock.
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(b) Exchange Procedures. Promptly after the Effective Time,
Parent shall mail to each holder of record (as of the Effective Time) of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding shares of Callisto Common Stock or Synergy Common Stock
(the "Certificates") (i) a letter of transmittal in customary form (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Parent
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock pursuant to
Section 1.9(a) and (e). Upon surrender of Certificates for cancellation to the
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock into which their
shares of Callisto Common Stock and Synergy Common Stock were converted pursuant
to Section 1.9(a) and Section 1.9(e), respectively, and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed, from and after the Effective Time, to evidence only
the ownership of the number of whole shares of Parent Common Stock into which
such shares of Callisto Common Stock and Synergy Common Stock shall have been so
converted (including any voting, notice or other rights associated with the
ownership of such shares of Parent Common Stock under the Certificate of
Incorporation or Bylaws of Parent or under the Florida Business Corporation
Act).
(c) Transfers of Ownership. If certificates representing
shares of Parent Common Stock are to be issued in a name other than that in
which the Certificates surrendered in exchange therefor are registered, it will
be a condition of the issuance thereof that the Certificates so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have (i) paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the issuance
of certificates representing shares of Parent Common Stock in any name other
than that of the registered holder of the Certificates surrendered, or (ii)
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(d) Required Withholding. Each of the Parent, the Callisto
Surviving Corporation and the Synergy Surviving Corporation 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 Callisto Common
Stock or Synergy Common Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or state, local or foreign tax law. 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.
(e) No Liability. Notwithstanding anything to the contrary
in this Section 1.10, neither the Parent, the Callisto Surviving Corporation,
the Synergy Surviving Corporation nor any party hereto shall be liable to a
holder of shares of Parent Common Stock, Callisto Common Stock or Synergy Common
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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1.11 No Further Ownership Rights in Callisto Common Stock. All shares
of Parent Common Stock issued in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Callisto Common Stock. After the Effective Time, there shall be no
further registration of transfers on the records of Callisto Surviving
Corporation of shares of Callisto Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to Callisto Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.12 No Further Ownership Rights in Synergy Common Stock. All shares of
Parent Common Stock issued in accordance with the terms hereof shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Synergy Common Stock. After the Effective Time, there shall be no further
registration of transfers on the records of Synergy Surviving Corporation of
shares of Synergy Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
Synergy Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.13 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Parent shall issue
and pay in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Callisto
Common Stock or Synergy Common Stock represented by such Certificates were
converted pursuant to Section 1.9(a) and (e), respectively; provided, however,
that the Parent may, in its discretion and as a condition precedent to the
issuance of such certificates representing shares of Parent Common Stock require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent, the Callisto Surviving Corporation or the Synergy Surviving
Corporation with respect to the Certificates alleged to have been lost, stolen
or destroyed.
1.14 Tax Treatment. It is intended by the parties hereto that each of
the Mergers shall constitute reorganizations within the meaning of Section
368(a) of the Code. Each of the parties hereto 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. Both prior to and after the Closing,
each party's books and records shall be maintained, and all federal, state and
local income tax returns and schedules thereto shall be filed in a manner
consistent with the Synergy Merger being qualified as a reverse triangular
merger under Section 368(a)(2)(E) of the Code (and comparable provisions of any
applicable state or local laws) and with the Callisto Merger being qualified as
a reorganization described in Sections 368(a)(1)(A) and 368(a)(1)(D) of the Code
(and comparable provisions of any applicable state or local laws).
1.15 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Callisto Surviving Corporation or
the Synergy Surviving Corporation (and/or their respective successors in
interest) with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Callisto, Synergy, Callisto Merger Sub and
Synergy Merger Sub, the officers and directors of Parent, the Callisto Surviving
Corporation and the Synergy Surviving Corporation shall be fully authorized (in
the name of Callisto Merger Sub, Synergy Merger Sub, Callisto, Synergy and
otherwise) to take all such necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SYNERGY
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to Callisto by Synergy on or prior to entering into
this Agreement a copy of which is attached hereto as Exhibit A and incorporated
herein by this reference (the "Synergy Schedule"), Synergy each hereby
represents and warrants to Callisto, Parent, Callisto Merger Sub and Synergy
Merger Sub that:
2.1 Organization of Synergy. (a) Synergy is a corporation duly
organized, validly existing and in good standing under the laws of Delaware; has
the corporate power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted; and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Synergy
Material Adverse Effect. As used in this Agreement, the term (i) "Subsidiary"
means the subsidiaries of Synergy set forth in Schedule 2.1 of the Synergy
Schedule and (ii) "Synergy Material Adverse Effect" means a material adverse
effect on the condition (financial or otherwise), business, assets or results of
operations of Synergy and its Subsidiaries as a whole, or on the ability of the
Synergy to consummate the transactions contemplated by this Agreement; it being
understood, however, that Synergy's continuing to incur losses, as long as such
losses are in the ordinary course of business and are comparable to those
incurred by Synergy prior to the date hereof, shall not, alone, be deemed to be
a Synergy Material Adverse Effect.
(b) Synergy has delivered to Callisto a true and complete list
of all of Synergy's Subsidiaries, indicating the jurisdiction of incorporation
of each Subsidiary and Synergy's equity interest therein.
(c) Synergy has delivered or made available to Callisto a true
and correct copy of the Certificate of Incorporation and Bylaws of Synergy and
similar governing instruments of each of its Subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither Synergy nor
any of its Subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing instruments.
2.2 Synergy Capital Structure. The authorized capital stock of Synergy
consists of 20,000,000 shares of Common Stock, par value $.001 per share, of
which there were 2,944,064 shares issued and outstanding as of December 31,
2002; 3,700,001 shares of Series A Preferred Stock, par value $.001 per share,
3,700,001 of which are issued and outstanding as of December 31, 2002; 1,874,999
shares of Series B Preferred Stock, par value $.001 per share, 1,154,065 of
which are issued and outstanding as of December 31, 2002; 1,453, 547 shares of
Series C Preferred Stock, par value $.001 per share of which 1,453,547 are
issued and outstanding as of December 31, 2002 and 2,238,363 shares of Series D
Preferred Stock, par value $.001 per share
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of which 2,238,363 are issued and outstanding as of December 31, 2002. All
outstanding shares of Synergy Common Stock are duly authorized, validly issued,
fully paid and non-assessable and are not subject to preemptive rights created
by statute, the Certificate of Incorporation or Bylaws of Synergy, or any
agreement or document to which Synergy is a party or by which it is bound. As of
March 10, 2003, Synergy had reserved an aggregate of 2,051,000 shares of Synergy
Common Stock, net of exercises, for issuance to employees, consultants and
non-employee directors pursuant to the Synergy Option Plans, under which options
are outstanding for 2,051,000 shares and there are no more shares available for
grant. As of March 10, 2003, Synergy had reserved an aggregate of 3,303,038
shares of Synergy Common Stock for issuance to holders of warrants to purchase
shares of Synergy Common Stock. All shares of Synergy Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. Schedule 2.2 lists (i) each
outstanding option to acquire shares of Synergy Common Stock as of March 10,
2003, the name of the holder of such option, the number of shares subject to
such option, the exercise price of such option, the number of shares as to which
such option will have vested at such date, the vesting schedule for such option
and whether the exercisability of such option will be accelerated in any way by
the transactions contemplated by this Agreement or for any other reason and
indicates the extent of acceleration, if any, and (ii) each outstanding Synergy
Warrant as of March 10, 2003, the name of the holder of such Synergy Warrant and
the exercise price therefor.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Synergy, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. Except for securities Synergy owns, directly or indirectly through
one or more Subsidiaries, there are no equity securities, partnership interests
or similar ownership interests of any class of any Subsidiary of Synergy, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Synergy or any of its Subsidiaries is a
party or by which it is bound obligating Synergy or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition,
of any shares of capital stock of Synergy or any of its Subsidiaries or
obligating Synergy or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, partnership
interest or similar ownership interest, call, right, commitment or agreement.
Except as set forth in Schedule 2.3, there are no registration rights and, to
the knowledge of Synergy there are no voting trusts, proxies or other agreements
or understandings with respect to any equity security of any class of Synergy or
with respect to any equity security, partnership interest or similar ownership
interest of any class of any of its Subsidiaries.
2.4 Authority. (a) Synergy has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the consummation of the transactions
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contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Synergy, subject only to the adoption of this Agreement by
Synergy's stockholders and the filing and recordation of the Certificates of
Merger pursuant to Delaware Law. A vote of the holders of at least a majority of
the outstanding shares of the Synergy Common Stock is required for Synergy's
stockholders to approve and adopt this Agreement and approve the Mergers. This
Agreement has been duly executed and delivered by Synergy and, assuming the due
authorization, execution and delivery by Callisto, Parent, Callisto Merger Sub
and Synergy Merger Sub, constitute the valid and binding obligations of Synergy,
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws and general principles of equity. The
execution and delivery of this Agreement by Synergy does not, and the
performance of this Agreement by Synergy will not, (i) conflict with or violate
the Certificate of Incorporation or Bylaws of Synergy (the "Synergy Charter
Documents") or the equivalent organizational documents of any of its
Subsidiaries, (ii) subject to compliance with the requirements set forth in
Section 2.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Synergy or any of its Subsidiaries or by which
its or any of their respective properties is bound or affected, or (iii) except
as set forth in Schedule 2.4, result in any breach of, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair Synergy's rights or alter the rights or obligations of any
third party under, or to Synergy's knowledge, give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Synergy
or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Synergy or any of its Subsidiaries is a party or by which
Synergy or any of its Subsidiaries or its or any of their respective properties
are bound or affected, except to the extent such conflict, violation, breach,
default, impairment or other effect would not, in the case of clause (ii) or
(iii), individually or in the aggregate, reasonably be expected to have a
Synergy Material Adverse Effect.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Synergy in connection with the
execution and delivery of this Agreement, or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificates
of Merger with the Secretary of State of Delaware, (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, individually or in the aggregate, would not be
reasonably likely to have a Synergy Material Adverse Effect.
2.5 Synergy Financial Statements. Attached to Schedule 2.5 of the
Synergy Schedule are (i) the audited consolidated balance sheets of Synergy and
its Subsidiaries as of March 31, 2002 together with the related consolidated
statements of income and cash flows for the fiscal years of Synergy then ended
March 31, 2002, all certified by KPMG Chartered Accountants, Synergy's
independent public accountants whose audit reports thereon are included
therewith and (ii) an unaudited consolidated balance sheet of Synergy and its
Subsidiaries as of February
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15, 2003 (the "Synergy Balance Sheet"), together with the related statements of
income and cash flows for the 10.5 month period then ended February 15, 2003
(collectively, the "Synergy Financial Statements"). Each of the Synergy
Financial Statements (including, in each case, any related notes thereto) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved, and each fairly
presents the consolidated financial position of Synergy and its Subsidiaries as
of the respective dates thereof and the consolidated results of its operations
and cash flows and stockholder equity for the periods indicated. Except as
disclosed in the Synergy Financial Statements, Synergy does not have any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Synergy, except liabilities incurred since the date of the Synergy
Financial Statements in the ordinary course of business consistent with past
practices and which would not reasonably be expected to have a Synergy Material
Adverse Effect.
2.6 Absence of Certain Changes or Events. Except as contemplated by
this Agreement, since the date of the Synergy Balance Sheet, Synergy and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction other than according to, the ordinary and
usual course of such businesses and there has not been (i) any change that,
individually or in the aggregate, has had or is reasonably likely to have a
Synergy Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by Synergy or any of its Subsidiaries, whether or not covered by
insurance; (iii) any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property in respect of the capital stock of
Synergy, except for dividends or other distributions on its capital stock
publicly announced prior to the date hereof and except as expressly permitted
hereby; (iv) any event that would constitute a violation of Section 4.1 hereof
if such event occurred after the date of this Agreement and prior to the
Effective Time; or (v) any change by Synergy in accounting principles, practices
or methods. Since the date of the Synergy Balance Sheet, except as set forth in
Schedule 2.6, there has not been any increase in the compensation payable or
that could become payable by Synergy to officers or key employees or any
amendment of the Synergy Option Plans other than increases or amendments in the
ordinary course of business consistent with past practice or (y) as required by
any relevant employment agreement, option agreement or (z) which, individually
or in the aggregate, would not reasonably be expected to have a Synergy Material
Adverse Effect.
2.7 Taxes. (a) For purposes of this Agreement, (i) "Taxes" shall mean
all Federal, state, local, foreign, provincial, territorial or other taxes,
imports, tariffs, fees, levies or other similar assessments or liabilities and
other charges of any kind, including income taxes, profits taxes, franchise
taxes, ad valorem taxes, excise taxes, withholding taxes, stamp taxes or other
taxes of or with respect to gross receipts, premiums, real property, personal
property, windfall profits, sales, use, transfers, licensing, employment, social
security, workers' compensation, unemployment, payroll and franchises imposed by
or under any law (meaning all laws, statutes, ordinances and regulations of any
governmental authority including all decisions of any court having the effect of
law); and any other taxes, duties or assessments, together with all interest,
penalties and additions imposed with respect to such amounts; (ii) "Tax Returns"
shall mean any declaration, return, report, schedule, certificate, statement or
other similar document (including relating or supporting information) required
to be filed with any Taxing Authority (as defined below), or where none is
required to be filed with a Taxing Authority, the statement or other document
issued by the applicable Taxing Authority in connection with any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax; and (iii) "Taxing Authority" shall mean any
domestic, foreign, Federal, national, provincial, state, county or municipal or
other local government or court, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising tax regulatory
authority.
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(b) Synergy and each of its Subsidiaries, (i) have timely
filed all Tax Returns that are required to have been filed by it with all
appropriate Taxing Authorities (and all such returns are true and correct and
fairly reflect in all material respects its operations for tax purposes); and
(ii) have timely paid all Taxes shown as owing on such Tax Returns or assessed
by any Taxing Authority (other than Taxes the validity of which are being
contested in good faith by appropriate proceedings). Between December 31, 2002
and the Closing Date, neither Synergy nor any of its Subsidiaries has incurred
(or will incur) a Tax liability other than a Tax liability in the ordinary
course of business and in accordance with past custom and practice. The
assessment of any additional Taxes for periods for which Tax Returns have been
filed is not expected to exceed reserves made in accordance with GAAP and
reflected in the Synergy Financial Statements and the Synergy Balance Sheet and,
to Synergy's knowledge, there are no material unresolved questions or claims
concerning Synergy's or any Subsidiaries' tax liability. Neither Synergy's nor
any Subsidiaries' Tax Returns have been reviewed or audited by any Taxing
Authority and no deficiencies for any Taxes have been proposed, asserted or
assessed either orally or in writing against Synergy or any of its Subsidiaries
that are not adequately reserved for in accordance with GAAP. No liens exist for
Taxes (other than liens for Taxes not yet due and payable) with respect to any
of the assets or properties of Synergy or any Subsidiary.
(c) Neither Synergy nor any Subsidiary has outstanding any
agreements or waivers extending, or having the effect of extending, the statute
of limitations with respect to the assessment or collection of any Tax or the
filing of any Tax Return.
(d) Neither Synergy nor any Subsidiary is a party to or bound
by any tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(e) Except as set forth on Schedule 2.7, Synergy shall not be
required to include in a taxable period ending after the Closing Date any
taxable income attributable to income that accrued in a prior taxable period but
was not recognized in any prior taxable period as a result of the installment
method of accounting, the long-term contract method of accounting, the cash
method of accounting or Section 481 of the Code or any comparable provision of
state, local or foreign Tax law, or for any other reason.
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(f) Except as set forth on Schedule 2.7, neither Synergy, nor
any of its Subsidiaries or affiliates, has made with respect to Synergy any
consent under Section 341 of the Code, no property of Synergy is "tax exempt use
property" within the meaning of Section 168(h) of the Code, and none of the
assets of Synergy is subject to a lease under Section 7701(h) of the Code or
under any predecessor section thereof.
(g) Synergy has complied in all material respects with all
applicable laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442, 3121,
3402 and 3406 of the Code or any comparable provision of any state, local or
foreign laws) and has, within the time and in the manner prescribed by
applicable law, withheld from and paid over to the proper Taxing Authorities all
amounts required to be so withheld and paid over under applicable laws.
(h) The net operating losses ("NOL") of Synergy or any of its
Subsidiaries are not, as of the date hereof, subject to Section 382 or 269 of
the Code, Regulation Section 1.1502-21(c), or any similar provisions or
Regulations otherwise limiting the use of the NOLs of Synergy or its
Subsidiaries.
(i) Synergy is not, and has not been for the five years
preceding the Closing, a "United States real property holding company" (as such
term is defined in Section 897(c)(2) of the Code).
(j) As of the date hereof, to the knowledge of Synergy,
neither Synergy nor any of its Subsidiaries or affiliates has taken or agreed to
take any action or failed to take any action that would prevent the Mergers from
constituting a reorganization within the meaning of Section 368(a) of the Code.
(k) Any deficiency resulting from any audit or examination
relating to Taxes of Synergy by any Taxing Authority has been timely paid.
(l) Except as set forth on Schedule 2.7, no power of attorney
with respect to any Taxes has been executed or filed with any Taxing Authority
by or on behalf of Synergy.
2.8 Patents and Trademarks. As used in this Agreement, "Intellectual
Property" means (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures, together with all reissuances,
continuations, divisionals, substitutions, continuations-in-part, provisionals,
revisions, extensions and re-examinations thereof, (ii) all trademarks, service
marks, trade names, logos, corporate names and Internet domain names, including
all goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, (iii) all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all trade secrets and
confidential business information (including ideas, research and development,
copyrights, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (v) all computer programs and software
(including data and related documents), (vi) all know-how , research
information, research data and notebooks and (vii) all other proprietary rights.
Schedule
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2.8 contains a complete list of all Intellectual Property registered in
Synergy's name and material to Synergy's business as conducted as of the date
hereof (collectively, the "Synergy Registered Intellectual Property"), which
registrations are valid. Synergy's use of Intellectual Property does not
constitute an infringement of any third party's rights that could reasonably be
expected to result in a Synergy Material Adverse Effect. Except as set forth on
Schedule 2.8, Synergy owns, free and clear of any Liens, all right, title and
interest to the Synergy Registered Intellectual Property. With respect to
Intellectual Property, other than the Synergy Registered Intellectual Property,
used or held for use by Synergy in its business as conducted as of the date
hereof (the "Other Intellectual Property"), Synergy owns, controls or has a
right to use, to the extent necessary to conduct its business in a manner
generally consistent with its past practice, such Other Intellectual Property
which is material to Synergy's business. Except as set forth on Schedule 2.8,
Synergy is not a party to any outstanding options, licenses or agreements of any
kind relating to (i) any Other Intellectual Property owned by any other person
or entity or (ii) the Synergy Registered Intellectual Property. Synergy has not
during the preceding three years received any communications or claims nor, to
Synergy's knowledge, is there any threatened claim, alleging that Synergy has
infringed upon, or, by conducting its business as proposed, would infringe upon
the intellectual property rights of any other person which such infringement
would have a Synergy Material Adverse Effect. Except as set forth on Schedule
2.8, to the knowledge of Synergy, no third party has interfered with, infringed
upon or misappropriated any of Synergy's rights to the Synergy Registered
Intellectual Property or Other Intellectual Property which such interference,
infringement or misappropriation would constitute a Synergy Material Adverse
Effect.
2.9 Compliance; Permits; Restrictions. (a) Except as disclosed on
Schedule 2.9 neither Synergy nor any of its Subsidiaries is in conflict with, or
in default or violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Synergy or any of its Subsidiaries or by which its or any
of their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Synergy or any of its Subsidiaries is a
party or by which Synergy or any of its Subsidiaries or its or any of their
respective properties is bound or affected except for those conflicts, defaults
or violations which would not be reasonably expected to have a Synergy Material
Adverse Effect. Except as disclosed on Schedule 2.9 to the knowledge of Synergy,
no investigation or review by any Governmental Entity is pending or threatened
against Synergy or its Subsidiaries, nor has any Governmental Entity indicated
in writing an intention to conduct the same other than those which would not
reasonably be expected to have a Synergy Material Adverse Effect. There is no
agreement, judgment, injunction, order or decree binding upon Synergy or any of
its Subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Synergy or any of
its Subsidiaries, any acquisition of material property by Synergy or any of its
Subsidiaries or the conduct of business by Synergy as currently conducted.
(b) Synergy and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which
would necessary to the conduct of the business of Synergy except those the
absence of which would not, individually or in the aggregate, reasonably be
likely to have a Synergy Material Adverse Effect (collectively, the "Synergy
Permits"). Synergy and its Subsidiaries are in compliance in all material
respects with the terms of the Synergy Permits.
15
2.10 Litigation. Except as set forth on Schedule 2.10, as of the date
of this Agreement, there is no action, suit, proceeding, claim, arbitration or
investigation pending, including derivative suits brought by or on behalf of
Synergy or as to which Synergy or any of its Subsidiaries has received any
notice of assertion nor, to Synergy's knowledge, is there a threatened action,
suit, proceeding, claim, arbitration or investigation against Synergy or any of
its Subsidiaries seeking to delay, limit or enjoin the transactions contemplated
by this Agreement or which might reasonably be expected to have a Synergy
Material Adverse Effect.
2.11 Brokers' and Finders' Fees. Synergy has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.12 Labor Agreements and Actions; Employee Benefit Plans. (a) Synergy
is not bound by or subject to (and none of its assets or properties is bound by
or subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of Synergy, has sought to represent any of the employees,
representatives, or agents of Synergy. There is no strike or other labor dispute
involving the Synergy pending or, to the knowledge of Synergy, threatened, nor
is Synergy aware of any labor organization activity involving its employees.
(b) Schedule 2.12(b) contains a complete list of each pension,
profit-sharing or other retirement, bonus, deferred compensation, employment
agreement, severance agreement, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, long- or short-term disability, fringe benefit, sick pay, or
vacation pay, or other employee benefit plan, program, agreement, or arrangement
or policy, whether formal or informal, funded or unfunded, written or unwritten,
and whether legally binding or not, sponsored, maintained, contributed to or
required to be contributed to by (i) Synergy with respect to current or former
employees or any current or former director or consultant of Synergy, and/or
(ii) any trade or business, whether or not incorporated, that together with
Synergy would be deemed a "single employer" that includes Synergy within the
meaning of Section 4001(a)(14) of ERISA, and the rules and regulations
promulgated thereunder (collectively, "Synergy Benefit Plans"); provided that
each informal or unwritten Synergy Benefit Plan is described in summary form in
Schedule 2.12(b). Schedule 2.12(b) identifies each Synergy Benefit Plan that is
a "pension benefit plan" under Section 3(2) of ERISA ("Synergy Pension Plan").
Schedule 2.12(b) discloses whether each Synergy Benefit Plan that is an
"employee welfare benefit plan" under Section 3(1) of ERISA ("Synergy Welfare
Plan") is (i) unfunded, (ii) insured, or (iii) funded through a "welfare benefit
fund" within the meaning of Section 419(e) of the Code or another funding
mechanism.
(c) True and complete copies of all (i) Synergy Benefit Plans,
including but not limited to, any trust instruments and insurance contracts
forming a part of any Synergy Plans, and all amendments thereto and summaries of
unwritten Synergy Benefit Plans; (ii) the three (3) most recent actuarial
valuations, if any, prepared for each Synergy Plan; (iii) the three (3) most
recent reports (Series 5500 and all schedules thereto), if any, required under
ERISA or the Code in connection with each Synergy Plan or related trust; (iv)
the most recent determination letters received from the Internal Revenue
Service, if any, for each Synergy Plan and related trust which is intended to
satisfy the requirements of Section 401(a) of the Code; (v) the most recent
summary plan description, together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Synergy Plan;
and (vi) all material communications to any Synergy Employees relating to each
Synergy Plan have been provided or made available to Callisto.
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(d) All "employee benefit plans" within the meaning of Section
3(3) of ERISA, other than "multiemployer plans" within the meaning of Section
3(37) of ERISA, covering Synergy Employees (the "Synergy Plans"), to the extent
subject to ERISA, are in substantial compliance with ERISA, the Code, and all
other applicable law. Each Synergy Pension Plan which is intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service with respect to TRA or a
timely application for such determination is now pending or a request for such
determination filed within the remedial amendment period of Section 401(b) of
the Code is pending, and the Synergy is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. As of the date
hereof, other than claims for benefits submitted in the ordinary course by
participants or beneficiaries under the Synergy Benefit Plans, no material claim
against any Synergy Benefit Plan, and no legal or regulatory proceeding
(including any audit or voluntary compliance resolution or closing agreement
program proceeding) involving, any Synergy Benefit Plan, is pending, or to the
knowledge of Synergy, threatened.
(e) Neither Synergy nor any of its Subsidiaries has engaged in
a transaction with respect to any Synergy Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject Synergy or any
Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(f) No current or former Synergy Pension Plan or pension plan
of any of its Subsidiaries, or any entity which is considered one employer with
Synergy under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"), is or has ever been subject to Title IV of ERISA or Section 412 of
the Code. No Synergy Benefit Plan constitutes a multiemployer plan within the
meaning of ss.3(37) of ERISA.
(g) All contributions required to be made under the terms of
any Synergy Plan have been timely made or have been reflected on the audited
financial statements of the Synergy.
(h) Neither Synergy nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Synergy Plan or has
ever represented, promised or contracted (whether in oral or written form) to
any employee(s) that such employee(s) would be provided with retiree health or
life benefits which would have a material impact on Synergy, except as required
under ss.601 of ERISA.
(i) Except as set forth in Schedule 2.12, the consummation of
the transactions contemplated by this Agreement will not (x) entitle any
employees of Synergy or any of its Subsidiaries to severance pay, (y) accelerate
the time of payment or vesting or trigger any payment or funding (through a
grantor trust other otherwise) of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Synergy Benefit Plans or (z) result in any breach or violation of, or a default
under, any of the Synergy Benefit Plans.
17
(j) Any amount that could be received (whether in cash,
property, or vesting of property) as a result of the transaction contemplated by
this Agreement by any officer, director, employee or independent contractor of
Synergy or any of its Subsidiaries, who is a "disqualified individual" (as
defined in proposed Treasury Regulation Section 1.280G-1), under any employment
arrangement or Synergy Benefit Plan would not be characterized as an "excess
parachute payment" (as defined in Section 280G of the Code).
(k) All Synergy Benefit Plans covering current or former
non-U.S. Employees complies in all material respects with applicable law, and no
unfunded liabilities exist with respect to any Synergy Benefit Plan that covers
such non-U.S. Employees.
(l) Schedule 2.12(l) contains a complete and correct list of
employment agreements for senior officers of Synergy; copies of each such
agreement have been provided or made available to Callisto or Callisto's
counsel.
2.13 Absence of Liens and Encumbrances. Synergy and each of its
Subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
Liens and Encumbrances except (i) as reflected in the Synergy Financial
Statements, (ii) for liens for taxes not yet due and payable and (iii) for such
imperfections of title and encumbrances, if any, which would not be reasonably
expected to have a Synergy Material Adverse Effect.
2.14 Environmental Matters. (a) Hazardous Materials Activities. Except
as would not reasonably be likely to result in a material liability to Synergy
(in any individual case or in the aggregate), (i) neither Synergy nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to pollutants, contaminants, wastes, any
toxic, radioactive or otherwise hazardous materials ("Hazardous Materials") in
violation of any law in effect on or before the Closing Date, and (ii) neither
Synergy nor any of its Subsidiaries has disposed of, transported, sold, used,
released, exposed its employees or others t or manufactured any product
containing a Hazardous Material (collectively, "Hazardous Materials Activities")
in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(b) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Synergy's knowledge, threatened concerning any Synergy Permit
relating to any environmental matter, Hazardous Material or any Hazardous
Materials Activity of Synergy or any of its Subsidiaries. Synergy is not aware
of any fact or circumstance which could involve Synergy or any of its
Subsidiaries in any environmental litigation or impose upon Synergy or any of
its Subsidiaries any environmental liability.
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2.15 Agreements. (a) Except as set forth in Schedule 2.15(a), there are
no written agreements between Synergy and any of its officers, directors,
employees or shareholders or any affiliate thereof.
(b) Except as set forth in Schedule 2.15(b), there are no
written agreements, to which Synergy is a party or by which it is bound which
(i) involve obligations (contingent or otherwise) of, or payments to, the
Synergy in excess of $100,000, (ii) are material to the conduct and operations
of the Synergy's business or properties (including, without limitation, the
license of any Intellectual Property to or from Synergy), (iii) restrict or
materially adversely affect the development, manufacture, sale, marketing or
distribution of Synergy's products or services, (iv) relating to the employment
or compensation of any employee or consultant, (v) of duration of six months or
more and not cancelable without penalty by Synergy on 30 days or less notice or
(vi) relating to the sale, lease, pledge or other disposition of any material
assets of or to Synergy.
(c) Except as set forth in Schedule 2.15(c), neither Synergy
nor any of its Subsidiaries, nor to Synergy's knowledge any other party to a
Synergy Contract (as defined below), is in breach, violation or default under,
and neither Synergy nor any of its Subsidiaries has been notified that it has
breached, violated or defaulted under, any of the material terms or conditions
of any of the agreements, contracts or commitments to which Synergy or any of
its Subsidiaries is a party or by which it is bound that are required to be
disclosed in Schedules 3.15(a) or 3.15(b) (any such agreement, contract or
commitment, a "Synergy Contract") in such a manner as would permit any other
party to cancel or terminate any such Synergy Contract, or would permit any
other party to seek material damages or other remedies (for any or all of such
breaches, violations or defaults, in the aggregate).
(d) Each of the Synergy Contracts are legal, valid, binding
and enforceable and in full force and effect with respect to the Synergy and any
of its Subsidiaries with respect to each other party thereto, in either case
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as the
availability of equitable remedies may be limited by general principles of
equity; and the Synergy Contracts will continue to be legal, valid, binding and
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing subject to
the effect of bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity.
(e) Neither Synergy nor any of its Subsidiaries have been
notified that any party to any of the Synergy Contracts intends to cancel,
terminate, proposes to amend, not renew or exercise an option under any of
Synergy Contracts, whether in connection with the transactions contemplated
hereby or otherwise nor is Synergy or any Subsidiary aware of any intention by
any party to any Synergy Contract to effect any of the foregoing.
2.16 Board Approval. The Board of Directors of Synergy has, as of the
date of this Agreement, (i) determined that the Mergers are fair to and in the
best interests of Synergy and its stockholders, (ii) determined to recommend
that the stockholders of Synergy adopt this Agreement and (iii) duly approved
the Mergers, this Agreement and the transactions contemplated hereby.
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2.17 Disclosure. No representation or warranty of the parties to this
Agreement and no statement in the Schedules omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CALLISTO, PARENT, CALLISTO
MERGER SUB AND SYNERGY MERGER SUB
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to Synergy by Callisto on or prior to entering into
this Agreement a copy of which is attached hereto as Exhibit B and incorporated
herein by this reference (the "Callisto Schedule"), each of Callisto, Parent,
Callisto Merger Sub and Synergy Merger Sub hereby represents and warrants to
Synergy that:
3.1 Organization of Callisto, Parent, Callisto Merger Sub and Synergy
Merger Sub. (a) Each of Callisto, Parent, Callisto Merger Sub and Synergy Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation; has the corporate power and
authority to own, lease and operate its assets and property and to carry on its
business as now being conducted; and is duly qualified to do business and in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified would have a Callisto Material Adverse Effect. As used in
this Agreement, the term (i) "Subsidiary" means the subsidiaries of Callisto set
forth in Schedule 3.1 of the Callisto Schedule and (ii) "Callisto Material
Adverse Effect" means a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of Callisto and its
Subsidiaries as a whole or on the ability of Callisto to consummate the
transactions contemplated by this Agreement; it being understood, however, that
Callisto's continuing to incur losses, as long as such losses are in the
ordinary course of business and are comparable to those incurred by Callisto
prior to the date hereof, shall not, alone, be deemed to be a Callisto Material
Adverse Effect.
(b) Callisto has delivered to Synergy a true and complete list of
all of Callisto's Subsidiaries, indicating the jurisdiction of each Subsidiary
and Callisto's equity interest therein.
(c) Callisto has delivered or made available to Synergy a true and
correct copy of the Certificate of Incorporation and Bylaws of each of Callisto,
Parent, Callisto Merger Sub and Synergy Merger Sub and similar governing
instruments of each of Callisto's Subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither Callisto, Parent,
Callisto Merger Sub, Synergy Merger Sub or any of Callisto's Subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent governing instruments.
3.2 Capital Structure. The authorized capital stock of Callisto
consists of 60,000,000 shares of Common Stock, par value $.0001 per share, of
which there were 13,083,695 shares issued and outstanding as of December 31,
2002; 2,350,000 shares of Series A Convertible Preferred Stock, par value $.0001
per share, of which there were 2,252,441 shares issued and outstanding as of
December 31, 2002; 2,290,000 shares of Series B Convertible Preferred Stock, par
value $.0001 per share, of which there were 1,232,858 shares issued and
outstanding as of December 31, 2002 and 750,000 shares of Series C Convertible
Preferred Stock, par value $.0001 per share, of which there were 750,000 shares
issued and outstanding as of December 31,
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2002. The authorized capital stock of Parent consists of 50,000,000 shares of
Common Stock, par value $.0001 per share, of which there were 1,054,500 shares
issued and outstanding as of December 31, 2002 and 20,000,000 shares of
Preferred Stock, par value $.0001 per share, of which none were issued and
outstanding as of December 31, 2002. The authorized capital stock of Callisto
Merger Sub consists of 100 shares of Common Stock, par value $.0001 per share,
of which there were 100 shares issued and outstanding as of March 10, 2003. The
authorized capital stock of Synergy Merger Sub consists of 100 shares of Common
Stock, par value $.0001 per share, of which there were 100 shares issued and
outstanding as of March 10, 2003. All outstanding shares of Callisto, Parent,
Callisto Merger Sub and Synergy Merger Sub Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of
Callisto, Parent, Callisto Merger Sub and Synergy Merger Sub or any agreement or
document to which Callisto, Parent, Callisto Merger Sub or Synergy Merger Sub is
a party or by which it is bound. As of March 10, 2003, Callisto did not have any
warrants to purchase common stock outstanding. As of March 10, 2003, Callisto
had reserved an aggregate of 10,000,000 shares of Callisto Common Stock, net of
exercises, for issuance to employees, consultants and non-employee directors
pursuant to the Callisto Stock Option Plan (the "Callisto Stock Option Plan"),
under which options are outstanding for an aggregate of 3,204,000 shares and
under which 6,796,000 shares are available for grant as of March 10, 2003. As of
March 10, 2003, Callisto had reserved an aggregate of 947,505 shares of Callisto
Common Stock for outstanding non-Callisto Stock Option Plan options. All shares
of Callisto Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable. Schedule 3.2 lists each outstanding option to acquire shares of
Callisto Common Stock at March 10, 2003, the name of the holder of such option,
the number of shares subject to such option, the exercise price of such option,
the number of shares as to which such option will have vested at such date, the
vesting schedule for such option and whether the exercisability of such option
will be accelerated in any way by the transactions contemplated by this
Agreement or for any other reason and indicates the extent of acceleration, if
any.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2 and Schedule 3.3, there are no equity securities, partnership
interests or similar ownership interests of any class of Callisto, Parent,
Callisto Merger Sub or Synergy Merger Sub, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. Except for securities Callisto owns, directly or indirectly through
one or more Subsidiaries, there are no equity securities, partnership interests
or similar ownership interests of any class of any Subsidiary of Callisto, or
any security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except as set forth in Section 3.2 and
Schedule 3.3, there are no options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Callisto or any of
its Subsidiaries is a party or by which it is bound obligating Callisto or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of Callisto or any of
its Subsidiaries or obligating Callisto or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, partnership interest or similar ownership interest, call, right,
commitment or agreement. Except as set forth on Schedule 3.3, there are no
registration rights and, to the knowledge of Callisto there are no voting
trusts, proxies or other agreements or understandings with respect to any equity
security of any class of Callisto or with respect to any equity security
partnership interest or similar ownership interest of any class of any of its
Subsidiaries.
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3.4 Authority. (a) Each of Callisto, Parent, Callisto Merger Sub and
Synergy Merger Sub has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of each of Callisto, Parent, Callisto Merger Sub
and Synergy Merger Sub, subject only to the adoption of this Agreement by
Callisto's stockholders and the filing and recordation of the Certificates of
Merger pursuant to Delaware Law. A vote of the holders of at least a majority of
the outstanding shares of Callisto's Common Stock is required for Callisto's
stockholders to approve and adopt this Agreement and approve the Mergers. A vote
of the holders of at least a majority of the outstanding shares of Parent's
Common Stock is required for the stockholders of Parent to approve the Share
Issuance. This Agreement has been duly executed and delivered by each of
Callisto, Parent, Callisto Merger Sub and Synergy Merger Sub and, assuming the
due authorization, execution and delivery by Synergy, constitutes the valid and
binding obligations of each of Callisto, Parent, Callisto Merger Sub and Synergy
Merger Sub, enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws and general principles of
equity. The execution and delivery of this Agreement by each of Callisto,
Parent, Callisto Merger Sub and Synergy Merger Sub, do not, and the performance
of this Agreement by each of Callisto, Parent, Callisto Merger Sub and Synergy
Merger Sub, will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Callisto, Parent, Callisto Merger Sub or Synergy
Merger Sub, respectively, (collectively, the "Callisto Charter Documents"), (ii)
subject to compliance with the requirements set forth in Section 3.4(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Callisto, Parent, Callisto Merger Sub, Synergy Merger Sub or any
of Callisto's Subsidiaries, respectively, or by which its or any of their
respective properties is bound or affected, or (iii) except as set forth in
Schedule 3.4, result in any breach of, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or impair
any of Callisto's, Parent's, Callisto Merger Sub's or Synergy Merger Sub's
rights or alter the rights or obligations of any third party under, or to
Callisto's knowledge, give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Callisto, Parent, Callisto
Merger Sub, Synergy Merger Sub or any of Callisto's Subsidiaries, respectively,
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which any of
Callisto, Parent, Callisto Merger Sub, Synergy Merger Sub or any of Callisto's
Subsidiaries is a party or by which Callisto, Parent, Callisto Merger Sub,
Synergy Merger Sub or any of Callisto's Subsidiaries, or any of their respective
properties are bound or affected, except to the extent such conflict, violation,
breach, default, impairment or other effect would not, in the case of clause
(ii) or (iii), individually or in the aggregate, reasonably be expected to have
a Callisto Material Adverse Effect.
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(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to any of Callisto, Parent, Callisto Sub or Synergy Merger Sub
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Certificates of Merger with the Secretary of State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and (iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, individually or in the aggregate,
would not be reasonably likely to have a Callisto Material Adverse Effect.
3.5 Parent SEC Filings; Callisto Financial Statements. (a) The Parent
has filed all forms, reports and documents required to be filed with the SEC
since the initial filing date of the registration statement for the Parent's
initial public offering. All such required forms, reports and documents
(including the financial statements, exhibits and schedules thereto and those
documents that the Parent may file subsequent to the date hereof) are
collectively referred to herein as the "Parent SEC Reports." As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit 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) Each of the financial statements (including, in each case, any
related notes thereto) contained in the Parent SEC Reports (the "Parent
Financials"), including any Parent SEC Reports filed after the date hereof
until the Closing, as of their respective dates, (i) complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented the financial position of the Parent at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount. The balance sheet of the Parent as
of September 30, 2002 is hereinafter referred to as the "Parent Balance Sheet."
Except as disclosed in the Parent Financials, the Parent does not have any
liabilities (absolute, accrued, contingent or otherwise) of a nature required
to be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or in the aggregate, material to the business, results of operations or
financial condition of the Parent, except liabilities (i) provided for in the
Parent Balance Sheet, or (ii) incurred since the date of the Parent Balance
Sheet in the ordinary course of business consistent with past practices and
which would not reasonably be expected to have a Callisto Material Adverse
Effect.
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(c) Parent has heretofore furnished to Synergy a complete and
correct copy of any amendments or modifications to the Parent SEC Reports, if
any, which have not yet been filed with the SEC but which will be required to
be filed, to agreements, documents or other instruments which previously had
been filed by the Parent with the SEC pursuant to the Securities Act or the
Exchange Act.
(d) Attached to Schedule 3.5 of the Callisto Schedule are the
audited consolidated balance sheets of Callisto and its Subsidiaries as of
December 31, 2002 together with the related consolidated statements of income
and cash flows for the fiscal years of Callisto then ended December 31, 2002,
all certified by Xxxxxx Xxxxxx & Co., Callisto's independent public accountants
whose audit reports thereon are included therewith (the "Callisto Financial
Statements"). Each of the Callisto Statements (including, in each case, any
related notes thereto) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved, and each fairly presents the
consolidated financial position of Callisto and its Subsidiaries as of the
respective dates thereof and the consolidated results of its operations and
cash flows and stockholder equity for the periods indicated. Except as
disclosed in the Callisto Financial Statements, Callisto does not have any
liabilities (absolute, accrued, contingent or otherwise) of a nature required
to be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or in the aggregate, material to the business, results of operations or
financial condition of Callisto, except liabilities incurred since the date of
the Callisto Financial Statements in the ordinary course of business consistent
with past practices and which would not reasonably be expected to have a
Callisto Material Adverse Effect.
3.6 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports filed prior to the date hereof or as contemplated by this
Agreement, since the date of the Callisto Balance Sheet, Callisto and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction other than according to, the ordinary and
usual course of such businesses and there has not been (i) any change that
individually or in the aggregate, has had or is reasonably likely to have a
Callisto Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by Callisto or any of its Subsidiaries, whether or not covered by
insurance; (iii) any declaration, setting aside or payment of any dividend or
other distribution in cash, stock or property in respect of the capital stock of
Callisto or Parent, except for dividends or other distributions on its capital
stock publicly announced prior to the date hereof and except as expressly
permitted hereby; (iv) any event that would constitute a violation of Section
4.2 hereof if such event occurred after the date of this Agreement and prior to
the Effective Time; or (v) any change by Callisto or Parent in accounting
principles, practices or methods.
3.7 Tax Matters. (a) Callisto and each of its Subsidiaries (i) have
timely filed all Tax Returns that are required to have been filed by it with all
appropriate Taxing Authorities (and all such returns are true and correct and
fairly reflect in all material respects its operations for tax purposes); and
(ii) have timely paid all Taxes shown as owing on such Tax Returns or assessed
by any Taxing Authority (other than Taxes the validity of which are being
contested in good faith by appropriate proceedings). Between December 31, 2002
and the Closing Date, neither Callisto nor any of its Subsidiaries has incurred
(or will incur) a Tax liability other than a Tax liability in the ordinary
course of business and in accordance with past custom and practice. The
assessment of any additional Taxes for periods for which Tax Returns have been
filed is not expected to exceed reserves made in accordance with GAAP and
reflected in the Callisto Financial Statements and the Callisto Balance Sheet
and, to Callisto's knowledge, there are no material unresolved questions or
claims concerning Callisto's tax liability. Neither Callisto's nor any
Subsidiaries' Tax Returns have been reviewed or audited by any Taxing Authority
and no deficiencies for any Taxes have been proposed, asserted or assessed
either orally or in writing against Callisto or any of its Subsidiaries that are
not adequately reserved for in accordance with GAAP. No liens exist for Taxes
(other than liens for Taxes not yet due and payable) with respect to any of the
assets or properties of Callisto or any Subsidiary.
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(b) Neither Callisto nor any Subsidiary has outstanding any agreements
or waivers extending, or having the effect of extending, the statute of
limitations with respect to the assessment or collection of any Tax or the
filing of any Tax Return.
(c) Neither Callisto nor any Subsidiary is a party to or bound by any
tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(d) Except as set forth on Schedule 3.7, Callisto shall not be required
to include in a taxable period ending after the Closing Date any taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or any comparable provision of state,
local or foreign Tax law, or for any other reason.
(e) Except as set forth on Schedule 3.7, neither Callisto, nor any of
its Subsidiaries or affiliates, has made with respect to Callisto, any consent
under Section 341 of the Code, no property of Callisto is "tax exempt use
property" within the meaning of Section 168(h) of the Code, and none of the
assets of Callisto is subject to a lease under Section 7701(h) of the Code or
under any predecessor section thereof.
(f) Callisto has complied in all material respects with all applicable
laws relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441, 1442, 3121, 3402 and
3406 of the Code or any comparable provision of any state, local or foreign
laws) and has, within the time and in the manner prescribed by applicable law,
withheld from and paid over to the proper Taxing Authorities all amounts
required to be so withheld and paid over under applicable laws.
(g) The net operating losses ("NOL") of Callisto or any of its
Subsidiaries are not, as of the date hereof, subject to Section 382 or 269 of
the Code, Regulation Section 1.1502-21(c), or any similar provisions or
Regulations otherwise limiting the use of the NOLs of Callisto or its
Subsidiaries.
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(h) Callisto is not, and has not been for the five years preceding the
Closing, a "United States real property holding company" (as such term is
defined in Section 897(c)(2) of the Code).
(i) As of the date hereof, to the knowledge of Callisto, neither
Callisto nor any of its Subsidiaries has taken or agreed to take any action or
failed to take any action that would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code.
(j) Any deficiency resulting from any audit or examination relating to
Taxes of Callisto by any Taxing Authority has been timely paid.
(k) Except as set forth on Schedule 3.7, no power of attorney with
respect to any Taxes has been executed or filed with any Taxing Authority by or
on behalf of Callisto.
(l) The total adjusted tax basis of the assets of Callisto equal or
exceed the sum of any liabilities of Callisto.
3.8 Patents and Trademarks. Schedule 3.8 contains a complete list of
all Intellectual Property registered in Callisto's name and material to
Callisto's business as conducted as of the date hereof (collectively, the
"Registered Intellectual Property"), which registrations are valid. Callisto's
use of Intellectual Property does not constitute an infringement of any third
party's rights that could reasonably be expected to result in a Callisto
Material Adverse Effect. Except as set forth on Schedule 3.8, Callisto owns,
free and clear of any liens, claims, encumbrances, security interests and rights
of redemption (collectively, the "Liens"), all right, title and interest to the
Registered Intellectual Property. With respect to Intellectual Property, other
than the Registered Intellectual Property, used or held for use by Callisto in
its business as conducted as of the date hereof (the "Other Intellectual
Property"), Callisto owns, controls or has a right to use, to the extent
necessary to conduct its business in a manner generally consistent with its past
practice, such Other Intellectual Property which is material to Callisto's
business. Except as set forth on Schedule 3.8, Callisto is not a party to any
outstanding options, licenses or agreements of any kind relating to (i) any
Other Intellectual Property owned by any other person or entity, or (ii) the
Registered Intellectual Property. Callisto has not during the preceding three
years received any communications or claims nor, to Callisto's knowledge, is
there any threatened claim, alleging that Callisto has infringed upon, or, by
conducting its business as proposed, would infringe upon the intellectual
property rights of any other person which such infringement would have a
Callisto Material Adverse Effect. Except as set forth on Schedule 3.8, to the
knowledge of Callisto, no third party has interfered with, infringed upon or
misappropriated any of Callisto's rights to the Registered Intellectual Property
or Other Intellectual Property which such interference, infringement or
misappropriation would constitute a Callisto Material Adverse Effect.
3.9 Compliance; Permits; Restrictions. Except as disclosed on Schedule
3.9,
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(a) Neither Callisto nor any of its Subsidiaries is in conflict
with, or in default or violation of (i) any law, rule, regulation, order,
judgment or decree applicable to Callisto or any of its Subsidiaries or by which
its or any of their respective properties is bound or affected, or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Callisto or any of its
Subsidiaries is a party or by which Callisto or any of its Subsidiaries or its
or any of their respective properties is bound or affected except for those
conflicts, defaults or violations which would not be reasonably expected to have
a Callisto Material Adverse Effect. Except as disclosed on Schedule 3.9 to the
knowledge of Callisto, no investigation or review by any Governmental Entity is
pending or threatened against Callisto or any of its Subsidiaries, nor has any
Governmental Entity indicated in writing an intention to conduct the same; other
than those which would not reasonably be expected to have a Callisto Material
Adverse Effect. There is no agreement, judgment, injunction, order or decree
binding upon Callisto or any of its Subsidiaries which has or would reasonably
be expected to have the effect of prohibiting or materially impairing any
business practice of Callisto or any of its Subsidiaries, any acquisition of
material property by Callisto or any of its Subsidiaries or the conduct of
business by Callisto as currently conducted.
(b) Callisto and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which are
necessary to the conduct of the business of Callisto except those the absence of
which would not, individually or in the aggregate, be reasonably likely to have
a Callisto Material Adverse Effect, (collectively, the "Callisto Permits").
Callisto and its Subsidiaries are in compliance in all material respects with
the terms of the Callisto Permits.
3.10 Litigation. Except as set forth on Schedule 3.10, as of the date
of this Agreement, there is no action, suit, proceeding, claim, arbitration or
investigation pending, including derivative suits brought by or on behalf of
Callisto, or as to which Callisto or any of its Subsidiaries has received any
written notice of assertion nor, to Callisto's knowledge, is there a threatened
action, suit, proceeding, claim, arbitration or investigation against Callisto
or any of its Subsidiaries seeking to delay, limit or enjoin the transactions
contemplated by this Agreement or which might reasonably be expected to have a
Callisto Material Adverse Effect.
3.11 Brokers' and Finders' Fees. Callisto has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby except as disclosed on Schedule 3.11.
3.12 Labor Agreements and Actions, Employee Benefit Plans. (a) Callisto
is not bound by or subject to (and none of its assets or properties is bound by
or subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of Callisto, has sought to represent any of the employees,
representatives, or agents of Callisto. There is no strike or other labor
dispute involving Callisto pending or, to the knowledge of Callisto, threatened,
nor is Callisto aware of any labor organization activity involving its
employees.
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(b) Schedule 3.12(b) contains a complete list of each pension,
profit-sharing or other retirement, bonus, deferred compensation, employment
agreement, severance agreement, compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life or other
insurance, long- or short-term disability, fringe benefit, sick pay, or vacation
pay, or other employee benefit plan, program, agreement, or arrangement or
policy, whether formal or informal, funded or unfunded, written or unwritten,
and whether legally binding or not, sponsored, maintained, contributed to or
required to be contributed to by (i) Callisto with respect to current or former
employees or any current or former director or consultant of Callisto, and/or
(ii) any trade or business, whether or not incorporated, that together with
Callisto would be deemed a "single employer" that includes Callisto within the
meaning of Section 4001(a)(14) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA "), and the rules and regulations promulgated
thereunder (collectively, "Callisto Benefit Plans"); provided that each informal
or unwritten Callisto Benefit Plan is described in summary form in Schedule
3.12(b). Schedule 3.12(b) identifies each Callisto Benefit Plan that is a
"pension benefit plan" under Section 3(2) of ERISA ("Callisto Pension Plan").
Schedule 3.12(b) discloses whether each Callisto Benefit Plan that is an
"employee welfare benefit plan" under Section 3(1) of ERISA ("Callisto Welfare
Plan") is (i) unfunded, (ii) insured, or (iii) funded through a "welfare benefit
fund" within the meaning of Section 419(e) of the Internal Revenue Code ("Code")
or another funding mechanism.
(c) True and complete copies of all (i) Callisto Benefit Plans,
including, but not limited to, any trust instruments and insurance contracts
forming a part of any Callisto Benefit Plans, and all amendments thereto and
summaries of unwritten Callisto Benefit Plans; (ii) the three (3) most recent
actuarial valuations, if any, prepared for each Callisto Benefit Plan; (iii) the
three (3) most recent reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Callisto Benefit Plan
or related trust; (iv) the most recent determination letters received from the
Internal Revenue Service, if any, for each Callisto Benefit Plan and related
trust which is intended to satisfy the requirements of Section 401(a) of the
Code; (v) the most recent summary plan description together with the most recent
summary of material modifications, if any, required under ERISA with respect to
each Callisto Benefit Plan; and (vi) all material communications to any
Employees relating to each Callisto Benefit Plan have been provided or made
available to Synergy.
(d) All "employee benefit plans" within the meaning of Section 3(3) of
ERISA, other than "multiemployer plans" within the meaning of Section 3(37) of
ERISA, covering Callisto Employees (the "Callisto ERISA Plans"), to the extent
subject to ERISA, are in substantial compliance with ERISA, the Code, and all
other applicable law. Each Callisto Pension Plan which is intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service with respect to "TRA" (as
defined in Section 1 of Rev. Proc. 93-39) or a timely application for such
determination is now pending or a request for such determination filed within
the remedial amendment period of Section 401(b) of the Code is pending, and
Callisto is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. As of the date hereof, other than claims
for benefits submitted in the ordinary course by participants or beneficiaries
under the Callisto Benefit Plans, no material claim against any Callisto Benefit
Plan, and no legal or regulatory proceeding (including any audit or voluntary
compliance resolution or closing agreement program proceeding) involving any
Callisto Benefit Plan, is pending, or to the knowledge of Callisto, threatened.
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(e) Neither Callisto nor any of its Subsidiaries has engaged in a
transaction with respect to any Callisto Plan that, assuming the taxable period
of such transaction expired as of the date hereof, could subject Callisto or any
Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(f) No current or former Callisto Pension Plan of Callisto or any of
its Subsidiaries, or any ERISA Affiliate, is or has ever been subject to Title
IV of ERISA or Section 412 of the Code. No Callisto Benefit Plan constitutes a
multiemployer plan within the meaning of ss.3(37) of ERISA.
(g) All contributions required to be made under the terms of any
Callisto Plan have been timely made or have been reflected on the audited
financial statements of Callisto.
(h) Neither Callisto nor any of its Subsidiaries has any obligations
for retiree health and life benefits under any Callisto Plan or has ever
represented, promised or contracted (whether in oral or written form) to any
employee(s) that such employee(s) would be provided with retiree health or life
benefits which would have a material impact on Callisto, except as required
under ss. 601 of ERISA.
(i) Except as set forth in Schedule 3.12(i) the consummation of the
transactions contemplated by this Agreement will not (x) entitle any employees
of Callisto any of its Subsidiaries to severance pay, (y) accelerate the time of
payment or vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Callisto Benefit
Plans or (z) result in any breach or violation of, or a default under, any of
the Callisto Benefit Plans.
(j) Any amount that could be received (whether in cash, property, or
vesting of property) as a result of the transaction contemplated by this
Agreement by any officer, director, employee or independent contractor of
Callisto or any of its Subsidiaries, who is a "disqualified individual" (as
defined in proposed Treasury Regulation Section 1.280G-1), under any employment
arrangement or Callisto Benefit Plan would not be characterized as an "excess
parachute payment" (as defined in Section 280G of the Code).
(k) All Callisto Benefit Plans covering current or former non-U.S.
Employees complies in all material respects with applicable law. No unfunded
liabilities exist with respect to any Callisto Benefit Plan that covers such
non-U.S. Employees.
(l) Schedule 3.12(l) contains a complete and correct list of employment
agreements for senior officers of Callisto; copies of each such agreement have
been provided or made available to Synergy or Synergy 's counsel.
3.13 Absence of Liens and Encumbrances. Callisto and each of its
Subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
Liens and Encumbrances except (i) as reflected in the Callisto Financial
Statements, (ii) for liens for taxes not yet due and payable and (iii) for such
imperfections of title and encumbrances, if any, which would not be reasonably
expected to have a Callisto Material Adverse Effect.
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3.14 Environmental Matters. (a) Hazardous Materials Activities. Except
as would not reasonably be likely to result in a material liability to Callisto
(in any individual case or in the aggregate), (i) neither Callisto nor any of
its Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any law in effect on or before the Closing Date, and (ii) neither Callisto
nor any of its Subsidiaries has engaged in, Hazardous Materials Activities in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(b) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Callisto's knowledge, threatened concerning any Callisto Permit relating to any
environmental matter, Hazardous Material or any Hazardous Materials Activity of
Callisto or any of its Subsidiaries. Callisto is not aware of any fact or
circumstance which could involve Callisto or any of its Subsidiaries in any
environmental litigation or impose upon Callisto or any of its Subsidiaries any
environmental liability.
3.15 Agreements. (a) Except as set forth in Schedule 3.15(a), there are
no written agreements between Callisto and any of its officers, directors,
employees or shareholders or any affiliate thereof.
(b) Except as set forth in Schedule 3.15(b), there are no written
agreements to which Callisto is a party or by which it is bound which (i)
involve obligations (contingent or otherwise) of, or payments to, Callisto in
excess of $100,000, (ii) are material to the conduct and operations of
Callisto's business or properties (including, without limitation, the license of
any Intellectual Property to or from Callisto), (iii) restrict or materially
adversely affect the development, manufacture, sale, marketing or distribution
of Callisto's products or services, (iv) relating to the employment or
compensation of any employee or consultant, (v) of duration of six months or
more and not cancelable without penalty by Callisto on 30 days or less notice or
(vi) relating to the sale, lease, pledge or other disposition of any material
assets of or to Callisto.
(c) Except as set forth in Schedule 3.15(c) neither Callisto nor
any of its Subsidiaries, nor to Callisto's knowledge any other party to a
Callisto Contract (as defined below), is in breach, violation or default under,
and neither Callisto nor any of its Subsidiaries has been notified that it has
breached, violated or defaulted under, any of the material terms or conditions
of any of the agreements, contracts or commitments to which Callisto or any of
its Subsidiaries is a party or by which it is bound that are required to be
disclosed in Schedules 3.15(a) or 3.15(b) (any such agreement, contract or
commitment, a "Callisto Contract") in such a manner as would permit any other
party to cancel or terminate any such Callisto Contract, or would permit any
other party to seek material damages or other remedies (for any or all of such
breaches, violations or defaults, in the aggregate).
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(d) Each of the Callisto Contracts are legal, valid, binding and
enforceable and in full force and effect with respect to Callisto and any of its
Subsidiaries with respect to each other party thereto, in either case subject to
the effect of bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; and the
Callisto Contracts will continue to be legal, valid, binding and enforceable and
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect prior to the Closing subject to the effect of
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity.
(e) Neither Callisto nor any of its Subsidiaries have been
notified that any party to any of the Callisto Contracts intends to cancel,
terminate, proposes to amend, not renew or exercise an option under any of the
Callisto Contracts, whether in connection with the transactions contemplated
hereby or otherwise nor is Callisto or any Subsidiary aware of any intention by
any party to any Callisto Contract to effect any of the foregoing.
3.16 Board Approval. The Board of Directors of Callisto has, as of the
date of this Agreement, (i) determined that the Mergers are fair to, advisable
and in the best interests of Callisto and its stockholders, (ii) determined to
recommend that the stockholders of Callisto adopt this Agreement and (iii) duly
approved the Mergers, this Agreement and the transactions contemplated hereby.
3.17 Interim Operations of Callisto Merger Sub and Synergy Merger Sub.
Each of Callisto Merger Sub and Synergy Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has engaged in
no other business other than incident to its creation and this Agreement and the
transactions contemplated hereby.
3.18 Disclosure. No representation or warranty of the parties to this
Agreement and no statement in the Schedules omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Parties. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, each of Synergy and its
Subsidiaries and Callisto and its Subsidiaries shall carry on their respective
business in the ordinary course in substantially the same manner as heretofore
conducted and in substantial compliance with all applicable laws and
regulations, pay their respective debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due subject to good faith disputes over such obligations, and use their
commercially reasonable efforts consistent with past practices and policies to
(i) preserve intact their present business organization, (ii) keep available the
services of each of their present officers and employees, respectively, and
(iii) preserve their relationships with customers, suppliers, distributors,
licensors, licensees and others with which each party has business dealings
material to their respective business.
4.2 Covenants of Synergy. Except as permitted by the terms of this
Agreement, without the prior written consent of Callisto, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, Synergy shall not
do any of the following and shall not permit its Subsidiaries to do any of the
following:
(a) Except as required by law or pursuant to the terms of the Synergy
Option Plans in effect as of the date hereof, waive any stock repurchase
rights, accelerate, amend or change the period of exercisability of options or
restricted stock, or reprise options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans;
(b) Except as required by applicable law, grant any severance or
termination pay to any officer or employee except pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing or made available to Callisto, or adopt any new
severance plan, or amend or modify or alter in any manner any severance plan,
agreement or arrangement existing on the date hereof;
(c) Except as provided under Section 6.2(f) below, or other than in the
ordinary course of business consistent with past practices, transfer or license
to any person or entity or otherwise extend, amend or modify any rights to the
Synergy Registered Intellectual Property, or enter into grants to transfer or
license to any person future patent rights; provided that in no event shall
Synergy license on an exclusive basis or sell any Synergy Registered
Intellectual Property (other than in connection with the abandonment of
immaterial Synergy Registered Intellectual Property after at least five
business days' written notice to Callisto);
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
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(e) Except as provided under Section 6.2(f) below, purchase, redeem or
otherwise acquire, directly or indirectly, any shares of capital stock of
Synergy or its Subsidiaries, except (i) repurchases of unvested shares at cost
in connection with the termination of the employment relationship with any
employee pursuant to stock option or purchase agreements in effect on the date
hereof (or any such agreements entered into in the ordinary course of business
consistent with past practice by Synergy with employees hired after the date
hereof), (ii) for the purpose of funding or providing benefits under any
Synergy Benefit Plans, Synergy Option Plans, any other stock option and
incentive compensation plans, directors plans, and stock purchase and dividend
reinvestment plans in accordance with past practice;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, or any equity-based awards (whether payable in shares,
cash or otherwise) other than the issuance, delivery and/or sale of shares of
Synergy Common Stock (as appropriately adjusted for stock splits and the like)
pursuant to the exercise of stock options or warrants outstanding as of the
date of this Agreement.
(g) Cause, permit or submit to a vote of Synergy's stockholders any
amendments to the Synergy Charter Documents (or similar governing instruments
of any of its Subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to enter into any joint ventures, strategic partnerships or strategic
investments; provided, that Synergy shall not be prohibited from entering into
business development deals in the ordinary course of business;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except in the ordinary course of business consistent with
past practice, except for the sale, lease, licensing, encumbering or
disposition (other than through licensing permitted by clause (c)) of property
or assets which are not material, individually or in the aggregate, to the
business of Synergy and its Subsidiaries;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Synergy,
enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than in connection with the financing of working
capital consistent with past practice;
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(k) Adopt or amend any Synergy Benefit Plan, Synergy Option Plans or
any employee stock purchase or employee stock option plan; or enter into any
employment contract or collective bargaining agreement (other than offer
letters and letter agreements entered into in the ordinary course of business
consistent with past practice with employees who are terminable "at will"); pay
any special bonus or special remuneration to any director or employee; or
increase the salaries, wage rates, compensation or other fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants except, in each case, as may be required by law and
except for (i) salary increases in the ordinary course of business consistent
with past practice for non-officer employees, (ii) salary increases for
officers in an amount not exceeding 5% of such officer's salary on the date
hereof and (iii) as set forth on Schedule 4.1(k);
(l) Pay, discharge, settle or satisfy any litigation (whether or not
commenced prior to the date of this Agreement) or any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities recognized or disclosed in
the Synergy Balance Sheet or incurred since the date of such financial
statements, or (ii) waive the benefits of, agree to modify in any manner,
terminate, release any person from or knowingly fail to enforce the
confidentiality or nondisclosure provisions of any agreement to which Synergy
or any of its Subsidiaries is a party or of which Synergy or any of its
Subsidiaries is a beneficiary, in the case of both (i) and (ii) of this Section
4.1(l), which payment, discharge, satisfaction, waiver, termination,
modification, release or failure to enforce has a value to Synergy in excess of
$100,000; provided, that Synergy shall provide prior notice to Callisto of any
such action with a value to Synergy in excess of $50,000;
(m) Except in the ordinary course of business consistent with past
practice, and except as provided under Section 6.2(f) below, materially modify,
amend or terminate any Synergy Contracts disclosed in Schedule 2.15 of the
Synergy Schedule or waive, delay the exercise of, release or assign any
material rights or claims thereunder without providing prior notice to Callisto;
(n) Except as required by GAAP, revalue any of its assets or make any
change in accounting methods, principles or practices;
(o) Make any Tax election or accounting method change (except as
required by GAAP) inconsistent with past practice that, individually or in the
aggregate, is reasonably likely to adversely affect in any material respect the
Tax liability or Tax attributes of Synergy or any of its Subsidiaries, settle
or compromise any material Tax liability or consent to any extension or waiver
of any limitation period with respect to Taxes; or
(p) Agree in writing or otherwise to take any of the actions described
in Section 4.1 (a) through (o) above.
4.3 Covenants of Callisto. Except as disclosed on Schedule 4.3 of the
Callisto Schedule, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Callisto and each of its Subsidiaries shall not
(i) amend the Callisto Charter Documents (other than to change its name); (ii)
split, combine or reclassify its outstanding shares of capital stock; or (iii)
declare, set aside or pay any dividend payable in cash, stock or property in
respect of any capital stock other than dividends from its wholly-owned
Subsidiaries.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Public Disclosure. Callisto and Synergy will consult with each
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Mergers or this
Agreement and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange or Nasdaq, in which case
reasonable efforts to consult with the other party will be made prior to such
release or public statement. The parties will agree to the text of the joint
press release announcing the signing of this Agreement.
5.2 Commercially Reasonable Efforts; Notification. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
agrees to use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Mergers and
the other transactions contemplated by this Agreement, including to accomplish
the following: (i) causing the conditions precedent set forth in Article VI to
be satisfied; (ii) obtaining all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities; (iii)
making all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any);
(iv) avoiding any suit, claim, action, investigation or proceeding by any
Governmental Entity challenging the Mergers or any other transaction
contemplated by this Agreement; (v) obtaining all consents, approvals or waivers
from third parties required as a result of the transactions contemplated in this
Agreement; (vi) defending any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (vii) executing or delivering any
additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(b) Callisto shall give prompt notice to Synergy upon becoming
aware that any representation or warranty made by it, Parent, Callisto Merger
Sub or Synergy Merger Sub contained in this Agreement has become untrue or
inaccurate, or of any failure of Callisto, Parent, Callisto Merger Sub or
Synergy Merger Sub to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, where the conditions set forth in Section 6.2(a)
or Section 6.2(b) would not be satisfied as a result thereof; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
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(c) Synergy shall give prompt notice to Callisto upon becoming
aware that any representation or warranty made by it contained in this Agreement
has become untrue or inaccurate, or of any failure of Synergy to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, where the
conditions set forth in Section 6.3(a) or Section 6.3(b) would not be satisfied
as a result thereof; provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.3 Third Party Consents. On or before the Closing Date, Callisto and
Synergy will each use its commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its Subsidiaries' respective
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
5.4 Callisto Stock Options. (a) At the Effective Time, each outstanding
option to purchase shares of Callisto Common Stock (each, a "Callisto Stock
Option") under the Callisto Option Plan or otherwise, whether or not vested,
shall, by virtue of the Mergers, be assumed by Parent. Each Callisto Stock
Option so assumed by Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions of such options or warrants
immediately prior to the Effective Time (including, without limitation, any
repurchase rights or vesting provisions and provisions regarding the
acceleration of vesting and exercisability on certain transactions), except that
(i) each Callisto Stock Option will be exercisable (or will become exercisable
in accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the number of shares of Callisto Common Stock that were issuable
upon exercise of such Callisto Stock Option (assuming full vesting), immediately
prior to the Effective Time, (ii) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed Callisto Stock Option
will be equal to the exercise price per share of Callisto Common Stock at which
such Callisto Stock Option was exercisable immediately prior to the Effective
Time and (iii) all vesting period with respect thereto shall, to the extent
provided by the terms thereof, accelerate, and be subject to any other rights
which arise under the Callisto Option Plan or the option agreements evidencing
awards thereunder as a result of the transactions contemplated by this
Agreement. At the Effective Time, (x) all references in the related stock option
agreements to Callisto shall be deemed to refer to Parent and (ii) Parent shall
assume all of Callisto 's obligations with respect to Callisto 's options as so
amended. As promptly as reasonably practicable after the Effective Time, Parent
shall issue to each holder of an outstanding Callisto option a document
evidencing the foregoing assumption by Parent.
(b) It is intended that the Callisto Stock Options assumed by
Parent shall qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent the Callisto Stock Options
qualified as incentive stock options immediately prior to the Effective Time and
the provisions of this Section 5.4 shall be applied consistently with such
intent.
5.5 Synergy Stock Options and Warrants. At the Effective Time, each
outstanding option to purchase shares of Synergy Common Stock (each, a "Synergy
Stock Option") under the Synergy Option Plans or otherwise, whether or not
vested, and each outstanding Synergy Warrant, whether or not then exercisable,
shall, by virtue of the Mergers, be canceled.
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5.6 Benefits; Prior Service. From and after the Effective Time, Synergy
employees shall be provided with employee benefits that are substantially
similar to those provided to employees of Callisto who are similarly situated.
Callisto shall cause employees of Synergy and its Subsidiaries to be credited
with service with Synergy and each of its Subsidiaries for purposes of
eligibility and vesting under each employee benefit plan maintained by Callisto
or its Subsidiaries prior to the Effective Time. Callisto shall have the
absolute discretion to (i) cash-out Synergy employees accrued and unused
vacation, personal and sick leave days or to (ii) carry over Synergy employees'
accrued but unused vacation, personal and sick leave days; provided, that, such
service shall not be recognized to the extent that such recognition would result
in duplication of benefits.
5.7 Parent Board of Directors. Prior to the Effective Time, the Board
of Directors of Parent, in accordance with applicable law and the Parent Charter
Documents, shall take all necessary action (which action may include the
resignation of existing directors) to cause the Board of Directors of Parent, as
of the Effective Time, to consist of not more than seven (7) directors, with
four directors designated by the stockholders of Callisto existing immediately
prior to the Effective Time and three directors (the "Synergy Directors")
designated by the stockholders of Synergy existing immediately prior to the
Effective Time.
5.8 Parent Management. Prior to the Effective Time, the Board of
Directors of Parent, in accordance with applicable law and the Articles of
Incorporation and Bylaws of Parent shall take all necessary action to appoint
Xxxxxx Xxxxxx, Ph.D. as Chief Executive Officer of Parent and Xxxx X. Xxxxx,
Ph.D. as Chief Scientific Officer of Parent. For a period of 18 months after the
Closing, any change in the Chief Executive Officer of the Parent will require
the majority approval of the Synergy Directors. At the Effective Time the Parent
and Xxxxxx Xxxxxx, Ph.D. will enter into an Executive Employment Agreement in
the form and substance attached as Exhibit F-1, and at the Effective Time the
Parent and Xxxx X. Xxxxx, Ph.D. will enter into an Executive Employment
Agreement in the form and substance attached as Exhibit F-2.
5.9 Non-Disclosure, Invention Release and Non-Competition Agreements.
(a) Synergy shall use its commercially reasonable efforts to cause employees of
Synergy and its Subsidiaries who will become employees of Parent from and after
the Effective Time to enter into Parent's standard form of Non- Disclosure,
Invention Release and Non-Competition Agreement prior to the Closing.
(b) Parent shall use its commercially reasonable efforts to
cause employees of Parent and its Subsidiaries who have not already entered into
Parent's standard form of Non-Disclosure, Invention Release and Non-Competition
Agreement to enter into such agreement prior to the Closing.
5.10 Conveyance Taxes. Parent, Callisto, Synergy, Callisto Merger Sub
and Synergy Merger Sub shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications, or other documents regarding (i)
any real property transfer gains, sales, use, transfer, value-added, stock
transfer and stamp Taxes, (ii) any recording, registration and other fees, and
(iii) any similar Taxes or fees that become payable in connection with the
transactions contemplated hereby. The Taxes described in clause (i) shall be
paid equally by Callisto and Synergy.
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5.11 No Negotiation. Until the Effective Date, or such time, if any, as
this Agreement is terminated pursuant to Article VI below, neither Callisto nor
Synergy shall, nor shall they permit any of their respective affiliates,
directors, officers, employees, investment bankers, attorneys or other agents,
advisors or representatives to, directly or indirectly, (a) sell, offer or agree
to sell its business, by sale of shares or assets, merger or otherwise (an
"Acquisition Transaction") other than pursuant to this Agreement, (b) solicit or
initiate the submission of any proposal for an Acquisition Transaction, or (c)
participate in any discussions or negotiations with, or furnish any information
concerning its business to, any corporation, person or other entity in
connection with a possible Acquisition Transaction other than pursuant to this
Agreement.
5.12 SEC Reporting. As soon as practicable after the Effective Time,
the Board of Directors of Parent, in accordance with applicable law and the
Articles of Incorporation and Bylaws of Parent, shall take all necessary action
and shall cause its authorized officers to make all the necessary filings with
the SEC, for Parent to become a reporting company pursuant to Section 12(g)(1)
of the Securities Exchange Act of 1934.
5.13 Survival after Closing. All of the covenants and obligations of
the parties to this Agreement, which by their terms are to be performed or will
become effective after the Closing, including without limitation, those
contained in Sections 1.9, 1.15, 5.4, 5.5, 5.6, 5.8, 5.9, 5.10, 5.11 and 5.12
shall survive the Closing.
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ARTICLE VI
CONDITIONS TO THE MERGERS
6.1 Conditions to Obligations of Each Party to Effect the Mergers. The
respective obligations of each party to this Agreement to effect the Mergers
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived if waived in writing by both
Callisto and Synergy:
(a) Stockholder Approval. This Agreement shall have been
adopted and the Mergers shall have been duly approved (i) by the requisite vote
under applicable law and the Callisto Charter Documents by the stockholders of
Callisto and (ii) by the requisite vote under applicable law and the Synergy
Charter Documents by the stockholders of Synergy. The Share Issuance shall have
been duly approved by the requisite vote under applicable law and the Articles
of Incorporation and Bylaws of Parent by the stockholders of Parent.
(b) No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Mergers illegal or otherwise prohibiting consummation of the Mergers.
(c) Schedules. Each of the parties hereto shall have delivered
to each other complete and accurate Schedules to this Agreement and such
Schedules shall have been approved by the recipient.
(d) Exhibits. The parties shall mutually agree upon the form
and substance of all the agreement attached as Exhibits to this Agreement, which
agreements shall be executed and delivered to each other at the Closing Date.
6.2 Additional Conditions to Obligations of Synergy. The obligation of
Synergy to effect the Mergers shall be subject to the satisfaction at or prior
to the Closing Date of each of the following conditions, any of which may be
waived, in writing, exclusively by Synergy:
(a) Representations and Warranties. The representations and
warranties of Callisto, Parent, Callisto Merger Sub and Synergy Merger Sub set
forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as if made on and as of the Closing Date
(except to the extent any such representation and warranty expressly speaks as
of an earlier date) and Synergy shall have received a certificate signed on
behalf of Callisto by the Chief Executive Officer of Callisto to such effect;
provided, however, that notwithstanding anything herein to the contrary, this
Section 6.2(a) shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct unless the failure of
such representations or warranties to be so true and correct, individually or in
the aggregate, has had, or is reasonably likely to have, a Callisto Material
Adverse Effect.
(b) Agreements and Covenants. Each of Callisto, Parent,
Callisto Merger Sub and Synergy Merger Sub shall have performed or complied
with, in all material respects, all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date, and Synergy shall have received a certificate to such effect signed on
behalf of each of Callisto, Parent, Callisto Merger Sub and Synergy Merger Sub
by an authorized officer of Callisto.
40
(c) No Closing Material Adverse Effect. Since the date hereof,
there has not occurred a Callisto Material Adverse Effect. For purposes of the
preceding sentence and Section 6.2(a), the occurrence of any of the following
events or circumstances, in and of themselves and in combination with any of the
others, shall not constitute a Callisto Material Adverse Effect:
(1) any litigation or threat of litigation filed or made after
the date hereof challenging any of the transactions
contemplated herein or any shareholder litigation or threat of
shareholder litigation filed or made after the date hereof
resulting from this Agreement or the transactions contemplated
herein;
(2) any adverse change, event or effect that is demonstrated
to be caused primarily by conditions generally affecting the
United States economy; and
(3) any adverse change, event or effect that is demonstrated
to be caused primarily by conditions generally affecting the
healthcare, biotechnology, or services industries.
(d) Cash at Closing. At the time of Closing, Callisto shall
have approximately $1,600,000 in cash or cash equivalents. Such amount will be
reduced by the amount of liabilities at Closing set forth on Schedule 2.5 of the
Synergy Schedule which amount will not exceed $150,000.
(e) Conversion of Debt and Loans. Prior to or at Closing,
Callisto shall provide satisfactory evidence to Synergy that except as disclosed
on Schedule 6.2(e), any and all institutional indebtedness, promissory notes,
shareholder and employee loans of Callisto and its Subsidiaries shall have been
extinguished or converted into equity of Callisto.
(f) Unither Agreements. Prior to or at Closing, Synergy and
Unither Pharmaceuticals, Inc. ("Unither") shall have entered into and
consummated the transactions contemplated in that certain Redemption and
Termination Agreement and Assignment and Assumption Agreement which agreements
have been, prior to execution, supplied to and reviewed by Callisto
(collectively, the "Unither Agreements"). Pursuant to the Unither Agreements
Synergy will buy back all of Unither's Series D Preferred Stock and Warrants to
purchase Synergy Common Stock, thus terminating all of Unither's rights and
interest as a stockholder of Synergy, and all of its rights and obligations
under any other agreement with Synergy, in consideration for Synergy's agreement
to assign to Unither all of Synergy's rights, title and interest in Synergy's
patents, licenses, grant and other intellectual property rights relating to
iminosugar compounds. As additional consideration, Unither will pay Synergy, the
amount of Seven Hundred Fifty Thousand Dollars ($750,000).
41
6.3 Additional Conditions to the Obligations of Callisto, Parent,
Callisto Merger Sub and Synergy Merger Sub. The obligations of Callisto, Parent,
Callisto Merger Sub and Synergy Merger Sub to effect the Mergers shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Callisto:
(a) Representations and Warranties. The representations and
warranties of Synergy set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date as if made on and as of
the Closing Date (except to the extent any such representation and warranty
expressly speaks as of an earlier date) and Callisto shall have received a
certificate signed on behalf of Synergy by the Chief Executive Officer of
Synergy to such effect; provided, however, that notwithstanding anything herein
to the contrary, this Section 6.3(a) shall be deemed to have been satisfied even
if such representations or warranties are not so true and correct unless the
failure of such representations or warranties to be so true and correct,
individually or in the aggregate, has had, or is reasonably likely to have, a
Synergy Material Adverse Effect.
(b) Agreements and Covenants. Synergy shall have performed or
complied with, in all material respects, all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date, and Callisto shall have received a certificate to such effect
signed on behalf of Synergy by an authorized officer of Synergy.
(c) No Closing Material Adverse Effect. Since the date hereof,
there has not occurred a Synergy Material Adverse Effect. For purposes of the
preceding sentence and Section 6.3(a), the occurrence of any of the following
events or circumstances, in and of themselves and in combination with any of the
others, shall not constitute a Synergy Material Adverse Effect:
(1) any litigation or threat of litigation filed or made
after the date hereof challenging any of the transactions
contemplated herein or any shareholder litigation or threat of
shareholder litigation filed or made after the date hereof
resulting from this Agreement or the transactions contemplated
herein;
(2) any adverse change, event or effect that is demonstrated
to be caused primarily by conditions generally affecting the
United States economy; and
(3) any adverse change, event or effect that is demonstrated
to be caused primarily by conditions generally affecting the
healthcare, biotechnology, or services industries.
(d) Conversion of Debt and Loans. Prior to or at Closing,
Synergy shall provide satisfactory evidence to Callisto that except as disclosed
on Schedule 6.3(d), any and all institutional indebtedness, promissory notes,
shareholder and employee loans of Synergy and its Subsidiaries shall have been
extinguished or converted into equity of Synergy.
42
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approval of the
stockholders of Callisto and Synergy:
(a) by mutual written consent duly authorized by the Boards of
Directors of Callisto and Synergy;
(b) by either Callisto or Synergy if the Mergers shall not
have been consummated by March 31, 2003, which date shall be automatically
extended for an additional period of up to two (2) weeks, as it may be necessary
to obtain the requisite stockholder approval by the stockholders of Callisto and
Synergy (such date, or such other date that may be agreed by mutual written
consent, being the "Outside Date") for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Mergers to occur on or before such date if
such action or failure to act constitutes a breach of this Agreement;
(c) by either Callisto or Synergy if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Mergers, which order, decree, ruling or other action shall have
become final and nonappealable or any law, order, rule or regulation is in
effect or is adopted or issued, which has the effect of prohibiting the Mergers;
7.2 Fees and Expenses. (a) Except as set forth in this Section 7.2, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses whether
or not the Mergers are consummated: As used in this Agreement, "Expenses" shall
include all reasonable out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters relating to
the closing of the Mergers and the other transactions contemplated hereby.
(b) In the event of a breach of Section 5.11 by Callisto or
Synergy, the breaching party shall pay the non-breaching a fee of $200,000.
7.3 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after the approval and
adoption of this Agreement by the stockholders of Callisto and Synergy, there
shall not be any amendment that by law requires further approval by the
stockholders of Callisto or Synergy without the further approval of such
stockholders. This Agreement may not be amended by the parties hereto except by
execution of an instrument in writing signed on behalf of each of Callisto,
Parent, Synergy, Callisto Merger Sub and Synergy Merger Sub.
43
7.4 Extension; Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
44
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given on the day of delivery if delivered personally
or sent via telecopy (receipt confirmed) or on the second business day after
being sent if delivered by commercial delivery service, to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent, Callisto, Callisto Merger Sub or Synergy
Merger Sub:
Callisto Pharmaceuticals, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention:
Telecopy No.:
with a copy to:
Xxxxx Xxxxxx Radin Tischman Xxxxxxx & Xxxxx
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to Synergy, to
Synergy Pharmaceuticals, Inc.
0 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention:
Telecopy No.:
with a copy to
Xxxxx Xxxxxxx
000 X. Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
8.2 Interpretation. (a) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to a Section,
such reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
45
(b) For purposes of this Agreement, the term "knowledge" means
with respect to a party hereto, with respect to any matter in question, that any
of the officers of such party has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "person" shall
mean any individual, 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, entity or
Governmental Entity.
(d) For purposes of this Agreement, an "agreement,"
"arrangement," "contract," "commitment" or "plan" shall mean a legally binding,
written agreement, arrangement, contract, commitment or plan, as the case may
be.
8.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Callisto Schedule and the
Synergy Schedule constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
8.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which t they are entitled at law or in
equity. 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.
46
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.10 Waiver of Jury Trial. EACH OF CALLISTO, PARENT, SYNERGY, CALLISTO
MERGER SUB AND SYNERGY MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF CALLISTO, PARENT, SYNERGY, CALLISTO MERGER SUB AND SYNERGY MERGER SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
CALLISTO PHARMACEUTICALS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------------
Title: Director
-----------------------------
SYNERGY PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------
Title: President
-----------------------------
WEBTRONICS, INC.
By: /s/ Xxxxxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxxxxx Xxxxxxxx
------------------------------
Title: President
-----------------------------
CALLISTO ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------------
Title: Director
-----------------------------
SYNERGY ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------------
Title: Director
-----------------------------
48
EXHIBITS AND SCHEDULES TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WEBTRONICS, INC.,
CALLISTO PHARMACEUTICALS, INC.,
CALLISTO ACQUISITION CORP.,
SYNERGY PHARMACEUTICALS, INC.
AND
SYNERGY ACQUISITION CORP.
EXHIBIT A: Synergy Disclosure Schedule
EXHIBIT B: Callisto Disclosure Schedule
EXHIBIT C: Certificate of Formation of Newco
EXHIBIT D: Form of Amended Articles of Incorporation of Parent
EXHIBIT E-1: Certificates of Incorporation of the Callisto Surviving
Corporation
EXHIBIT E-2: Certificates of Incorporation of the Synergy Surviving
Corporation
EXHIBIT F-1: Form of Executive Employment Agreement for Xxxxxx Xxxxxx, Ph.D.
EXHIBIT F-2: Form of Executive Employment Agreement for Xxxx X. Xxxxx, Ph.D.
Schedule 1.8: Capitalization Table of Parent as of the Effective Date
