Exhibit 2.1
MERGER AGREEMENT
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AGREEMENT AND PLAN OF MERGER
by and
among
Insite Vision Incorporated
a Delaware corporation,
Arrow Acquisition, Inc.,
a Delaware corporation
and
Ophthalmic Solutions, Inc.
a Delaware corporation
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
22, 2003, by and among Insite Vision Incorporated, a Delaware corporation (the
"Company"), Arrow Acquisition, Inc., a Delaware corporation ("Acquisition") and
Ophthalmic Solutions, Inc., a Delaware corporation ("OS").
RECITALS
WHEREAS, the Company and OS desire to merge Acquisition with and into
OS whereby OS shall be the surviving entity pursuant to the terms and conditions
set forth herein and whereby the transaction is intended to qualify as a tax
free reorganization pursuant to Section 368(a) of the Internal Revenue Code of
1986, as amended (the "IRC"), to the extent permitted by applicable law;
WHEREAS, in furtherance of such combination, the Boards of Directors
of the Company, Acquisition and OS have each approved the merger of Acquisition
with and into OS (the "Merger"), upon the terms and subject to the conditions
set forth herein, in accordance with the applicable provisions of the Delaware
General Corporation Law (the "DGCL").
WHEREAS, the stockholder of OS desires to exchange all of its shares
of the capital stock of OS (the "OS Capital Stock") for shares of the capital
stock of the Company (the "Company Capital Stock") as a tax free reorganization
pursuant to Section 368(a) of the IRC, to the extent permitted by applicable
law;
WHERAS, just prior to the Merger, OS's 1% Convertible Debentures Due
September 21, 2008 in the aggregate principal amount of Nine Hundred Ninety Two
Thousand Seven Hundred Fifty Dollars ($992,750) (the "OS First Debentures") and
OS's 1% Convertible Debenture Due September 21, 2008 in the principal amount of
Seven Thousand Two Hundred Fifty Dollars ($7,250) (the "OS Second Debenture"
and, together with the OS First Debentures, the "OS Debentures") are convertible
into shares of OS common stock par value $0.001 per share (the "OS Common
Stock") pursuant to the terms of the OS Debentures and the Purchase Agreement
(as defined below) and upon the consummation of the Merger will be convertible
into an equivalent number of shares of the Company's common stock, par value
$0.01 per share (the "Company Common Stock") (the "Company Underlying Shares");
WHEREAS, upon the effectiveness of the Merger and pursuant to the
terms of this Agreement and the Purchase Agreement, the Company Underlying
Shares will be substituted for the OS Underlying Shares, the Company will assume
the obligations, jointly and severally, with OS under the OS Debentures and the
Company will assume the obligations of OS under that certain Convertible
Debenture Purchase Agreement dated even date herewith between OS and HEM Mutual
Assurance LLC ("HEM") (the "Purchase Agreement") and OS will be released from
certain of such obligations; and
WHEREAS, all defined terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Purchase Agreement.
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined) and
subject to and upon the terms and conditions of this Agreement and the DGCL,
Acquisition shall be merged with and into OS pursuant to the Merger. Following
the Merger, OS shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Acquisition shall cease.
As part of the Merger and as more fully described in Section 2.1, (i) the One
Thousand (1,000) issued and outstanding shares of the OS Common Stock shall be
exchanged for Company Common Stock at the Exchange Ratio (as defined below) and
(ii) each share of Acquisition's issued and outstanding of common stock, par
value $.001 per share (the "Acquisition Common Stock"), shall be converted into
one validly issued, fully paid and non-assessable share of common stock, par
value of $.001 per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock").
1.2 Effective Time. The Merger shall be consummated as promptly as
practicable after satisfaction of all conditions to the Merger set forth herein,
by filing with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger"), and all other appropriate documents,
executed in accordance with the relevant provisions of the DGCL. The Merger
shall become effective upon the filing of the Certificate of Merger. The time of
such filing shall be referred to herein as the "Effective Time."
1.3 Effects of the Merger. At the Effective Time, all the rights,
privileges, immunities, powers and franchises of Acquisition and OS and all
property, real, personal and mixed, and every other interest of, or belonging to
or due to each of Acquisition and OS shall vest in the Surviving Corporation,
and all debts, liabilities, obligations and duties of Acquisition and OS,
including, without limitation, the performance of all obligations and duties of
OS pursuant to the Purchase Agreement, the OS Debentures and the exhibits,
schedules and all documents executed in connection therewith or any other
Transaction Document (as defined in the Purchase Agreement), shall become the
debts, liabilities, obligations and duties of the Surviving Corporation (except
as assumed by the Company) without further act or deed, all in the manner and to
the full extent provided by the DGCL. Whenever a conveyance, assignment,
transfer, deed or other instrument or act is necessary to vest any property or
right in the Surviving Corporation, the directors and officers of the respective
constituent corporations shall execute, acknowledge and deliver such instruments
and perform such acts, for which purpose the separate existence of the
constituent corporations and the authority of their respective directors and
officers shall continue, notwithstanding the Merger.
1.4 Certificate of Incorporation. The Certificate of Incorporation of
OS, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation and thereafter may be
amended or repealed in accordance with its terms and applicable law.
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1.5 By-Laws. At the Effective Time and without any further action on
the part of Acquisition and OS, the By-laws of OS shall be the By-laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
1.6 Directors. The directors of Acquisition at the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.7 Officers. The officers of Acquisition at the Effective Time shall
be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly appointed
and qualified, as the case may be.
1.8 Tax-Free Reorganization. The parties intend that the Merger shall
be treated as a tax-free reorganization pursuant to Section 368(a) of the IRC,
to the extent permitted by applicable law.
ARTICLE II
CONVERSION OF OS SHARES AND ASSUMPTION OF OS DEBENTURES
2.1 Conversion and Cancellation of OS Common Stock. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the Company, Acquisition or OS or the holders of any shares of the capital stock
of Acquisition or OS:
(a) Subject to the provisions of Sections 2.4 and 2.5, each share
of OS Common Stock (the "OS Common Stock Shares") issued and outstanding
immediately prior to the Effective Time (other than shares canceled in
accordance with Section 2.1(b) and other than with respect to the escrow shares
deposited by OS with the Escrow Agent (as defined below) in accordance with the
Purchase Agreement (the "OS Escrow Shares") which shall be automatically
cancelled and replaced with an equal number of Company Escrow Shares in
accordance with Section 2.2, shall be converted into 0.10 (the "Exchange Ratio")
of a validly issued, fully paid and nonassessable share of Company Common Stock
(the "Company Common Stock Shares"). As of the Effective Time, each OS Common
Stock Share shall no longer be outstanding and shall automatically be canceled
and cease to exist, and each holder of a certificate representing any OS Common
Stock Share shall cease to have any rights with respect thereto other than the
right to receive Company Common Stock Shares to be issued in consideration
therefor upon the surrender of such certificate, properly endorsed to the
Company.
(b) Each share of OS Capital Stock held in the treasury of the OS
and each share of OS Capital Stock owned by Acquisition or Company shall be
canceled without any conversion thereof and no payment, distribution or other
consideration shall be made with respect thereto.
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(c) Each issued and outstanding share of Acquisition Common Stock
shall be converted into one validly issued, fully paid and nonassessable share
of Surviving Corporation Common Stock.
2.2 Escrow Materials. (a) At the Post-Closing, the Company shall
deposit into escrow with Gottbetter & Partners, LLP, as escrow agent (the
"Escrow Agent") the following, which are hereinafter collectively referred to as
the "Escrow Materials," (i) the escrow agreement annexed hereto and made a part
hereof as Exhibit 2.2(a) (the "Escrow Agreement"), (ii) certificates
representing Five Million (5,000,000) shares of duly issued Company Common
Stock, without restriction and freely tradable pursuant to Rule 504 of
Regulation D of the Securities Act (the "Company Escrow Shares"), in share
denominations specified by the Purchaser, registered in the name of the
Purchaser and/or its assigns; and (iii) a power of attorney with respect to the
Company Underlying Shares and the Company Escrow Shares, in the form annexed to
the Escrow Agreement as Appendix I. At the Post-Closing, upon the Company
fulfilling its obligations under this Section 2.2, Escrow Agent shall release to
the Company the OS Escrow Shares cancelled in accordance with Section 2.1. The
Escrow Materials shall be held in escrow in accordance with the Escrow
Agreement. The Escrow Materials shall be released from escrow only in accordance
with this Section 2.2, the Purchase Agreement, the Note, the OS Debentures and
the Escrow Agreement.
(b) Upon the effectiveness of the Merger and in accordance with
Section 2.7 hereof, the Company shall substitute the Company Underlying Shares
and the Company Escrow Shares for the OS Underlying Shares and the OS Escrow
Shares with regard to all of the rights and obligations, specifically including
the conversion rights, under the OS Debentures, and the OS Escrow Shares shall
be cancelled.
2.3 [Intentionally left blank].
2.4 Adjustment of the Exchange Ratio. In the event that, prior to the
Effective Time, any stock split, combination, reclassification or stock dividend
with respect to the Company Common Stock or OS Common Stock, any change or
conversion of Company Common Stock or OS Common Stock or into other securities
or any other dividend or distribution with respect to the Company Common Stock
or OS Common Stock (other than regular quarterly dividends) should occur or, if
a record date with respect to any of the foregoing should occur, appropriate and
proportionate adjustments shall be made to the Exchange Ratio, and thereafter
all references to an Exchange Ratio shall be deemed to be to such Exchange Ratio
as so adjusted.
2.5 No Fractional Shares. No certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon the surrender for
exchange of certificates and such fractional share shall not entitle the record
or beneficial owner thereof to vote or to any other rights as a stockholder of
the Company. The number of shares of Company Common Stock to be issued shall be
rounded up to the nearest whole share.
2.6 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
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the rights, privileges, powers, franchises, properties or assets of either OS or
Acquisition or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or their designees
shall be authorized (to the fullest extent allowed under applicable law) to
execute and deliver, in the name and on behalf of either OS or Acquisition , all
such deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of OS or Acquisition, all such other acts and things necessary, desirable
or proper to vest, perfect or confirm its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
OS or Acquisition, as applicable, and otherwise to carry out the purposes of
this Agreement.
2.7 OS Debentures. (a) As of the Effective Time, the Company assumes,
jointly and severally with OS, all of the obligations and responsibilities under
the OS Debentures to the holder or holders of the OS Debentures. With respect to
the OS Debentures, at the Effective Time, the Company shall (i) replace the OS
Underlying Shares, with the Company Underlying Shares and (ii) replace the
Escrow Shares deposited by OS with the Escrow Agent with the Company Escrow
Shares.
(b) At the Effective Time, (i) all references in the OS Debentures to
Company Common Stock (as defined in the OS Debentures) shall be references to
Company Common Stock (as defined herein) and (ii) all references to the Company
(as defined in the OS Debentures) in the OS Debentures shall be read as
references to the Company (as defined herein) as if the OS Debentures were
issued on the date the OS Debentures were issued, by the Company (as defined
herein), specifically including all calculations in the OS Debentures such as
the determination of the conversion price, the Conversion Price, the Fixed
Conversion Price and the Floating Conversion Price. The Exchange Ratio (as
defined herein) shall have no effect on the OS Debentures or the assumption
thereof by the Company (as defined herein).
(c) At the Effective Time, OS shall assign and the Company shall
assume all of OS's obligations and covenants under the Purchase Agreement as if
the Company executed the Purchase Agreement instead of OS on the date thereof.
At the Effective Time, all references to the Company (as defined in the Purchase
Agreement) in the Purchase Agreement shall mean the Company (as defined herein)
and all references to dates or tolling of periods shall be read as if the
Company (as defined herein) executed the Purchase Agreement instead of the
Company (as defined in the Purchase Agreement). At the Effective Time, all of
the remedies available to the current and future holders of the OS Debentures
under the Purchase Agreement against the Company (as defined in the Purchase
Agreement) shall be available against the Company (as defined herein).
(d) The provisions described in this Section 2.7 shall not be amended
and shall be in effect until the earlier of (i) the date all of the OS
Convertible Debentures have been converted into Company Common Stock Shares and
(ii) six (6) years from the date the OS Debentures were issued.
(e) The current and future holders of the OS Debentures shall be third
party beneficiaries of this Agreement only. There shall be no other third party
beneficiaries to this Agreement or any part hereof.
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ARTICLE III
CLOSING
Subject to satisfaction of the conditions to closing set forth in this
Agreement and unless this Agreement is otherwise terminated in accordance with
the provisions contained herein, the closing of the Merger and the Contemplated
Transactions (the "Post-Closing") shall take place at the offices of Gottbetter
& Partners, LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as promptly as
practicable after satisfaction of the conditions set forth in this Agreement,
which in no event shall be more than ten days after the Closing Date under the
Purchase Agreement (except if such 10th day is not a Business Day, then the next
Business Day) (the "Post-Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company and Acquisition.
Except as disclosed in the Reports (as defined below) or in a document of even
date herewith referring to the representations and warranties in this Agreement
and delivered by Company to OS prior to the execution and delivery of this
Agreement (the "Company Disclosure Schedule"), Acquisition and the Company
hereby make the following representations and warranties to OS, all of which
shall survive the Post-Closing, subject to the limitations set forth in Section
8.1 hereof:
(a) Organization and Good Standing. Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it owns or
uses, and to perform all its obligations under this Agreement. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and assets
that it owns or uses, and to perform all its obligations under this Agreement
and, upon the Post-Closing the OS Debentures. Company has no subsidiaries other
than Acquisition and other than as set forth on the Company Disclosure Schedule
(individually, a "Subsidiary" and collectively, the "Subsidiaries"). Acquisition
has no subsidiaries. Each of the Company and Acquisition is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which either the ownership or use of the properties owned or used by it, or
the nature of the activities conducted by it, requires such qualification,
except for such failures to be so qualified or in good standing would not have a
Material Adverse Effect.
(b) Authority; No Conflict.
i. This Agreement and any agreement executed in connection
herewith by Company or Acquisition constitute the legal, valid and binding
obligations of the Company and
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Acquisition, as the case may be, enforceable against the Company and
Acquisition, as the case may be, in accordance with their respective terms,
except as such enforceability is limited by bankruptcy, insolvency and other
laws affecting the rights of creditors and by general equitable principles. The
Company has the absolute and unrestricted right, power, authority and capacity
to execute and deliver this Agreement and any agreement executed by it in
connection herewith and to perform its obligations hereunder and thereunder.
ii. Neither the execution and delivery of this Agreement by each
of the Company and Acquisition, nor the consummation or performance by each of
any of its respective obligations contained in this Agreement or in connection
with the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
a. contravene, conflict with or result in a violation of (x)
any provision of the Organizational Documents of the Company or Acquisition, as
the case may be, or (y) any resolution adopted by the board of directors or the
stockholders of the Company or Acquisition, as the case may be;
b. other than with respect to federal and state securities
laws which are limited to the Company's knowledge based on the opinions received
by the Company referenced in Sections 6.2(b) and 6.2 (c), contravene, conflict
with or result in a violation of, or give any governmental body or other Person
the right to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order to which
the Company or Acquisition or any of the assets owned or used by the Company or
Acquisition may be subject;
c. contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, this Agreement, the OS Debentures (once assumed
by Company) or any Applicable Contract, where such contravention, conflict,
violation or breach is reasonably likely to have a Material Adverse Effect;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the material assets owned or used by
the Company or Acquisition;
e. to the Company's knowledge, cause the Company or
Acquisition to become subject to, or to become liable for the payment of, any
tax, where such contravention, conflict, violation or breach is reasonably
likely to have a Material Adverse Effect; or
f. cause any of the assets owned by the Company or
Acquisition to be reassessed or revalued by any taxing authority or other
governmental body, except in connection with the transfer of real estate
pursuant to this Agreement or the Contemplated Transactions, if any.
(c) Capitalization. The capitalization of the Company as of June 30,
2003 is as set forth in the Form 10-Q for the period ended June 30, 2003 (the
"June 10-Q"), increased as set
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forth in the next sentence. The Company has not issued any capital stock since
that date other than pursuant to (i) employee benefit plans disclosed in the
Reports (as defined in Section 4.1(d)) or (ii) outstanding warrants, options or
other securities disclosed in the Reports. All of the issued and outstanding
shares of the Company Capital Stock have been duly authorized and validly issued
and are fully paid and non-assessable. Except for this Agreement and as
disclosed in the Reports, there are no outstanding options, warrants, script,
rights to subscribe to, registration rights, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of the Company Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of the Company
Common Stock, or securities or rights convertible or exchangeable into shares of
the Company Common Stock. None of the outstanding Company Capital Stock was
issued in violation of the Securities Act or any other legal requirement.
(d) Financial Statements. The Company has delivered or made available
to OS copies of its Form 10-K Annual Report for the fiscal year ended December
31, 2002 and copies of its quarterly reports on Form 10-Q for the quarters ended
March 31, 2003 and June 30, 2003, each as filed with the SEC and including, in
each case, any amendments thereto (collectively, the "Reports"). The financial
statements contained in the Reports are in all material respects in accordance
with the books and records of the Company and have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated, all as
more particularly set forth in the notes to such statements. The consolidated
balance sheets contained in such Reports (the "Company Balance Sheets") present
fairly in all material respects as of their dates the consolidated financial
condition of the Company and its subsidiaries. Except as and to the extent
reflected or reserved against in the Company Balance Sheets (including the notes
thereto), the Company did not have, as of the date of any such Company Balance
Sheet, any material liabilities or obligations (absolute or contingent) of a
nature customarily reflected in a balance sheet or the notes thereto. The
consolidated statements of operations, consolidated statements of stockholders'
equity and changes in consolidated statements of cash flows present fairly in
all material respects the results of operations and changes in financial
position of the Company and its subsidiaries for the periods indicated.
(e) SEC Filings. Since September 12, 2001, the Company has filed all
reports required to be filed with the SEC under the rules and regulations of the
SEC and all such reports have complied in all material respects, as of their
respective filing dates and effective dates, as the case may be, with all the
applicable requirements of the Securities Exchange Act of 1934, as amended. As
of the respective filing and effective dates, none of such reports (including
without limitation, the Reports) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(f) Absence of Material Adverse Change. Since the date of the latest
Company Balance Sheets, there have been no events, changes or occurrences which
have had or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect.
(g) Issuance of Company Securities. The Company Common Stock Shares,
and when issued in accordance with this Agreement, the Purchase Agreement, the
OS Debentures and the
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Escrow Agreement, the Company Underlying Shares and the Company Escrow Shares,
shall be duly authorized, validly issued, fully-paid and nonassessable. The
Company currently has, and at all times while the OS Debentures are outstanding
will use commercially reasonable efforts to maintain, an adequate reserve of
shares of the Company Common Stock to enable it to perform its obligations under
this Agreement and OS Debentures. Except as set forth in the Reports, there is
no equity line of credit or convertible security or instrument outstanding of
the Company.
(h) Undisclosed Liabilities. Except as disclosed in any Schedule to
this Agreement, none of the Company, Acquisition or the Subsidiaries has any
material obligations and liabilities (contingent or otherwise) except those
liabilities (i) that are reflected in the Company Balance Sheets or in the notes
thereto, or disclosed in the notes therein in accordance with GAAP or, in
accordance with GAAP, are not required to be so reflected or disclosed, or (ii)
that were incurred after the date of the Company Balance Sheets in the Ordinary
Course of Business, none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law or could reasonably be expected to have
a Material Adverse Effect.
(i) Taxes.
i. The Company has filed or caused to be filed on a timely basis
all tax returns that are or were required to be filed by it pursuant to
applicable Legal Requirements. The Company has paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by the Company,
except such taxes, if any, as are listed in the Company Disclosure Schedule and
are being contested in good faith as to which adequate reserves have been
provided in the Company Balance Sheets.
ii. All tax returns filed by the Company are true, correct and
complete in all material respects.
(j) Employee Benefits. Except as disclosed in the Reports, the Company
does not sponsor or otherwise maintain a "pension plan" within the meaning of
Section 3(2) of ERISA or any other retirement plan other than the Company Profit
Sharing and 401(k) Plan and Trust that is intended to qualify under Section 401
of the Code, nor do any unfunded liabilities exist with respect to any employee
benefit plan, past or present. No employee benefit plan, any trust created
thereunder or any trustee or administrator thereof has engaged in a "prohibited
transaction," as defined in Section 4975 of the Code, which may have a Material
Adverse Effect.
(k) Governmental Authorizations. The Company, Acquisition and the
Subsidiaries have all permits that are legally required to enable them to
conduct their business in all material respects as now conducted, except as
would not have a Material Adverse Effect.
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(l) Legal Proceedings; Orders.
i. Except as set forth in the Reports, there is no material
pending Proceeding:
a. that has been commenced by or against the Company,
Acquisition or the Subsidiaries, or any of the assets owned or used by, the
Company, Acquisition or the Subsidiaries; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
ii. Except as set forth in the Reports:
a. there is no material Order to which the Company or the
Subsidiaries, or any of the assets owned or used by the Company, Acquisition or
the Subsidiaries, is subject; and
b. no officer, director, agent, or employee of the Company
or Acquisition is subject to any material Order that prohibits such offer,
director, agent or employee from engaging in or continuing any conduct, activity
or practice relating to the business of the Company or Acquisition, as the case
may be.
(m) Absence of Certain Changes and Events. Except as set forth in the
Reports, since the date of the most recent Company Balance Sheets, the Company
and the Subsidiaries and Acquisition, since the date of its inception, have
conducted their business only in the Ordinary Course of Business, and other than
as contemplated by this Agreement or the Contemplated Transactions there has not
been any:
i. change in the authorized or issued Company Capital Stock or
the authorized or issued capital stock of Acquisition and the Subsidiaries;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any equity lines of credit, security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
ii. amendment to the Organizational Documents of the Company,
Acquisition or the Subsidiaries;
iii. damage to or destruction or loss of any material asset or
property of the Company, Acquisition or the Subsidiaries, whether or not covered
by insurance, causing a Material Adverse Effect;
iv. receipt of notice that any of their substantial customers
have terminated or intends to terminate their relationship, which termination
would have a Material Adverse Effect;
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v. entry into any transaction other than in the Ordinary Course
of Business;
vi. entry into, termination of, or receipt of written notice of
termination of any material (i) license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) contract or
transaction other than in the Ordinary Course of Business;
vii. sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of the
Company, Acquisition or the Subsidiaries or mortgage, pledge, or imposition of
any lien or other encumbrance on any material asset or property of the Company,
Acquisition or the Subsidiaries;
viii. cancellation or waiver of any claims or rights with a value
to the Company in excess of $10,000;
ix. material change in the accounting methods used by the
Company, Acquisition or the Subsidiaries; or
x. agreement, whether oral or written, by the Company,
Acquisition or the Subsidiaries to do any of the foregoing.
(n) No Default or Violation. The Company, Acquisition and the
Subsidiaries (i) are in material compliance with all applicable material terms
and requirements of each material contract under which they have or had any
obligation or liability or by which they or any of the assets owned or used by
them is or was bound and (ii) is not in material violation of any Legal
Requirement, except as has no Material Adverse Effect.
(o) Certain Payments. Since the most recent date of the Company
Balance Sheets, neither the Company, Acquisition or the Subsidiaries, nor any
director, officer, agent or employee of the Company or the Subsidiaries has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company, Acquisition or
the Subsidiaries or (iv) in violation of any Legal Requirement, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company, Acquisition or the Subsidiaries.
(p) Brokers or Finders. The Company and Acquisition have not incurred
any obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
4.2 Representations and Warranties of OS. OS hereby makes the
following representations and warranties to the Company, all of which shall
survive the Post-Closing, subject to the limitations set forth in Section 8.2
hereof:
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(a) Organization, Good Standing and Purpose. OS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and authority to conduct its businesses as it is now
being conducted, to own or use the properties and assets that it owns or uses,
and to perform all of its obligations under this Agreement. OS has no
subsidiaries. OS is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification, except for such failures to be so qualified or
in good standing would not have a Material Adverse Effect. OS was formed to
pursue opportunities for over-the-counter products in the area of ophthalmology.
(b) Authority; No Conflict.
i. This Agreement and any agreement executed in connection
herewith have been duly authorized by all required action of OS and constitute
the legal, valid and binding obligations of OS, enforceable against OS in
accordance with their respective terms. OS has the absolute and unrestricted
right, power and authority to execute and deliver this Agreement and any
agreements executed in connection herewith and to perform its obligations
hereunder and thereunder.
ii Neither the execution and delivery of this Agreement by OS,
nor the consummation or performance by it of any of its obligations contained in
this Agreement or in connection with the Contemplated Transactions by the
Company will, directly or indirectly (with or without notice or lapse of time):
a. contravene, conflict with or result in a violation of (x) any
provision of the Organizational Documents of OS or (y) any resolution adopted by
the board of directors or the stockholders of OS;
b. contravene, conflict with or result in a violation of, or give
any governmental body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which OS or any of the assets owned or
used by OS may be subject;
c. contravene, conflict with or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, this Agreement, the Purchase Agreement, the OS
Debentures or any Applicable Contract;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the material assets owned or used by
OS;
e. cause OS to become subject to, or to become liable for the
payment of, any tax; or
f. cause any of the assets owned by OS to be reassessed or
revalued by any taxing authority or other governmental body, except in
connection with the transfer of real estate pursuant to this Agreement or the
Contemplated Transactions.
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iii. OS is not required to obtain any consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions, other than the requisite
approval of its sole stockholder, Jehu Hand (the "OS Stockholder"), which
approval has been obtained.
(c) Capitalization. The entire authorized OS Capital Stock consists of
5,001,000 shares OS Common Stock, of which 1,000 shares are issued and
outstanding and held by the OS Stockholder and 5,000,000 of which are held in
escrow pursuant to the OS Escrow Agreement (as defined below). With the
exception of the OS Common Stock Shares and the OS Debentures, there are no
other outstanding equity or debt securities of the Company. No legend or other
reference to any purported encumbrance appears upon any certificate representing
the OS Common Stock Shares, other than applicable Securities Act legends. The OS
Common Stock Shares have been duly authorized and validly issued and are fully
paid and non-assessable. Except for the OS Debentures and the agreements
relating thereto set forth in the Purchase Agreement, there are no outstanding
options, voting agreements or arrangements, warrants, script, rights to
subscribe to, registration rights, calls or commitments of any character
whatsoever relating to, or, securities, rights or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of OS Capital Stock or other securities, or contracts, commitments,
understandings, or arrangements by which OS is or may become bound to issue
additional shares of OS Capital Stock or other securities, or securities or
rights convertible or exchangeable into shares of OS Capital Stock or other
securities. Except as set forth in this Section 4.2(c), OS has no outstanding
equity, debt, debt or equity equivalent security, or debt or equity lines of
credit. None of the outstanding OS Common Stock Shares were issued in violation
of the Securities Act or any other legal requirement. OS does not own, and has
no contract to acquire, any equity securities or other securities of any Person
or any direct or indirect equity or ownership interest in any other business.
The OS Escrow Shares have been duly authorized, validly issued, fully paid and
are nonassessable pursuant to the escrow agreement between OS, HEM, and the
Escrow Agent (the "OS Escrow Agreement"). The OS Underlying Shares have been
duly authorized, and when and if issued pursuant to the terms of the Purchase
Agreement, will be fully paid and nonassessable.
(d) Financial Statements. OS has delivered to the Company a balance
sheet of OS as at September 12, 2003 (the "OS Balance Sheet"), and a statement
of operations for the period from inception to September 12, 2003. Such
financial statements were prepared in accordance with GAAP, are set forth in
Schedule 4.2(d) hereto and fairly present the financial condition and the
results of operations of OS as at September 12, 2003 of and for the period then
ended.
(e) Absence of Material Adverse Change. Since the date of the most
recent OS Balance Sheet provided under Section 4.2(d) hereof, there have been no
events, changes or occurrences which have had or are reasonably likely to have,
individually or in the aggregate, a material adverse effect on OS.
(f) Books and Records. The books of account, minute books, stock
record books, and other records of OS, all of which have been made available to
the Company and original copies of which will be delivered to the Company at the
Post-Closing, are complete and correct and have been maintained in accordance
with sound business practices, including the maintenance of an adequate system
of internal controls. The minute books of OS contain accurate and complete
records
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of all meetings held of, and corporate action taken by, the stockholders, the
Board of Directors, and any committees of the Board of Directors of OS.
(g) No Undisclosed Liabilities. There are no material liabilities of
OS, whether absolute, accrued, contingent, or otherwise, other than the OS
Debentures and as set forth in Schedule 4.2(g).
(h) Title to Properties; Encumbrances. OS has good and marketable
title to all the properties, interest in such properties and assets, real and
personal, reflected in the OS Balance Sheet or acquired after the date of such
balance sheet, free and clear of all mortgages, liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes to the OS Balance Sheet. OS neither owns nor leases any real property.
(i) Legal Proceedings; Orders.
i. Except as set forth in Schedule 4.2(i) hereto, there is no
pending Proceeding:
a. that has been commenced or threatened by or against OS or
any of its officers, directors, agents or employees as such or that otherwise
relates to or may affect the business of, or any of the assets owned or used by,
OS; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
ii. Except as set forth in Schedule 4.2(i) hereto:
a. there is no Order to which OS, or any of the assets owned
or used by OS, is subject; and
b. no officer, director, agent, or employee of OS is subject
to any Order that prohibits such offer, director, agent or employee from
engaging in or continuing any conduct, activity or practice relating to the
business of OS.
(j) Brokers or Finders. OS has incurred no liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
(k) No Default or Violation. Schedule 4.2(k) hereto lists each
contract, agreement and commitment to which OS is a party or otherwise bound
(each, an "OS Contract") or has any obligation or liability pursuant thereto. OS
(i) is in compliance with all terms and requirements of each OS Contract and
(ii) is not in violation of any Legal Requirement.
(l) Taxes.
i. OS has filed or caused to be filed on a timely basis all tax
returns that are or were required to be filed by it pursuant to applicable Legal
Requirements. OS has paid, or
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made provision for the payment of, all taxes that have or may have become due
pursuant to those tax returns or otherwise, or pursuant to any assessment
received by OS, except such taxes, if any, as are listed in Schedule 4.2(l)
hereto and are being contested in good faith as to which adequate reserves have
been provided in the OS Balance Sheets.
ii. All tax returns filed by OS are true, correct and complete in
all material respects and no taxes are currently owed or tax returns due by or
on behalf of OS.
(m) Absence of Certain Changes and Events. Except as set forth in
Schedule 4.2(m) hereto, since the date of the OS Balance Sheet, OS has conducted
its business only in the Ordinary Course of Business, there has not been any
material adverse effect on OS's business or operations, and there has not been
any:
i. change in the authorized or issued capital stock of OS; grant
of any stock option or right to purchase shares of capital stock of OS; issuance
of any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition or payment of any
dividend or other distribution or payment in respect of shares of capital stock;
ii. amendment to the Organizational Documents of OS;
iii. damage to or destruction or loss of any asset or property of
OS, whether or not covered by insurance or any other event or circumstance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of OS;
iv. receipt of notice that any of its substantial customers have
terminated or intends to terminate their relationship, which termination would
have a material adverse effect on its financial condition, results or
operations, business assets or properties of OS;
v. entry into any transaction other than in the Ordinary Course
of Business;
vi. entry into, termination of, or receipt of written notice of
termination of any (i) license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) contract or transaction;
vii. sale, lease, or other disposition of any asset or property
of OS or mortgage, pledge, or imposition of any lien or other encumbrance on any
asset or property of OS;
viii. cancellation or waiver of any claims or rights with a value
to OS in excess of $1,000;
ix. material change in the accounting methods used by OS;
x. accrual or payment of any salaries or other compensation,
increase in salaries, compensation or bonuses or retention or hiring of, any
consultant or employee;
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xi. debt or other liability incurred, other than the OS
Debentures; or
xii. agreement, whether oral or written, by OS to do any of the
foregoing, other than the Purchase Agreement.
(n) Compliance with Law. Except as set forth in Schedule 4.2(n)
hereto:
i. OS has complied in all material respects with, and is not in
violation of, in any material respect, any Law to which it or its business is
subject; and
ii. OS has obtained all licenses, permits, certificates or other
governmental authorizations (collectively "Authorizations") necessary for the
ownership or use of its assets and properties or the conduct of its business;
and
(iii) OS has not received written notice of violation of, or
knows of any material violation of, any Laws to which it or its business is
subject or any Authorization necessary for the ownership or use of its assets
and properties or the conduct of its business.
(o) Environmental Laws. OS has not received any notice or claim (and
is not aware of any facts that would form a reasonable basis for any claim), or
entered into any negotiations or agreements with any other Person, and, to the
best knowledge of OS, OS is not the subject of any investigation by any
governmental or regulatory authority, domestic or foreign, relating to any
material or potentially material liability or remedial action under any
Environmental Laws. There are no pending or, to the knowledge of OS, threatened,
actions, suits or proceedings against OS or any of its properties, assets or
operations asserting any such material liability or seeking any material
remedial action in connection with any Environmental Laws.
(p) Intellectual Property. (i) OS owns, or is validly licensed or
otherwise has the right to use, all patents, and patent rights ("Patents") and
all trademarks, trade secrets, trademark rights, trade names, trade name rights,
service marks, service xxxx rights, copyrights and other proprietary
intellectual property rights and computer programs (the "Intellectual Property
Rights"), in each case, which are material to the conduct of the business of OS.
(ii) To the best knowledge of OS, OS has not interfered with,
infringed upon (without license to infringe), misappropriated or otherwise come
into conflict with any Patent of any other Person. OS has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of any other Person. OS has not received any
written charge, complaint, claim, demand or notice alleging any such
interference, infringement, is appropriation or violation (including any claim
that OS must license or refrain from using any Patents or Intellectual Property
Rights of any other Person) which has not been settled or otherwise fully
resolved. To the best knowledge of OS, no other Person has interfered with,
infringed upon (without license to infringe), misappropriated or otherwise come
into conflict with any Patents or Intellectual Property Rights of OS.
K-17
(q) Employees. (a) OS has no employees other than Jehu Hand, who is
the President of OS; (b) Jehu Hand has been fully paid for all services rendered
by him to OS in his capacity as President of OS and is owed no further salary or
compensation in connection therewith; (c) OS has complied in all respects with
all applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, and OS is not liable for any arrears
of wages or any taxes or penalties for failure to comply with any such Laws; (d)
OS believes that OS's relations with its employees is satisfactory; (e) there
are no controversies pending or, to the best knowledge of OS, threatened between
OS and any of its employees or former employees; (f) OS is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by OS, nor, to the best knowledge of OS, are there any
activities or proceedings of any labor union to organize any such employees; (g)
there are no unfair labor practice complaints pending against OS before the
National Labor Relations Board or any current union representation questions
involving employees of OS; (h) there is no strike, slowdown, work stoppage or
lockout existing, or, to the best knowledge of OS, threatened, by or with
respect to any employees of OS; (i) no charges are pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices with respect to
OS; (j) there are no claims pending against OS before any workers' compensation
board; (k) OS has not received notice that any Federal, state, local or foreign
agency responsible for the enforcement of labor or employment laws intends to
conduct an investigation of or relating to OS and, to the best knowledge of OS,
no such investigation is in progress; and (l) OS has no consultants or
independent contractors.
(r) Employee Benefit Plans. There no "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) maintained, or contributed to, by OS for the benefit of
any current or any former employees, officers or directors of OS.
(s) Rule 504 Securities. The OS Debentures (which include the Escrow
Shares for the OS Underlying Shares) were sold in accordance with Rule 504 of
Regulation D of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 00-00-000 of the Colorado Securities Act of the Colorado Revised
Statutes (the "Colorado Act") and regulation 51-3.13B promulgated thereunder, to
an accredited investor residing in the State of Colorado. Accordingly, at the
Effective Time and pursuant to Rule 504, the Colorado Act, and Section 3(a)(9)
of the Securities Act, the OS Debentures (which include the Company Escrow
Shares for the Company Underlying Shares) shall continue to be without
restriction and shall be freely tradable in accordance with Rule 504.
4.3 Representations, Warranties and Covenants of OS Stockholder. Jehu
Hand, in his capacity as the sole stockholder and President of OS, hereby makes
the following representations, warranties and covenants to the Company, each of
which shall survive the Post-Closing and each of which are true and correct as
of the date hereof and each of which shall be true and correct (and deemed
remade by the OS Stockholder) as of the Post-Closing until and unless the OS
Stockholder notifies the Company in writing that any of them are no longer true
and correct prior to the Post-Closing, subject to the limitations set forth in
Section 8.3 hereof:
K-18
(a) OS Stockholder has relied solely on his own legal and tax
advisors with respect to this Agreement and the Contemplated Transactions and
understands and agrees he is solely responsible for any tax consequences
relating to him personally that might arise from or be related to the
Contemplated Transactions, including without limitation any tax consequences
that might arise from a determination that the Merger does not qualify as a tax
free reorganization under the IRC.
(b) OS Stockholder is familiar with the definition of an
"accredited investor" as defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act"), and OS Stockholder is an "accredited
investor" as so defined.
(c) OS Stockholder is knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to
investments in shares presenting an investment decision like that involved in
acquiring the Company Common Stock, including investments in comparable
companies, and has requested, received, reviewed and considered all information
he deems relevant in making an informed decision to approve the Merger and
thereby, if the Merger is consummated, acquire the Company Common Stock.
(d) OS Stockholder is acquiring the Company Common Stock for his
own account for investment only and with no present intention of distributing
any of such shares or any arrangement or understanding with any other persons
regarding the distribution of such shares.
(e) OS Stockholder understands that the Company Common Stock
Shares issued to him pursuant to this Agreement are "restricted securities" and
have not been registered under the Securities Act or registered or qualified
under any state securities law in reliance on specific exemptions therefrom,
which exemptions may depend upon, among other things, the bona fide nature of OS
Stockholder's investment intent as expressed herein. OS Stockholder may not
sell, assign, transfer or otherwise dispose of any such shares, or any interest
therein, except in compliance with all applicable state and federal securities
laws.
(f) OS Stockholder understands and agrees that each certificate
of Company Common Stock Shares issued to OS Stockholder upon conversion of OS
Common Stock Shares pursuant to Section 2 of this Agreement will bear an
appropriate legend referring to the fact that the Company Common Stock Shares
were issued in reliance upon an exemption from registration under the Securities
Act provided by Section 4(2) thereunder. Unless and until a registration
statement covering the Company Common Stock Shares issued to OS Stockholder upon
conversion of OS Common Stock Shares has been filed with the Securities and
Exchange Commission and declared effective or receipt by the Company of a legal
opinion reasonably acceptable to the Company stating that such shares may be
sold by non-affiliates of the Company pursuant to Rule 144 under the Securities
Act without any restriction as to the number of securities as of a particular
date that can then be immediately sold, such shares will bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such shares):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT."
OS Stockholder understands and agrees that the Company has no plans or
obligations to register the Company Common Stock Shares issued upon conversion
of OS Common Stock Shares.
(g) OS Stockholder acknowledges the following disclosure, which is set
forth herein as required pursuant to Section 25102(a) of the California
Corporate Securities Law of 1968:
"THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT
BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT."
ARTICLE V
COVENANTS
5.1 Covenants of the Company and Acquisition.
(a) Conduct of Business. Between the date hereof and up to and
including the Post-Closing Date, each of the Company and Acquisition shall:
i. conduct its business only in the Ordinary Course of Business;
ii. use its commercially reasonable efforts to preserve intact
the current business organization of the Company and Acquisition, as the case
may be, keep available the services of the current officers, employees and
agents of the Company and Acquisition, as the case may be, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
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employees, agents and others having business relationships with the Company and
Acquisition, as the case may be;
iii. not pay, incur or declare any dividends or distributions
with respect to its stockholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of the OS Debenture Holder, except
that dividends may accrue in the Company's Series A-1 Preferred Stock and any
required redemption, if any, under the Company's Certificate of Designations,
Preferences and Rights of Series A-1 Preferred Stock may be made;
iv. not authorize, issue, sell, purchase or redeem any shares of
its capital stock or any options or other rights to acquire ownerships interests
without the prior written consent of the OS Debenture Holder except as may be
required by pre-existing commitments disclosed herein or in the Reports or upon
the exercise of options or warrants outstanding as of the date hereof;
v. not incur any indebtedness for money borrowed or issue any
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, except those incurred in the Ordinary Course of
Business, or cause or permit any material lien, encumbrance or security interest
to be created or arise on or in respect of any material portion of its
properties or assets, except for promissory notes issued by the Company to raise
funds intended to cover operating expenses, repayable in cash only and not to
exceed $100,000;
vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause any representation or
warranty of the Company in this Agreement to be or become untrue in any material
respect or that is not in the Ordinary Course of Business;
viii. report periodically to the OS Debenture Holder concerning
the status of the business and operations of the Company upon the reasonable
request of the OS Debenture Holder, provided, however, that the Company shall
not be required to disclose anything of a confidential or proprietary manner
unless pursuant to a confidentiality agreement reasonably acceptable to the
Company; and
ix. confer with the OS Debenture Holder concerning operational
matters of a material nature upon the reasonable request of the OS Debenture
Holder, provided, however, that the Company shall not be required to disclose
anything of a confidential or proprietary manner unless pursuant to a
confidentiality agreement reasonably acceptable to the Company.
(b) Proposals; Other Offers. Commencing on the date of execution of
this Agreement up to and including the Post-Closing Date, each of the Company
and Acquisition shall not, directly or indirectly (whether through an employee,
a representative, an agent or otherwise), solicit or encourage any inquiries or
proposals, engage in negotiations for or consent to or enter into any agreement
providing for the acquisition of its business. Each of the Company and
Acquisition shall not, directly or indirectly (whether through an employee, a
representative, an agent or
K-21
otherwise) disclose any nonpublic information relating to the Company and
Acquisition or afford access to any of the books, records or other properties of
the Company and Acquisition to any person or entity that is considering, has
considered or is making any such acquisition inquiry or proposal relating to the
Company's and Acquisition's business.
(c) Further Assurances. Prior to the Post-Closing Date, with the
cooperation of OS where appropriate, each of the Company and Acquisition shall
use commercially reasonable efforts to:
i. promptly comply with all filing requirements which federal,
state or local law may impose on the Company or Acquisition, as the case may be,
with respect to the Contemplated Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing and
obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by the Company or
Acquisition in connection with the Contemplated Transactions by this Agreement.
(d) Access to Additional Agreements and Information. Prior to the
Post-Closing Date, the Company and Acquisition shall make available to the OS
Debenture Holder (as well as its counsel, accountants and other representatives)
any and all agreements, contracts, documents, other instruments and personnel
material to the Company's business, including without limitation, those
contracts to which the Company or Acquisition is a party and those by which each
of its business or any of the Company's or Acquisition's assets are bound
pursuant and subject to a confidentiality agent reasonably acceptable to Company
and Holder.
5.2 Covenants of OS.
(a) Conduct of Business. Between the date hereof and up to and
including the Post-Closing Date, OS shall:
i. conduct its business only in the Ordinary Course of Business;
ii. use its commercially reasonable efforts to preserve intact
the current business organization of OS, keep available the services of the
current officers, employees and agents of OS, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents and
others having business relationships with OS;
iii. not pay, incur or declare any dividends or distributions
with respect to its stockholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of the Company and OS Debenture
Holder;
iv. not authorize, issue, sell, purchase or redeem any shares of
its capital stock or any options or other rights to acquire ownerships interests
without the prior written consent of the Company and OS Debenture Holder;
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v. not incur any indebtedness for money borrowed or issue and
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, or cause or permit any material lien, encumbrance or
security interest to be created or arise on or in respect of any material
portion of its properties or assets;
vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause representation or
warranty of OS in this Agreement to be or become untrue in any material respect
or that is not in the Ordinary Course of Business;
viii. report periodically to the Company and the OS Debenture
Holder concerning the status of the business and operations of OS; and
ix. confer with the Company and the OS Debenture Holder
concerning operational matters of a material nature.
(b) Proposals; Other Offers. Commencing on the date of execution of
this Agreement through the Post-Closing Date, OS shall not, directly or
indirectly (whether through an employee, a representative, an agent or
otherwise), solicit or encourage any inquiries or proposals, engage in
negotiations for or consent to or enter into any agreement providing for the
acquisition of its business. OS shall not, directly or indirectly (whether
through an employee, a representative, an agent or otherwise) disclose any
nonpublic information relating to OS or afford access to any of the books,
records or other properties of OS to any person or entity that is considering,
has considered or is making any such acquisition inquiry or proposal relating to
the OS's business.
(c) Further Assurances. Prior to the Post-Closing Date, with the
cooperation of the Company where appropriate, OS shall:
i. promptly comply with all filing requirements which federal,
state or local law may impose on OS with respect to the Contemplated
Transactions by this Agreement and cooperate with the Company regarding the
same; and
ii. take all actions necessary to be taken, make any filing and
obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of OS and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by OS in connection with the
Contemplated Transactions by this Agreement.
(d) Actions by OS. OS shall take no action or enter into any
agreements or arrangements except as may be required by this Agreement.
(e) No Change in Capital Stock. Prior to the Effective Time, no change
will be made in the authorized, issued or outstanding capital stock of OS, and
no subscriptions, options,
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rights, warrants, calls, commitments or agreements relating to the authorized,
issued or outstanding capital stock of OS will be entered into, issued, granted
or created.
(f) Access to Additional Agreements and Information. Prior to the
Post-Closing Date, OS shall make available to the Company and OS Debenture
Holder (as well as its counsel, accountants and other representatives) any and
all agreements, contracts, documents, other instruments and personnel material
of OS's business, including without limitation, those contracts to which OS is a
party and those by which its business or any of OS's assets are bound.
(g) Further Assurances. Prior to the Post-Closing Date, with the
cooperation of the Company where appropriate, OS shall use commercially
reasonable efforts to:
i. promptly comply with all filing requirements which federal,
state or local law may impose on OS with respect to the Contemplated
Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing and
obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of OS and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by OS in connection with the
Contemplated Transactions by this Agreement.
5.3 Governmental Filings and Consents. The Company, Acquisition and OS
shall cooperate with one another in filing any necessary applications, reports
or other documents with any federal or state agencies, authorities or bodies
having jurisdiction with respect to the business of the Company, Acquisition or
OS and in seeking any necessary approval, consultation or prompt favorable
action of, with or by any of such agencies, authorities or bodies.
5.4 Publicity. Any public announcement or press release relating to
this Agreement or the Contemplated Transactions must be approved by the OS
Debenture Holder and the Company in writing before being made or released. The
Company shall have the right to issue a press release or make other disclosure
without the OS Debenture Holder's written approval if in the opinion of the
Company's counsel such a release is necessary to comply with SEC Rules and
Regulations or other Law; provided that, the OS Debenture Holder receives a copy
of such prepared press release or other disclosures for purposes of review at
least 24 hours before it is issued. This 24 hour period may be shortened if in
the opinion of the Company's counsel it is required by Law; provided that, the
OS Debenture Holder and the Company receives a copy of such release as long as
reasonably practical before it is issued.
5.5 Tax Returns. The current officers of the Company shall have the
right to prepare any tax returns of the Company with respect to any period that
ends on or before the Post-Closing Date. Such tax returns shall be timely filed
by the Company. OS shall cooperate with said officers in the preparation of such
tax returns.
K-24
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of OS. The obligation of OS to
consummate the Contemplated Transactions is subject to the fulfillment of each
of the following conditions, any of which may be waived by OS in its sole
discretion:
(a) Copies of Resolutions. At the Post-Closing (i) the Company shall
have furnished OS with a certificate of its CEO or President, as the case may
be, in the form of Exhibit 6.1(a) annexed hereto, certifying that attached
thereto are copies of resolutions duly adopted by the board of directors of the
Company authorizing the execution, delivery and performance of this Agreement
and all other necessary or proper corporate action to enable the Company to
comply with the terms of this Agreement and (ii) Acquisition shall have
furnished OS with a certificate of its CEO or President, as the case may be, in
the form of Exhibit 6.1(e) annexed hereto, certifying that attached thereto are
copies of resolutions duly adopted by the board of directors of Acquisition
authorizing the execution, delivery and performance of this Agreement and all
other necessary or proper corporate action to enable Acquisition to comply with
the terms of this Agreement.
(b) Opinion of Company's Counsel. The Company shall have furnished to
OS, at the Post-Closing, an opinion of its legal counsel, dated as of the
Post-Closing Date, substantially in the form of Exhibit 6.1(b) annexed hereto.
(c) Opinion of Company's Special Securities Counsel. The Company shall
have furnished to OS, at the Post-Closing, with an opinion of the special
securities counsel to the Company, dated as of the Post-Closing Date,
substantially in the form of Exhibit 6.1(c) annexed hereto.
(d) Instruction Letter to Transfer Agent. The Company shall have
furnished OS, at the Post-Closing, with a letter to its transfer agent, to
accept the legal opinion set forth in Section 6.1(c), dated as of the
Post-Closing Date, substantially in the form of Exhibit 6.1(d) annexed hereto.
(e) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Company and
Acquisition set forth in this Agreement was true, correct and complete in all
material respects when made (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true,
correct and complete in all material respects as of such date) and shall also be
true, correct and complete in all material respects at and as of the
Post-Closing Date (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true, correct and
complete in all material respects as of such date), with the same force and
effect as if made at and as of the Post-Closing Date. The Company shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by the Company and
Acquisition at or prior to the Post-Closing Date.
K-25
(f) Delivery of Certificate. (A) The Company shall have delivered to
OS a certificate, in the form of Exhibit 6.1(f) annexed hereto, dated the
Post-Closing Date, and signed by the CEO or President of the Company affirming
that the representations and warranties as set forth in Section 4.1 were and are
true, correct and complete as required by Section 6.1(e) and (B) Acquisition
shall have delivered to OS a certificate, in the form of Exhibit 6.1(h) annexed
hereto, dated the Post-Closing Date, and signed by the CEO or President of
Acquisition affirming that the representations and warranties as set forth in
Section 4.1 were and are true, correct and complete as required by Section
6.1(e).
(g) Consents and Waivers. At the Post-Closing, any and all necessary
consents, authorizations, orders or approvals shall have been obtained, except
as the same shall have been waived by the OS Debenture Holder.
(h) Litigation. On the Post-Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company issued by a court or governmental agency
(or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making consummation thereof unduly burdensome to OS. On the Post-Closing Date
and immediately prior to consummation of the Contemplated Transactions, no
proceeding or lawsuit shall have been commenced, be pending or have been
threatened by any governmental or regulatory agency or authority or any other
Person restraining or prohibiting the consummation of the Contemplated
Transactions.
(i) Delivery of Documents and Other Information. Prior to the
Post-Closing Date, the Company and Acquisition shall have made available or
delivered to OS all of the agreements, contracts, documents and other
instruments requested by OS.
6.2 Conditions to Obligations of the Company and Acquisition. The
obligations of the Company and Acquisition to consummate the Contemplated
Transactions are subject to the fulfillment of each of the following conditions,
any of which may be waived by the Company and Acquisition, in their sole
discretion:
(a) Copies of Resolutions. At the Post-Closing, OS shall have
furnished the Company with a certificate of its President, in the form of
Exhibit 6.2(a) annexed hereto, certifying that attached thereto are copies of
resolutions duly adopted by the board of directors of OS authorizing the
execution, delivery and performance of the terms of this Agreement and all other
necessary or proper corporate action to enable OS to comply with the terms of
this Agreement.
(b) Opinion of OS's Counsel. OS shall have furnished to the Company,
at the Post-Closing, with an opinion of counsel to OS, dated as of the
Post-Closing Date, substantially in the form of Exhibit 6.2(b) annexed hereto.
(c) Opinion of OS's Special Securities Counsel. OS shall have
furnished to the Company, at the Closing, with an opinion of the special
securities counsel to OS dated as of the Post-Closing Date, substantially in the
form of Exhibit 6.2(c) annexed hereto.
K-26
(d) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of OS was true, correct
and complete in all material respects when made (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true, correct and complete in all material respects as of
such date) and shall also be true, correct and complete in all material respects
at and as of the Post-Closing Date (except for representations and warranties
that speak as of a specific date, which representations and warranties shall be
true, correct and complete in all material respects as of such date), with the
same force and effect as if made at and as of the Post-Closing Date. OS shall
have performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by OS at or prior to the
Post-Closing Date.
(e) Delivery of Certificate. OS shall have delivered to the Company a
certificate, in the form of Exhibit 6.2(e) annexed hereto, dated the
Post-Closing Date and signed by the CEO or President of OS, affirming that the
representations and warranties of OS as set forth in Section 4.2 were and are
true, correct and complete and OS's agreements and covenants have been performed
as required by Section 6.2(d).
(f) Compliance with Rule 504. In connection with the issuance of the
Securities by OS under the Purchase Agreement, on or prior to the Post-Closing
Date OS shall be in full compliance with Rule 504 of Regulation D of the
Securities Act of 1933, as amended, and OS shall have delivered to the Company
at the Post-Closing a filed copy of the Form D required to be filed with the SEC
in connection therewith.
(g) Consents and Waivers. On or prior to the Post-Closing Date, any
and all necessary consents, authorizations, orders or approvals shall have been
obtained, except as the same shall have been waived by the Company.
(h) Litigation. On the Post-Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to OS issued by a court or governmental agency (or other
governmental or regulatory authority) of competent jurisdiction restraining or
prohibiting the consummation of the Contemplated Transactions or making the
consummation thereof unduly burdensome to the Company or OS. On the Post-Closing
Date, no proceeding or lawsuit shall have been commenced, threatened or be
pending or by any governmental or regulatory agency or authority or any other
person with respect to the Contemplated Transactions.
(i) Delivery of Documents and Other Information. Prior to the
Post-Closing Date, OS shall have made available or delivered to the Company all
of the agreements, contracts, documents and other instruments required to be
delivered pursuant to the provisions of this Agreement.
K-27
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Agreement. This Agreement may be terminated
at any time by mutual consent of the parties hereto, provided that such consent
to terminate is in writing and is signed by each of the parties hereto.
7.2 Termination for Failure to Close. This Agreement shall be
automatically terminated if the Closing shall not have occurred within ten (10)
days of the date hereof (except if such 10th day is not a Business Day, then the
next Business Day).
7.3 Termination by Operation of Law. This Agreement may be terminated
by any party hereto if there shall be any statute, rule or regulation that
renders consummation of the Contemplated Transactions illegal or otherwise
prohibited, or a court of competent jurisdiction or any government (or
governmental authority) shall have issued an order, decree or ruling, or has
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of such transactions and such order, decree, ruling or other action
shall have become final and nonappealable.
7.4 Termination for Failure to Perform Covenants or Conditions. This
Agreement may be terminated prior to the Post-Closing Date:
(a) by OS if: (i) any of the representations and warranties made in
this Agreement by the Company or Acquisition shall not be materially true and
correct, when made or at any time prior to consummation of the Contemplated
Transactions as if made at and as of such time; (ii) any of the conditions set
forth in Section 6.1 hereof have not been fulfilled in all material respects by
the Post-Closing Date; (iii) the Company or Acquisition shall have failed to
observe or perform in all material respects any of its material obligations
under this Agreement; or (iv) as otherwise set forth herein; or
(b) by the Company or Acquisition if: (i) any of the representations
and warranties of OS or the OS Stockholder shall not be materially true and
correct when made or at any time prior to consummation of the Contemplated
Transactions as if made at and as of such time; (ii) any of the conditions set
forth in Section 6.2 hereof have not been fulfilled in all material respects by
the Post-Closing Date; (iii) OS or the OS Stockholder shall have failed to
observe or perform any of their material respective obligations under this
Agreement; or (iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
provided that such party is a Non-Defaulting Party (as defined below). The
foregoing shall not relieve any party from liability for damages actually
incurred as a result of such party's breach of any term or provision of this
Agreement.
7.6 Remedies; Specific Performance. In the event that any party shall
fail or refuse to consummate the Contemplated Transactions or if any default
under or beach of any
K-28
representation, warranty, covenant or condition of this Agreement on the part of
any party (the "Defaulting Party") shall have occurred that results in the
failure to consummate the Contemplated Transactions, then in addition to the
other remedies provided herein, the non-defaulting party (the "Non-Defaulting
Party") shall be entitled to seek and obtain money damages from the Defaulting
Party, or may seek to obtain an order of specific performance thereof against
the Defaulting Party from a court of competent jurisdiction, provided that the
Non-Defaulting Party seeking such protection must file its request with such
court within forty-five (45) days after it becomes aware of the Defaulting
Party's failure, refusal, default or breach. In addition, the Non-Defaulting
Party shall be entitled to obtain from the Defaulting Party court costs and
reasonable attorneys' fees incurred in connection with or in pursuit of
enforcing the rights and remedies provided hereunder.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties of the Company. All
representations and warranties of the Company shall survive the execution and
delivery of this Agreement and the Post-Closing hereunder and shall thereafter
survive until the earlier of (i) the second anniversary of the Post-Closing Date
and (ii) the date of the OS Debentures have been fully converted or otherwise
cease to be outstanding (the "Conversion Date") and shall then terminate except
to the extent that notice of the Company's or Acquisition liability in respect
of any inaccuracy in or breach of any representation or warranty shall have been
given on or prior to such second anniversary or Conversion Date.
8.2 Survival of Representations and Warranties of OS. All
representations and warranties of OS shall terminate upon the Closing except to
the extent that notice of OS's liability in respect of any inaccuracy in or
breach of any representation or warranty shall have been given on or prior to
Closing.
8.3 Survival of Representation and Warranties of OS Stockholder. All
representations, warranties and covenants of OS Stockholder set forth in Section
4.3 shall continue in full force and effect until such time as OS Stockholder no
longer owns any Company Common Stock Shares.
8.4 Obligation of the Company to Indemnify. The Company agrees to
indemnify, defend and hold harmless OS (and its directors, officers, employees,
affiliates, stockholders, debenture holders, agents, attorneys, successors and
assigns) from and against all losses, liabilities, damages, deficiencies, costs
or expenses (including interest, penalties and reasonable attorneys' and
consultants' fees and disbursements) (collectively, "Losses") based upon,
arising out of or otherwise in respect of any (i) inaccuracy in any
representation or warranty of the Company contained in this Agreement or in the
Schedules and Exhibits hereto or (ii) breach by the Company of any covenant or
agreement contained in this Agreement.
8.5 Obligation of and OS to Indemnify. OS agrees to indemnify, defend
and hold harmless the Company (and its directors, officers, employees,
affiliates, stockholders, agents, attorneys, successors and assigns) from and
against any Losses based upon, arising out of or
K-29
otherwise in respect of any (i) inaccuracy in any representation or warranty of
OS contained in this Agreement or (ii) breach by OS of any covenant or agreement
contained in this Agreement.
8.6 Notice and Opportunity to Defend. (a) Promptly after receipt by
any Person entitled to indemnity under this Agreement (an "Indemnitee") of
notice of any demand, claim or circumstances which, with the lapse of time,
would or might give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in a Loss, the Indemnitee shall give notice thereof
(the "Claims Notice") to any other party (or parties) who is or may be obligated
to provide indemnification pursuant to Section 8.4 or 8.5 (the "Indemnifying
Party"). The Claims Notice shall describe the Asserted Liability in reasonable
detail and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Loss that has been or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 30
days after the date the Claims Notice is given (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Asserted Liability, provided,
however, the Indemnifying Party may settle or compromise any Asserted Liability
without the consent of the Indemnitee so long as such settlement or compromise
releases the Indemnitee and does not include any admission or statement of fault
against the Indemnitee. If the Indemnifying Party elects not to compromise or
defend the Asserted Liability, fails to notify the Indemnitee of its election as
herein provided or contests its obligation to indemnify under this Agreement,
the Indemnitee may pay, compromise or defend such Asserted Liability and all
reasonable expenses incurred by the Indemnitee in defending or compromising such
Asserted Liability, all amounts required to be paid in connection with any such
Asserted Liability pursuant to the determination of any court, governmental or
regulatory body or arbitrator, and amounts required to be paid in connection
with any compromise or settlement consented to by the Indemnitee, shall be borne
by the Indemnifying Party. Except as otherwise provided in the immediately
preceding sentence, the Indemnitee may not settle or compromise any claim over
the objection of the Indemnifying Party. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in (but the Indemnitee
may not control) the defense of such Asserted Liability. If the Indemnifying
Party chooses to defend any claim, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense.
ARTICLE IX
DEFINITIONS
The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement.
"Applicable Contract" means any Contract (a) to which the Company is a
party and under which the Company has or may acquire any material rights, (b)
under which the Company or OS, as the case may be, is a party and has or may
become subject to any material obligation or
K-30
material liability or (c) by which the Company or OS, as the case may be, or any
of the material assets owned or used by it is or may become bound.
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement, including, without limitation:
(1) the Merger; and
(2) the performance by the parties of their respective covenants and
obligations under this Agreement.
"Environmental Laws" means all applicable federal, state, local or
foreign laws, rules and regulations, orders, decrees, judgments, permits,
filings and licenses relating (i) to protection and clean-up of the environment
and activities or conditions related thereto, including those relating to the
generation, handling, disposal, transportation or release of hazardous
substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortious conduct.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to such law or any
successor law.
"GAAP" means generally accepted accounting principles in the United
States, applied on a consistent basis.
"Law" means all applicable laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions, judgments or decrees entered, enacted,
promulgated, enforced or issued by any court or other governmental or regulatory
authority, domestic or foreign.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative law, ordinance,
principle of common law, regulation, statute, treaty, court or arbitrator.
"Material Adverse Effect" means a material adverse effect upon the
business or financial condition of the Company (when used in Section 4.1) or OS
(when used in Section 4.2), taken as a whole with any subsidiaries.
"Order" means any award, decision, injunction, judgment, order,
ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other governmental body or by any arbitrator.
"Ordinary Course of Business" means an action taken by a Person where:
(1) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
K-31
(2) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(3) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" means the articles or certificate of
incorporation and the by-laws of a corporation and any amendment thereto.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any governmental body or arbitrator.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. Except as otherwise provided in this
Agreement, each party hereto will bear its own legal, accounting and other fees
and expenses incident to the Contemplated Transactions herein. Any fees and
expenses required to be paid by any party hereunder shall be limited to
reasonable and necessary fees and expenses
10.2 Modification, Amendments and Waiver. The parties hereto may
amend, modify or otherwise waive any provision of this Agreement by mutual
consent, provided that such consent and any amendment, modification or waiver is
in writing and is signed by each of the parties hereto.
10.3 Assignment. Neither the Company nor OS shall have the authority
to assign its respective rights or obligations under this Agreement without the
prior written consent of the OS Debenture Holder.
10.4 Successors. This Agreement shall be binding upon and, to the
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and permitted assigns.
10.5 Entire Agreement. This Agreement and the exhibits, schedules and
other documents referred to herein contain the entire agreement among the
parties hereto with respect to
K-32
the Contemplated Transactions and supersede all prior agreements with respect
thereto, whether written or oral.
10.6 Governing Law. This Agreement and the exhibits hereto shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts or choice of laws thereof. Any
action to enforce the terms of this Agreement or any of its exhibits shall be
brought exclusively in the state and/or federal courts situated in the County
and State of New York. Service of process in any action by either party to
enforce the terms of this Agreement may be made by serving a copy of the summons
and complaint, in addition to any other relevant documents, by commercial
overnight courier to the other party at its principal address set forth in this
Agreement.
10.7 Notices. Any notice, request, demand, waiver, consent, approval,
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by facsimile upon electronic confirmation
of receipt (promptly followed by a hard-copy delivered in accordance with this
Section 10.7) or three days after being mailed by registered or certified mail
(return receipt requested), with postage and registration or certification fees
thereon prepaid, or if sent by nationally recognized overnight courier, one day
after being mailed, addressed to the party at its address set forth below:
If to OS prior to
Post-Closing:
Ophthalmic Solutions, Inc.
00000 Xxxxx Xxxx, Xxxxx X
Xxxx Xxxxx, XX 00000
Attn: Jehu Hand, President
Tel: (000) 000-0000
Fax: (000) 000-0000
If to OS after Ophthalmic Solutions, Inc.
Post-Closing: c/o Insite Vision Incorporated
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies to: O'Melveny & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn.: Xxxxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
K-33
If to Acquisition: Arrow Acquisition, Inc.
c/o Insite Vision Incorporated
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies to: O'Melveny & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn.: Xxxxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Company: Insite Vision Incorporated
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies to: O'Melveny & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn.: Xxxxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
10.9 Rights Cumulative. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
K-34
10.10 Severability of Provisions. The provisions of this Agreement
shall be considered severable in the event that any of such provisions are held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable. Such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are valid and enforceable and
which are as similar as possible in term and intent to those provisions deemed
to be invalid, void or otherwise unenforceable and the remaining provisions
hereof shall remain enforceable to the fullest extent permitted by law.
10.11 Headings. The headings set forth in the articles and sections of
this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
10.12 Confidential Information. OS, OS Stockholder and the OS
Debenture Holder each represents to the Company that, at all times, they have
maintained in confidence all non-public information regarding the Company (
including existence of the transactions contemplated herein) received by them
from the Company or its agents, and covenants that it they will continue to
maintain in confidence such information until such information (a) becomes
generally publicly available other than through a violation of this provision by
OS, OS Stockholder, the OS Debenture Holder, or any of their respective agents
or (b) is required to be disclosed in legal proceedings (such as by deposition,
interrogatory, request for documents, subpoena, civil investigation demand,
filing with any governmental authority or similar process), provided, however,
that before making any use or disclosure in reliance on this subparagraph (b)
OS, OS Stockholder or the OS Debenture Holder, as applicable, shall give the
Company at least fifteen (15) days prior written notice (or such shorter period
as required by law) specifying the circumstances giving rise thereto and will
furnish only that portion of the non-public information which is legally
required and will exercise its best efforts to obtain reliable assurance that
confidential treatment will be accorded any non-public information so furnished.
[Signature Page Follows]
K-35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or have
caused this Agreement to be executed and delivered on the date and year first
above written.
INSITE VISION INCORPORATED
By: /s/ X. Xxxxx Xxxxxxxxxxxxxx
-------------------------------------
X. Xxxxx Xxxxxxxxxxxxxx, Ph. D.,
President and CEO
OPHTHAMALIC SOLUTIONS, INC.
By: /s/ Jehu Hand
-------------------------------------
Jehu Hand, President and
Chief Executive Officer
ARROW ACQUISITION, INC.
By: /s/ X. Xxxxx Xxxxxxxxxxxxxx
-------------------------------------
X. Xxxxx Xxxxxxxxxxxxxx, Ph. D.
President and CEO
/s/ Jehu Hand
-------------------------------
JEHU HAND
(As to Sections 4.3, 8.3 and 10.12 only)
HEM MUTUAL ASSURANCE LLC
By: /s/ Xxxxxx Xxxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxxx
Title: Manager
(As to Section 10.12 only)
K-36
