Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
By and Among
Alexion Pharmaceuticals, Inc.,
PI Acquisition Company, Inc.
and
Prolifaron, Inc.
Dated as of September 22, 2000
Index of Schedules and Exhibits
Exhibit Number Description
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Schedule A Defined Terms
Exhibit 2.3 Form of Purchaser's Questionnaire
Exhibit 2.4-A Form of Employment Agreement
Exhibit 2.4-B Form of Consulting Agreement
Exhibit 3.2(i) Form of Opinion of the Company's Counsel
Exhibit 3.2(r) Form of Option Assumption Agreement
Exhibit 3.3(c) Form of Opinion of Parent's Counsel
Exhibit 3.5(d) Required Consents
Exhibit 7.5 Form of Affiliate Agreement
Exhibit 8.10 Form of Stockholders Voting Agreement
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 22,
2000, is made by and among Alexion Pharmaceuticals, Inc., a Delaware corporation
("Parent"), PI Acquisition Company, Inc., a California corporation and a wholly
owned subsidiary of Parent ("Sub"), Prolifaron Inc., a California corporation
(the "Company") and certain major shareholders of the Company.
W I T N E S S E T H:
WHEREAS, The Boards of Directors of Parent, Sub and the Company deem it
advisable and in the best interests of their respective stockholders that Sub
merge with and into the Company, and such Boards of Directors have approved the
merger (the "Merger") of Sub with and into the Company upon the terms and
subject to the conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to the willingness of Parent and Sub to enter
into this Agreement, certain holders of shares of the Company's Common Stock, no
par value (the "Shares"), have agreed to and will enter into Stockholder Voting
Agreements with Parent, substantially in the form of Exhibit 8.10 (the
"Stockholder Voting Agreements"); and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and the agreement will
constitute a plan of reorganization within the meaning of Treasury Regulation
Section 1.368-2(g);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Stockholder Voting Agreements, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof,
at the Effective Time (as defined in Section 1.2 hereof), Sub shall be merged
with and into the Company and the separate corporate existence of Sub shall
thereupon cease, and the Company shall be the surviving corporation in the
Merger (the "Surviving Corporation"). The Merger shall have the effects set
forth in the General Corporation Law of the State of California (the "GCL").
1.2 Effective Time of the Merger. The Merger shall become effective
when a properly executed Agreement of Merger and appropriate officer's
certificate (collectively, the "Certificate of Merger") is duly filed with the
Secretary of State of the State of California, which filing shall be made as
soon as practicable after the closing of the transactions contemplated by this
Agreement in accordance with Section 3.1 hereof. When used in this Agreement,
the term "Effective Time" shall mean the date and time at which such Certificate
of Merger is so filed and becomes effective.
1.3 Certificate of Incorporation. The Certificate of Incorporation
of Sub in effect at the Effective Time shall be the Certificate of Incorporation
of the Surviving Corporation, until thereafter changed or amended as provided
therein or by applicable law, except that Article 1 of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows:
"The name of this corporation is Alexion Antibody Technologies, Inc."
1.4 By-Laws. The By-Laws of Sub as in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable law.
1.5 Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time the earlier of their resignation or removal or otherwise ceasing to be a
director or until their respective successors are duly elected or appointed and
qualify in the manner provided in the Certificate of Incorporation and By-Laws
of the Surviving Corporation or as otherwise provided by law.
(b) The officers of Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until the earlier of their resignation or removal or otherwise ceasing to
be an officer or until their respective successors are duly elected or appointed
and qualify, as the case may be, in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
ARTICLE 2
Conversion of Shares; Certain Terms
2.1 Exchange Ratio. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
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(a) Each Share of the Company issued and outstanding
immediately prior to the Effective Time (other than Shares held in the treasury
of the Company or by Parent or any subsidiary of Parent or the Company) shall be
converted as follows:
(A) except as provided in clause (B) below and subject
to the provisions of Section 2.5 below, into the right to receive the number of
shares of Parent Common Stock, par value $0.0001 per share (the "Parent Common
Stock"; and upon such conversion, the "Parent Shares") determined (calculated to
the fifth decimal point) by dividing (i) the Merger Consideration, by (ii) the
sum of (x) the number of issued and outstanding Shares of the Company (including
Shares directly or indirectly issuable upon the conversion or exchange of
securities of the Company) and (y) the number of Shares of the Company issuable
upon exercise of all options to purchase capital stock of the Company granted,
awarded, committed or which are pending, upon payment in full of the exercise
price thereof, whether or not accrued, vested or "in the money" ("Company Stock
Options"); or
(B) if the owner of Shares shall not have completed and
returned to Parent a Satisfactory Purchaser's Questionnaire, the Shares owned by
such shareholder shall be converted, subject to the provisions of Section 2.5
below, into the right to receive, in cash, an amount equal to the product of the
Average Price, the number of Shares of the Company held by such shareholder and
the Exchange Ratio.
The number of such shares of Parent Common Stock issuable upon
conversion of each Share determined in accordance with clause (A) above,
assuming no Shares shall be converted into cash pursuant to clause (B) above, is
referred to herein as the "Exchange Ratio."
"Satisfactory Purchaser's Questionnaire" shall mean a Purchaser's
Questionnaire of a shareholder of the Company duly completed and at or before
5:00 p.m. E.S.T. the day prior to the Effective Time returned to Parent,
substantially in the form of Exhibit 2.3 hereto, indicating that such
shareholder is an "accredited investor" (as defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended) and executed by such
shareholder, or that such shareholder is not an "accredited investor" but that,
by reason of the business or financial experience of the person designated by
such shareholder as a professional advisor and purchaser's representative within
the meaning of the applicable state securities or Blue Sky laws and Rule 501(h)
of such Regulation D, such shareholder together with such designee could be
reasonably assumed to have the capacity to protect such shareholder's own
interests in connection with the Merger and executed by such shareholder and
such designee, and in each case accepted by Parent as a purchaser of shares of
Parent Common Stock.
The "Merger Consideration" shall be the aggregate number of shares
of Parent Common Stock to be issued in respect of the Shares and the aggregate
number of shares of Parent Common Stock issuable upon exercise of all Company
Stock Options, determined by dividing $36.0
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million by the Average Price; provided, that the number of shares of Parent
Common Stock to comprise the Merger Consideration shall not be less than 400,000
shares (except in accordance with the next proviso) nor more than 500,000
shares; provided, further, that (i) if the Effective Time occurs on or prior to
September 22, 2000 and the Average Price shall be greater than $99.00, then the
Merger Consideration shall equal 400,000 shares of Parent Common Stock; and (ii)
if the Effective Time occurs after September 22, 2000 and the Average Price
shall be greater than $99.00, then Parent may elect to, and the Company shall
(x) consummate the Merger with Merger Consideration equal to the number of
shares of Parent Common Stock equal to $39.6 million divided by the Average
Price or (x) not consummate the Merger, in which case the Company is also not
obligated to consummate the Merger, except that if the Effective Time occurs on
September 25, 2000 and the Average Price shall be greater than $99.00, then the
Merger Consideration shall equal 394,000 shares of Parent Common Stock;
provided, further, that if the Average Price shall be less than $64.80, then (i)
Parent may at its own discretion increase the number of shares of Parent Common
Stock above 500,000 shares to provide a total value, based on the Average Price,
of $32.4 million, and if Parent shall determine not to so increase the number of
shares then (ii) the Company may determine not (and shall not be obligated) to
consummate the Merger in which case Parent is also not obligated to consummate
the Merger.
"Average Price" means the simple average of closing prices of Parent
Common Stock for the 10 trading days ending on the third trading day prior to
the Closing Date (as such term is hereinafter defined).
(b) Each Share held in the treasury of the Company, if any,
and each Share held by Parent or any subsidiary of Parent or the Company
immediately prior to the Effective Time shall be cancelled and retired and cease
to exist.
(c) Each share of Common Stock of the Sub, par value $0.0001
per share ("Sub Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be converted into and become a fully paid and nonassessable
share of Common Stock of the Surviving Corporation.
2.2 Representatives. Xxxxxxxxx Xxxxxxx and Xxxx Xxxxxx each is
hereby appointed as the representative (the "Representatives") of each
shareholder of the Company (each a "Shareholder"), to take such acts as
permitted under this Agreement.
2.3 Purchaser's Questionnaire. On or before the Closing Date, each
Shareholder of the Company has delivered to Parent a completed Purchaser's
Questionnaire executed by such Shareholder or such Shareholder's purchaser
representative, substantially in the form of Exhibit 2.3 hereto (the
"Purchaser's Questionnaire"), and Parent shall have accepted each such
Shareholder as a purchaser of shares of Parent Common Stock.
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2.4 Employment and Consulting Agreements. Simultaneously with the
execution of this Agreement, each of Drs. Xxxxxxxxx Xxxxxxx and Xxxxx Xxxxxx
will execute an employment agreement substantially in the form of Exhibit 2.4-A
(the "Employment Agreement") and each of Drs. Xxxxxxx Xxxxxx, Xxxxxx Xxxxxx and
Xxxxxx Xxxxxx (each of Drs. Bowdish, Lerner, Xxxxxx, Xxxxx Xxxxxx and Xxxxxx
Xxxxxx collectively referred to as the "Named Individuals") will execute a
consulting agreement in the form of Exhibit 2.4-B (the "Consulting Agreement"),
each providing, inter alia, that such agreement shall not become effective until
the Effective Time and that such Named Individuals shall not compete with the
Company. On or prior to the Closing Date, at least six (6) other current Ph.D
employee-scientists of the Company designated by Parent (the
"Employee-Scientists") substantially contemporaneously with the execution of
this Agreement will each execute an Employment Agreement. If the Effective Time
shall not occur for any reason prior to the expiration of the Closing Period (as
hereinafter defined), each such agreement shall be null and void.
2.5 Exchange of Certificates Representing Shares.
(a) As of the Effective Time, Parent shall make available, or
shall cause to be made available, with an exchange agent selected by Parent and
reasonably satisfactory to the Company (the "Exchange Agent"), for the benefit
of the holders of Shares, for exchange in accordance with this Article 2, (i)
certificates representing the number of Parent Shares issuable in the Merger, to
be issued in respect of all Shares outstanding immediately prior to the
Effective Time and which are to be exchanged pursuant to the Merger (exclusive
of shares in respect of which cash is to be paid pursuant to Section 2.1(a) (B)
above and shares to be cancelled pursuant to Section 2.1(b)), and (ii) cash to
be paid in respect of Shares converted into the right to receive cash as
provided in Section 2.1 (a) (B) above and cash to be paid in lieu of the
issuance of fractional shares as provided in Section 2.7 hereof (such cash and
certificates for Parent Shares being hereinafter referred to collectively as the
"Exchange Fund").
(b) Promptly after the Effective Time, Parent shall cause the
Exchange Agent to mail (or deliver at its principal office) to each holder of
record of a certificate or certificates representing Shares (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the certificates for Shares shall pass, only upon delivery of
the certificates for Shares to the Exchange Agent and such letter of transmittal
shall be in such form and have such other provisions, including appropriate
provisions with respect to back-up withholding and customary representations and
warranties and indemnification in respect thereof, as Parent may reasonably
specify, and (ii) instructions for use in effecting the surrender of the
certificates for Shares. Upon surrender of a certificate for Shares for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder thereof shall be entitled to receive in exchange therefor that portion of
the Exchange Fund which such holder has the right to receive pursuant to the
provisions of this Article 2, after giving effect to any required withholding
tax, and the certificate for Shares so surrendered shall forthwith be cancelled.
No interest will be paid or accrued on the cash to be paid which is in the
Exchange Fund or in respect of cash in lieu of fractional shares. In the event
of any transfer of
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ownership of Shares which has not been registered in the transfer records of the
Company, certificates representing the proper number of Parent Shares, if any,
together with a check in an amount of the cash to be paid in lieu of the
issuance of fractional shares as provided in Section 2.7 hereof, if any, will be
issued to the transferee of the certificate representing the transferred Shares
presented to the Exchange Agent, when accompanied by all documents required to
evidence and effect the prior transfer thereof and to evidence that any
applicable stock transfer taxes associated with such transfer were paid.
2.6 Dividends; Voting Rights; Transfer Taxes. No dividends that are
declared on Parent Shares will be paid to persons entitled to receive
certificates representing Parent Shares nor shall such persons be entitled to
vote any such Parent Shares at any regular or special meeting of Parent's
stockholders until such persons surrender their certificates representing
Shares. Upon such surrender, there shall be paid to the person in whose name the
certificates representing such Parent Shares shall be issued, any dividends
which shall have become payable with respect to such Parent Shares between the
Effective Time and the time of such surrender. In no event shall the person
entitled to receive such dividends be entitled to receive interest on such
dividends. If any certificates for any Parent Shares are to be issued in a name
other than that in which the certificate representing Shares surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the person requesting such exchange shall pay to the Exchange Agent any transfer
or other taxes required by reason of the issuance of certificates for such
Parent Shares in a name other than that of the registered holder of the
certificate surrendered or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Any shares of Parent
Common Stock, any cash payable with respect to Parent Common Stock and any
portion of the cash payable with respect to the Parent Common Stock pursuant to
Section 2.7 (including the proceeds of any investments thereof) that remains
unclaimed by the former shareholders of the Company 180 days after the Effective
Time shall be delivered to Parent. Any former shareholders of the Company who
have not theretofore complied with this Article 2 shall look only to Parent for
their shares of Parent Common Stock and any cash payable pursuant to Section
2.1(a) (B) or Section 2.7 upon due surrender of their certificates (or
affidavits of loss in lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of Shares for any Parent Shares or dividends thereon
or, in accordance with Section 2.7 hereof, proceeds of the sale of fractional
interests, delivered to a public official pursuant to applicable escheat laws.
2.7 No Fractional Securities. No certificates or scrip representing
fractional Parent Shares shall be issued upon the surrender for exchange of
certificates representing Shares pursuant to this Article 2 and no dividend,
stock split-up or other change in the capital structure of the Company shall
relate to any fractional security, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
of any such fractional securities, each holder of Shares who would otherwise
have been entitled to a fraction of a Parent Share upon surrender of stock
certificates for exchange pursuant to this Article 2 will be paid cash upon such
surrender in an amount equal to the product of such fraction multiplied by the
closing sale price of
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one share of Parent Common Stock on the Nasdaq National Market on the day of the
Effective Time, or, if shares of Parent Common Stock are not so traded on such
day, the closing sale price of one such share on the next preceding day on which
such share was traded on the Nasdaq National Market.
2.8 Closing of the Company Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates representing Parent Shares.
2.9 Lost, Stolen or Destroyed Certificates. In the event any
certificate for Shares shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed and the posting by such person of a bond in the
form customarily required by Parent as indemnity against any claim that may be
made against it with respect to such certificate, Parent will issue the shares
of Parent Common Stock, and the Exchange Agent will issue any cash payment in
lieu of a fractional share in respect thereof, issuable and/or payable in
exchange for such lost, stolen or destroyed certificate pursuant to this Article
2 upon due surrender of and deliverable in respect of the Shares represented by
such certificate pursuant to this Agreement, in each case, without interest.
2.10 Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or any provision
of state, local or foreign tax law. To the extent that amounts are so withheld
by the Surviving Corporation or Parent, as the case may be, such withheld amount
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by the Surviving Corporation or Parent, as the case may be.
ARTICLE 3
Closing; Deliveries; Conditions Precedent
3.1 Closing.
(a) The closing under this Agreement (the "Closing") shall
take place at the offices of Parent's counsel, Golenbock, Eiseman, Assor & Xxxx,
in New York, New York, at 10:00 a.m., local time, at any time on or before
October 5, 2000, upon not less than three days' prior written notice of closing
to the Representative (provided that the shareholders' approval has been
obtained as contemplated by Section 7.6 hereof), specifying the date of the
Closing (the date of the Closing being called the "Closing Date"). The Company
is granting this right to Parent in view of
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certain diligence Parent expects to conduct. If Parent shall fail to send such
notice of closing within such period or close because of the failure of a
condition precedent of Parent to be satisfied, Parent will have no liability to
the Shareholders or the Company. It is not presently expected that a closing
will occur prior to the expiration of a certain Research and License Agreement
between the Company and Centocor, Inc. dated as of January 1, 1999 (the
"Centocor Research Agreement").
(b) The date for the Closing may be extended by Parent in its
sole discretion beyond October 5, 2000, by written notice to the
Representatives, if (i) the Shareholders (other than not more than two
Shareholders owning, in the aggregate, not more than 2,400 Shares) shall not
have delivered Satisfactory Purchaser's Questionnaires to the Representatives
and the Named Individuals and the Employee Scientists shall not have delivered
executed Employment and Consulting Agreements to the Representatives, and the
Representatives shall not have delivered copies thereof to Parent by within two
days prior to the Effective Time, but not by more than ten (10) days after such
delivery and receipt by Parent of such certification; or (ii) any of
Shareholders or the Company shall fail to satisfy any of Company Controlled
Conditions (as defined in Section 8.9), but not extended by more than ten (10)
days after the satisfaction of such condition(s) precedent. The time during
which Parent may cause the Closing to occur, including any such extension, is
referred to herein as the "Closing Period".
(c) If the Company or Parent shall not close the Merger
because a document or instrument to be delivered by the other shall not have
been delivered, such of the Company or Parent as shall not have made such
delivery may extend the Closing Period by a period not to exceed three (3)
business days to produce such document or certificate and such period shall be
deemed to automatically extend the Closing Period.
(d) In the event a Material Litigation (as defined in Section
8.9 below) shall be commenced, Parent shall be entitled, in its sole and
absolute discretion, to extend the Closing Date until December 5, 2000 by
payment to the Company of $500,000 at any time on or before October 5, 2000.
(e) All proceedings to be taken and all documents to be
executed and delivered by the parties at the Closing shall be deemed to have
been taken and executed simultaneously and no proceedings shall be deemed taken
nor any documents executed or delivered until all have been taken, executed and
delivered.
3.2 The Company's Deliveries. At the Closing, the Company shall
deliver to Parent:
(a) a Certificate of Merger, duly signed on behalf of the
Company, in proper form for filing to effect the Merger;
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(b) the certificate, in a form reasonably acceptable to
Parent, of one or more professional advisors (as defined under applicable Blue
Sky laws) with respect to the qualifications of such advisor with respect to all
of the Shareholders who or which shall not be "accredited investors" under Rule
501 of Regulation D executed by such advisor and the Shareholder designating
such advisor, and Satisfactory Purchaser's Questionnaires duly completed by
every Shareholder, sufficient for Parent to issue Parent Shares without
registration under applicable securities laws; it being understood that
Satisfactory Purchaser's Questionnaires need be furnished with respect to all
but two Shareholders holding, in the aggregate, not more than 2,400 Shares;
(c) the resignation of all officers and directors of the
Company, excluding Xxxxxxxxx Xxxxxxx, effective on the Closing Date, subject,
however, to the provisions of the Employment Agreements referred to in
subsection (f) of this Section 3.2 below;
(d) a duly executed termination and cancellation of any and
all agreements among one or more Shareholders or among the Company and any one
or more Shareholders, including without limitation the Shareholders' Agreement
referenced in Schedule 4.3, but excluding a certain post-closing escrow
agreement entered into by some or all of the Shareholders and any other
agreement entered in connection herewith or therewith relating to
indemnification and other rights of the Shareholders after the Effective Time
and the disposition of Parent Shares;
(e) the minute books, stock certificate books and stock
ledgers and other similar corporate records of the Company, and there shall be
available at the principal office of the Company, all books, records, tax
returns, customer lists, client records, as well as patent portfolio, research
information and invention disclosures, and other similar records necessary or
convenient to the conduct of the business of the Company.
(f) the confirmation of each Named Individual that the
Employment Agreement or Consulting Agreement to which such Named Individual
shall be a party shall be effective and in full force and effect;
(g) the Employment Agreement of each Employee-Scientist
executed by each Employee Scientist and Parent;
(h) Certificates, dated as of a date within ten (10) days of
the Closing Date (and to the extent practicable, telegrams dated as of the
Closing Date or the date prior thereto), as to the good standing of the Company
and the payment of franchise taxes and filing of required reports from the
appropriate officials of all those jurisdictions in which Company is
incorporated or is qualified and authorized to do business as a foreign
corporation;
(i) the opinion of the Company's counsel, in the form of
Exhibit 3.2(i) hereto;
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(j) copies of resolutions of the board of directors of the
Company authorizing the execution, delivery and performance of this Agreement,
the Merger and the other transaction contemplated by this Agreement, and
authorizing under the 1999 Plan (as hereinafter defined) the assumption of all
options to purchase Shares by Parent, certified by an officer thereof; and
(k) a certificate of the Major Shareholders, with respect to
the letter dated September 20, 2000 to the Company from Xxxxxx Xxxxxx White &
XxXxxxxxx LLP ("HEWM") providing, inter alia, that after interviews and
discussions with management of the Company, the Major Shareholders have no
reason to believe that the factual basis set forth therein contains any untrue
statement of a material fact or omits to state any material fact upon which the
analysis, interpretations, positions and conclusions therein contained is based,
and the analysis, interpretations, positions and conclusions therein contained
are incorrect or misleading as of the Closing Date.
(l) the Affiliate Agreements pursuant to Section 7.5 herein;
(m) the certificate of the Major Shareholders pursuant to
Section 3.5(h) herein;
(n) the consents referred to in Sections 3.5(d) and 3.5(e)
herein;
(o) the certificate of the Chief Scientific Officer of the
Company pursuant to Section 3.5(m) herein;
(p) the inventories, plans, investigations and reports, if
any, referred to in Section 4.15(e) or (h) herein, to the extent not previously
delivered; and
(q) the summary of employee benefits plans referred to in
Section 4.16 herein and copies of any tax returns, reports and trust or funding
agreements related thereto; and
(r) Option Assumption Agreements, substantially in the form of
Exhibit 3.2(r) hereto, duly executed by each holder of a Company Stock Option.
3.3 Parent's Deliveries. At the Closing, Parent will deliver to the
Company:
(a) the Employment Agreements, executed by each
Employee-Scientist and Parent;
(b) copies of resolutions of the board of directors of Parent
authorizing the execution, delivery and performance of this Agreement, certified
by an officer thereof;
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(c) the opinion of Parent's counsel in the form of Exhibit
3.3(c) hereto; and
(d) Certificates dated as of a date within ten (10) days of
the Closing Date (and to the extent practicable, telegrams dated as of the
Closing Date or the date prior thereto) as to the good standing of the Parent
and the payment of franchise taxes and filing of required reports from the
appropriate officials of all those jurisdictions in which the Parent is
incorporated or is qualified or authorized to do business as a foreign
corporation.
3.4 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to an under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
3.5 Parent's Conditions Precedent. The obligations of Parent under
this Agreement to proceed with the transactions contemplated hereby and effect
the Merger are, at the option of Parent in its sole discretion, subject to
Section 3.1 above and to the fulfillment of the following conditions at or prior
to the Closing (or on such other date as may be agreed by Parent and the
Representatives), and the Company and the Major Shareholders shall use their
reasonable best efforts to cause each such condition to be fulfilled:
(a) the representations and warranties of the Major
Shareholders and the Company contained in this Agreement, any Schedules and
Exhibits hereto and/or any certificates or documents delivered in connection
with this Agreement that are qualified by materiality shall be true and correct
when made, and shall also be true and correct at the time of Closing with the
same force and effect as though such representations and warranties were made at
that time and all such representations and warranties that are not qualified by
materiality shall be true and correct when made and shall be true and correct in
all material respects at the time of Closing with the same force and effect as
though such representations and warranties were made at that time, in each case,
except for changes expressly permitted by this Agreement;
(b) each covenant, agreement, delivery and obligation required
by the terms of this Agreement to be complied with and performed by the Company
and any of the Shareholders at or prior to the Closing shall have been duly and
properly complied with and performed;
(c) since the date of this Agreement, there shall not have
occurred any material adverse change in the business, properties, assets,
liabilities, prospects or condition
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(financial or otherwise) or results of the operations of the Company due to any
cause whatsoever, and no place of business of the Company shall have suffered a
substantial fire or other casualty loss or damage;
(d) there shall have been obtained by the Company written
consents to the Merger from, and there shall have been given any required
notices of the Merger to, the appropriate party to or issuer of each contract,
agreement, plan, policy, lease (other than the lease referred to in paragraph
(e) below), permit, license and other document or instrument specified on
Exhibit 3.5(d) hereto and made a part hereof, without change in the financial
terms thereof, and there shall have been delivered to Parent executed
counterparts satisfactory in form and substance to Parent of such consents and
notices;
(e) any consent of, or notification to, any lessor under any
lease of real property used or occupied by the Company which requires such
consent or notification in order for such lease to remain in full force and
effect after consummation of the transactions contemplated hereby shall have
been obtained or given in form and substance satisfactory to Parent, as the case
may be, without any increase in the amounts payable by the Company. Each lessor
(whether or not described above) under such leases shall have executed and
delivered to the Company and Parent an estoppel certificate in form and
substance satisfactory to Parent;
(f) no action, suit, proceeding or investigation shall have
been instituted against Parent, the Company or a Shareholder and be continuing
before or by any court, tribunal or governmental body or agency or have been
threatened, and be unresolved which action, suit, proceeding or investigation
would be reasonably likely to restrain or prevent, or to obtain substantial
damages by reason of, any of the transactions contemplated hereby; no court,
arbitration or governmental body, agency or official shall have issued any order
which would materially restrain the operation by Parent of the business of the
Company after the Closing Date;
(g) the Company shall have obtained the requisite approval of
its shareholders to this Agreement and the Merger and, except for the
acceleration of Company Stock Options held by Xxxxx Xxxxxxx (the value of the
acceleration of which shall not exceed $5,000),any agreement, contract or
arrangement which, in the absence of such approval, might result in the payment
of an "excess parachute payment" within the meaning of Section 280G of the Code;
and Parent shall have received Satisfactory Purchaser's Questionnaires from all
Shareholders (other than not more than two Shareholders owning, in the
aggregate, not more than 2,400 Shares);
(h) there shall be delivered to Parent a certificate of the
Major Shareholders and/or the Representatives, in the name and on behalf of the
Major Shareholders, executed on the Closing Date that the conditions set forth
in subsections (a) through (g) of this Section 3.5 have been fulfilled;
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(i) receipt by Parent of an opinion from its financial advisor
that the Merger is fair from a financial point of view;
(j) all persons who are listed on Schedule 7.5 hereto are
affiliates of the Company for the purposes of Rule 145 promulgated pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), shall have
executed and delivered to Parent an Affiliate Agreement substantially in the
form of Exhibit 7.5 hereto;
(k) Parent shall have no reason to believe that the issuance
of shares of Parent Common Stock to Shareholders in connection with the Merger
shall not be exempt from registration under the Securities Act; and the issuance
of Parent Common Stock in connection with the Merger shall have been qualified
or registered with the appropriate authorities in all jurisdictions in which
such qualification or registration is necessary;
(l) Parent shall have satisfactory completed its due diligence
review of the Company and shall be satisfied with the relationship between the
Company and its express and implied licensors and the right of the Company to
use and commercialize such technology and the technology used or proposed to be
used by it;
(m) the Centocor Research Agreement shall have terminated and
the Company shall have no further responsibilities or obligations thereunder,
and there shall have been delivered to Parent a certificate of the Chief
Scientific Officer of the Company affirming same;
(n) each Employee-Scientist shall have entered into an
Employment Agreement; and
(o) all legal matters and proceedings relating to the
consummation of the transactions contemplated hereby shall have been completed
in all material respects to the satisfaction of counsel for Parent.
3.6 Company Conditions Precedent. The obligations of the Company and
Major Shareholders under this Agreement to proceed with the transactions
contemplated hereby and effect the Merger are, at the option of the Company in
its sole discretion, subject to the fulfillment of each of the following
conditions at or prior to the Closing (or on such other date as may be agreed by
Parent and the Representatives), and Parent shall use its reasonable best
efforts to cause each such condition to be fulfilled:
(a) the representations and warranties of Parent and Sub
contained in this Agreement or any certificates or documents delivered by Parent
to the Company in connection with this Agreement that are qualified by
materiality shall be true and correct when made, and shall also be true and
correct at the time of the Closing with the same force and effect as though such
representations and warranties were made at that time and all such
representations and warranties
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that are not qualified by materiality shall be true and correct when made and
shall be true and correct in all material respects at the time of closing with
the same force and effect as though such representations and warranties were
made at that time, in each case, except for changes expressly permitted by this
Agreement;
(b) each covenant, agreement, delivery and obligation required
by the terms of this Agreement to be complied with and performed by Parent or
Sub at or prior to the Closing shall have been duly and properly complied with
and performed;
(c) since the date of this Agreement, there shall not have
occurred any material adverse change in the business, properties, assets,
liabilities, prospects or condition (financial or otherwise) or results of
operations of Parent due to any cause whatsoever, and no place of business of
Parent shall have suffered a substantial fire or other casualty loss; and
(d) there shall be delivered to the Company a certificate of
Parent executed on the Closing Date that the conditions set forth in subsections
(a) and (c) of this Section 3.6 have been fulfilled.
ARTICLE 4
Representations and Warranties of the Company and Certain Shareholders
Except as set forth in the Disclosure Schedule delivered by the
Company and each of the directors, officers and certain other Shareholders
listed on Schedule 4 of the Disclosure Schedule (each, a "Major Shareholder" and
collectively, the "Major Shareholders") in connection and concurrently with the
execution and delivery of this Agreement (the "Disclosure Schedule"), the
Company and the Major Shareholders hereby jointly and severally make each of the
following representations and warranties, and for purposes hereof, the phrase
"Knowledge of any of the Major Shareholders" shall mean to the knowledge of any
of the Major Shareholders without any duty to investigate but including all
knowledge imputed to the Company:
4.1 Organization, Standing and Qualification; No Subsidiaries. (a)
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California; and has all requisite power
and authority and is entitled to own, lease and operate its properties and to
carry on its business as and in the places such properties are now owned, leased
or operated and where such business is presently conducted. The Company is
qualified to do business and is in good standing in each State listed in
Schedule 4.1(a) of the Disclosure Schedule; which states constitute all states
in which the failure to be so qualified is reasonably likely to have a material
adverse effect on the condition (financial or otherwise), business, properties,
assets, liabilities or results of the operations of the Company (a "Company
Material Adverse Effect"). The Company has delivered to Parent (i) a true and
correct copy of the Articles of Incorporation of the Company, together with all
amendments thereto, as certified by the Secretary or Assistant Secretary of the
Company (ii) a true and correct copy of the Bylaws of the Company as currently
in effect, as certified by the Secretary or Assistant Secretary
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of the Company and (iii) true and correct copies of the corporate minutes of the
Company from the date of its incorporation to the date of this Agreement, as
certified by the Secretary or Assistant Secretary of the Company.
(b) Subsidiaries. The Company has no subsidiaries and has no
interest, direct or indirect, and has no commitment to purchase any interest,
direct or indirect, in any other corporation or in any partnership, joint
venture or other business enterprise or entity. The business carried on by the
Company has not been conducted through any direct or indirect subsidiary or any
direct or indirect affiliate of the Company or of any shareholder of the
Company, except as set forth in Schedule 4.1(b) of the Disclosure Schedule.
4.2 Related Transactions. Except as set forth on Schedule 4.2 of the
Disclosure Schedule, during the past three years the Company has not, directly
or indirectly, purchased, leased from others or otherwise acquired any property
or obtained any services from, or sold, leased to others or otherwise disposed
of any property or furnished any services to, or otherwise dealt with, except
with respect to customary remuneration for services rendered as an officer or
employee of the Company in the ordinary course of business, (a) any shareholder
of the Company, or any member of the family of any such shareholder, or (b) any
person, firm or corporation which, directly or indirectly, alone or together
with others, controls, is controlled by or is under common control with the
Company or any shareholder of the Company, or any member of the family of any
such person. Except as set forth on Schedule 4.2 of the Disclosure Schedule, no
part of the property or assets of any shareholder of the Company or any direct
or indirect subsidiary or affiliate of the Company or any shareholder of the
Company is used by the Company in connection with its business. Except as set
forth on Schedule 4.2 of the Disclosure Schedule, the Company does not owe any
amount to, nor have any contract with or commitment to, any of its affiliates,
and none of such persons or entities owes any amount to the Company, except
employment agreements disclosed on the Disclosure Schedule and normal salary
accruals for the current period.
4.3 Capitalization. (a) The authorized, issued and outstanding
shares of capital stock of the Company and the names and addresses of the lawful
record and beneficial owners thereof are as set forth on Schedule 4.3(a) of the
Disclosure Schedule. All of such shares are duly and validly issued and
outstanding, fully paid and non-assessable.
(b) Except as set forth on Schedule 4.3(b) of the Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, calls,
puts, contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatever (i) relating to
the issuance, sale, purchase or redemption of any shares of the capital stock of
the Company or other securities of the Company convertible into or exercisable
or exchangeable for such shares or any other securities of the Company, or (ii)
requiring the Company to purchase any capital stock or other equity interest
held by others. Neither the Company nor any of the Major Shareholders is a party
to any shareholders agreement or any other similar contract, agreement,
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arrangement, commitment, plan or understanding restricting or otherwise relating
to the voting, dividend, ownership or transfer rights of any Shares.
(c) Upon the consummation of the transactions contemplated by
this Agreement, Parent will own all of the equity interest in the Company.
(d) The 1999 Stock Option and Long Term Incentive Plan (the
"1999 Plan") of the Company was adopted by the Board of Directors and
stockholders of the Company in April 1999 and amendment thereto to increase the
number of shares issuable under the 1999 Plan was approved by the stockholders
of the Company in April 2000. The names of each holder of a stock option granted
under the 1999 Plan and outstanding as of the date hereof, and the number of
shares subject thereto, together with the exercise price and expiration date of
each such option is set forth on the Company Disclosure Schedule. The Company
delivered to Parent and Sub true and correct copies of the 1999 Plan and of the
forms of all outstanding stock options under such plan. Except as provided
above, the 1999 Plan has not been amended since its adoption by the Board of
directors and stockholders of the Company.
4.4 Authority; No Violation. (a) The Company has the full power and
authority to enter into this Agreement and each other agreement, document and
instrument to be executed or delivered it in connection with this Agreement and,
subject to the adoption of this Agreement by the requisite approval of the
stockholders of the Company, to carry out the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by the Company's Board of Directors and, except for
the approval of the Company's stockholders as contemplated by Section 7.6
hereof, no other corporate proceedings on the part of the Company are necessary
to authorize this Agreement or the transactions contemplated hereby or thereby.
This Agreement constitutes, and when executed and delivered at the Closing, each
other agreement, document and instrument to be executed or delivered by the
Company (the "Company Documents") will constitute, the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
its terms.
(b) Except as indicated on Schedule 4.4 of the Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Company Documents and the consummation of the transactions contemplated hereby
and thereby, will not (i) conflict with or violate any provision of the Articles
of Incorporation or bylaws of the Company, (ii) with or without the giving of
notice or the passage of time, or both, result in a breach of, or violate, or be
in conflict with, or constitute a default under, or permit the termination of,
or cause or permit acceleration or loss of rights under, any agreement or
instrument or any debt or obligation to which the Company is a party or to or by
which it or any of its assets is subject or bound, or result in the loss or
adverse modification of any lease, license, franchise, or other authorization
granted to or otherwise held by the Company, (iii) require the consent of any
party to any agreement or commitment to which the Company is a party, or to or
by which it is subject or bound, (iv) result in the creation or imposition
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of any lien, pledge, charge, security interest, restriction, claim, encumbrance,
right of first refusal, preference or right of others of every kind and
description (collectively, "Liens") upon any of the assets of the Company or the
Shares, or (v) to the knowledge of any of the Major Shareholders, violate any
law, rule or regulation or any order, judgment, decree or award of any court,
governmental authority or arbitrator to or by which the Company is subject or
bound.
(c) Approval of the Merger by the stockholders of the Company
will only require the affirmative vote of the holders of a majority of the
outstanding Shares. Except for applicable requirements of the Securities Act,
state securities or blue sky laws, and the filing and recordation of Certificate
of Merger as required by the GCL, no filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for the
consummation by the Company of the transactions contemplated by this Agreement.
4.5 Financial Statements. The Company has delivered to Parent copies
of the financial statements of the Company listed on Schedule 4.5 of the
Disclosure Schedule (the "Financial Statements"), including without limitation,
the balance sheet of the Company as at December 31, 1999 (the "Balance Sheet").
All of the Financial Statements, together with the notes thereto have been
prepared from the books and records of the Company in accordance with generally
accepted accounting principles consistently applied and maintained throughout
the periods indicated and fairly present the financial condition of the Company
as at their respective dates and the results of operations of the Company for
the periods covered thereby. The Financial Statements do not contain any items
of special or nonrecurring income or any other income not earned in the ordinary
course of business except as expressly specified therein, and include all
adjustments, which consist only of normal recurring accruals, necessary for such
fair presentation, except that the unaudited financial statements are subject to
normal year-end audit and may not contain all footnotes required by generally
accepted accounting principles.
4.6 Absence of Undisclosed Liabilities; Guarantees. (a) Except as
and to the extent reflected or reserved against on the Balance Sheet (including
the notes thereto), or set forth on Schedule 4.6(a) of the Disclosure Schedule,
as of the Balance Sheet Date, the Company had no debts, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
whatsoever relating to or arising out of any act, transaction, circumstance or
state of facts which occurred or existed on or before the Balance Sheet Date,
whether or not then known, due or payable (other than contract obligations
disclosed pursuant to this Agreement, unsecured obligations for supplies,
equipment and travel expenses incurred in the ordinary course of business or not
required to be disclosed pursuant to this Agreement, which in each case conform
to the representations and warranties with respect thereto in this Agreement).
(b) Except as indicated in Schedule 4.6(b) of the Disclosure
Schedule, none of the obligations or liabilities of the Company is guaranteed by
any other person or entity, nor has the Company guaranteed any of the
obligations or liabilities of any other person or entity.
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4.7 Absence of Changes or Events. Except as set forth on Schedule
4.7 of the Disclosure Schedule, since December 31, 1999 (the "Balance Sheet
Date"), the Company has conducted its business in the ordinary course in a
manner consistent with past practices. Without limiting the foregoing, since
such date, the Company has not, except as set forth on said Schedule 4.7:
(i) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in the ordinary course of
business and consistent with its prior practice, none of which liabilities, in
any case or in the aggregate, materially and adversely affects the business,
condition (financial or otherwise), assets, liabilities, operations or prospects
of the Company;
(ii) discharged or satisfied any Lien, other than those
then required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, other than current liabilities shown on the Balance Sheet and current
liabilities incurred since the Balance Sheet Date in the ordinary course of
business and consistent with its prior practice;
(iii) mortgaged, pledged or subjected to any Lien any of
its property, business or assets, tangible or intangible;
(iv) sold, transferred, leased or licensed to others or
otherwise disposed of any of its assets (except for inventory sold and supplies
consumed in the ordinary course of business and on customary terms and
condition) or any interest therein (including any non-exclusive license or other
transfer of patent rights or other intellectual property, including an antibody
or a process related thereto), entered into, extended, reinstated or acquiesced
in the revocation of the termination of any research agreement or collaboration
or other similar allocation of resources to or for the benefit of any other
entity, or canceled or compromised any debt or claim, or waived or released any
right of substantial value;
(v) received any notice of termination of any license,
contract, lease or other agreement or received any notice of, or to the
Knowledge of any of the Major Shareholders, otherwise encountered any material
change in its relations with its employees, agents, licensees, licensors,
advisors, collaborators, investigators, customers or suppliers or any
governmental regulatory authority or self-regulatory authority, or that any
thereof intended to cease doing business with it or will refuse to do business
with Parent;
(vi) transferred or granted any rights under, or entered
into any settlement regarding the breach or infringement of, any license,
copyright, trademark, trade name, patent, invention, know-how or other
proprietary right or intellectual property, or modified any existing rights with
respect thereto;
-18-
(vii) adopt or amend any employee incentive, pension or
other benefit or made any change in the rate of compensation, commission, bonus
or other direct or indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus or extra compensation to,
or made any change in any pension, wage, condition or severance or vacation pay
policy covering, any shareholder, director, officer, employee, salesman,
scientific investigator, independent contractor or agent providing services to
or for the Company, who earned in excess of $60,000 per annum on June 30, 2000
(other than customary merit increases and profit sharing plan contributions
given to or made on behalf of officers and employees of the Company in the
ordinary course of business and consistent with past practices);
(viii) declared, set aside or made any payment of
dividends or other distributions to its shareholders or upon or in respect of
any shares of its capital stock or purchased, retired or redeemed, or obligated
itself to purchase, retire or redeem, any of its shares of capital stock or
other securities or made any commitment with respect thereto;
(ix) made any capital expenditures or capital additions
or betterment in excess of $10,000 in any individual instance and $150,000 in
the aggregate;
(x) suffered any damage, destruction or loss (whether or
not covered by insurance amounting to more than $10,000 in the aggregate); or
suffered any change, event or condition which, in any case or in the aggregate,
has had or could reasonably be expected to have a Company Material Adverse
Effect.
(xi) entered into any transaction, contract or
commitment other than in the ordinary course of business, or paid or agreed to
pay any brokerage, finder's fee, or other compensation in connection with, or
incurred any severance pay obligations by reason of, this Agreement or the
transactions contemplated hereby;
(xii) received any notice from any licensor, licensee,
research partner, investigator, client, customer or supplier that it intends to
cease doing business with the Company, nor to the Knowledge of any of the Major
Shareholders has any such cessation referred to in this clause (xii) occurred;
(xiii) issued or sold any shares of its capital stock or
other securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or other rights to subscribe for a purchase of capital
stock or any security convertible or exchangeable for such capital stock or
other equity interest, or acquired any capital stock or other securities of any
corporation or any interest in any business enterprise, or otherwise made any
loan or advance to or investment in any person, firm or corporation (other than
stock option grants to employees, directors and consultants in the ordinary
course of the Company's business and the issuance of stock upon the exercise of
stock options);
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(xiv) entered into any merger, consolidation,
reorganization or sale lease of all or substantially all of its assets or
business;
(xv) made any advances, loans, or capital contributions
to, or guarantee any obligation (contingent or otherwise) of, any person, firm
or other entity (other than by endorsement of negotiable instruments for
collection in the ordinary course of business);
(xvi) amended its articles of incorporation or bylaws or
other charter documents;
(xvii) forgave any claim (other than normal customary
adjustments in the ordinary course of business and consistent with past
practices);
(xviii) instituted, settled or agreed to settle any
litigation, claim, action, arbitration, investigation or proceeding before any
governmental authority relating to it or any of its property or received any
threat thereof;
(xix) effected a split, reclassification or similar
change in or of any of its capital stock or other equity interests;
(xx) made or permitted or agreed to make or permit, any
material amendment or termination of any material contract, lease agreement,
license or other instrument to which it is a party;
(xxi) had any threatened employee strikes, work
stoppages, slow downs or lockouts, grievances or arbitrations, or had any
material change in its relations with its employees or agents; and
(xxii) entered into any agreement or made any commitment
to take any of the types of actions described in any of subsections (i) through
(xx) above.
4.8 Title to and Condition of the Company's Assets. (a) The Company
does not own any real property. Except as set forth in Schedule 4.8(a) of the
Disclosure Schedule, the Company has good and valid title to the personal
property owned by it, including, without limitation, all personal property
reflected on or included in the Balance Sheet as owned by the Company and all
personal property acquired by the Company since the Balance Sheet Date, in each
case free and clear of all Liens. None of such properties and assets are subject
to any mortgage, pledge, lien, charge, security interest, encumbrance,
restriction, lease, license, easement, liability or adverse claim of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise, except as expressly set forth in the Balance Sheet as securing
specific liabilities or as otherwise expressly permitted by the terms hereof,
and except with respect to licenses expressly set forth in or pursuant to
Section 4.9 below or set forth on Schedule 4.9. All personal property owned by
the
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Company and all personal property held by the Company pursuant to personal
property leases is suitable for the purposes used, and is adequate and
sufficient in all of its current operations and is in good operating condition
and repair, reasonable wear and tear excepted.
(b) The Company enjoys peaceful possession of all real and
personal property owned or held under lease or license. The Properties (as
defined in Section 4.10(a)) constitute all real property and all the buildings,
facilities and improvements used by the Company. There are no defaults existing
or events or conditions which with notice or lapse of time or both, would
constitute events of default, or arrearages under any such leases or licenses,
and all such leases and licenses are in good standing, in full force and effect
and are valid, legally binding and enforceable obligations of the Company. None
of the real or personal property owned or leased by the Company necessary to
conduct the Company's business as presently conducted is owned by any
shareholder of the Company or any person or entity controlled by, controlling or
under common control with, any shareholder of the Company other than Company
itself.
4.9 Intellectual Property. (a) Except as set forth on Schedule
4.9(a) of the Disclosure Schedule or in a separate letter referring to this
Agreement delivered to Parent prior to execution of this Agreement, the Company
owns or possesses the perpetual, worldwide, royalty-free licenses and other
rights to use the name "Prolifaron" in connection with its business, and all
other Intellectual Property (as hereinafter defined) currently used in
connection with or necessary to conduct its business as it is presently operated
or contemplated to be conducted, including, without limitation, with respect to
pComb vectors and related information, phage display technology, catalytic
antibodies, antibody humanization and any rights necessary to commercialize
antibodies discovered pursuant thereto (collectively, the "Products"), all of
which are in good standing and uncontested and free and clear of any Liens and
none of the same are owned or licensed or held by any shareholder, director,
officer, entity controlled by the Company or any director, officer, consultant
or employee thereof other than the Company itself.
(b) Except as set forth on Schedule 4.9(b) of the Disclosure
Schedule or in a separate letter referring to the Agreement delivered to Parent
prior to execution of this Agreement, no such Intellectual Property nor the
Company or its business infringes upon or otherwise is in conflict with or
adverse to any Intellectual Property owned by any other person or entity which
Intellectual Property is in the public domain or of which any Major Shareholder
is aware. Except as set forth on Schedule 4.9(b) of the Disclosure Schedule, or
in a separate letter referring to this Agreement delivered to Parent prior to
execution of this Agreement, no claim, suit, demand, proceeding or, to the
Knowledge of any of the Major Shareholders, investigation is pending or has been
asserted and, to the Knowledge of any of the Major Shareholders, no claim, suit,
demand, proceeding or investigation is threatened against the Company with
respect to, based on or alleging infringement of (or by conducting its business
as proposed would infringe), any such rights of any third party, or challenging
the validity or effectiveness of any license for such rights, and the Major
Shareholders know of no basis for any such claim, suit, demand, proceeding or
investigation. The Company has used commercially reasonable efforts to maintain
and protect the Intellectual
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Property which it owns or uses or has been licensed to the Company. A
description of the Company's Intellectual Property is set forth in Schedule
4.9(b) of the Disclosure Schedule.
(c) Schedule 4.9(c) of the Disclosure Schedule contains a list
(including the parties, effective date and expiration date) of all contracts,
agreements, commitments or licenses relating to the Intellectual Property or the
Products to which the Company is a party or by which it is bound, including,
without limitation, all license agreements, material transfer agreements,
agreements for antibody identification, biological material supply, research
collaborations, development agreements, and other technology agreements (the
"Proprietary Rights Agreements"). The Company has delivered to Parent true and
complete copies of all of the Proprietary Rights Agreements, including, without
limitation, the Centocor Research Agreement and the Material Transfer Agreement
dated December 1997 between Ortho Pharmaceutical Corporation and the Company. To
the best of the Major Shareholders' knowledge, all of the Proprietary Rights
Agreements are in full force and effect and enforceable in accordance with their
terms and there is no violation or default under the Proprietary Rights
Agreements. To the best of the Major Shareholders' knowledge no event has
occurred or circumstance exists which with notice or lapse of time or both would
constitute an event of default, or give rise to a right of termination or
cancellation, or result in the loss or adverse modification of any right or
benefit under any of the Proprietary Rights Agreements. No party to any
Proprietary Rights Agreement has given the Company written notice of or made a
claim with respect to, and the Company is not otherwise aware of, any material
breach or default or anticipated termination or material breach or default under
any thereof. There have been no oral or written modifications to the terms or
provisions of any of the Proprietary Rights Agreements. No amount payable or
reserved under any Proprietary Rights Agreement has been assigned or anticipated
and no amount payable under any Proprietary Rights Agreement is in arrears or
has been collected in advance and to the best of the Major Shareholders'
knowledge, there exists no offset or defense to payment of any amount under a
Proprietary Rights Agreement.
(d) Except as set forth on Schedule 4.9(d) of the Disclosure
Schedule or in a separate letter referring to this Agreement delivered to Parent
prior to execution of this Agreement, the Company has not disclosed and has not
granted any person or entity the right to develop, make, have made, use, market,
license or commercialize the Products set forth on Schedule 4.9(d) of the
Disclosure Schedule (the "Proprietary Products"). The Company has not given any
such consent and the Company owns, or is the exclusive licensee (as shall be
designated on such Schedule) of, all right, title and interest in and to the
Proprietary Products and the exclusive right to apply for copyright and patent
protection therefor. None of the individuals or entities who have performed
services for the Company in connection with the development of any of the
Proprietary Products, as employees or as independent contractors, holds any
proprietary rights with respect to such Proprietary Products. Each of such
employees and independent contractors has signed an employment contract or
confidentiality agreement with the Company which contains an inventions
assignment clause and a covenant prohibiting the use of the Company's
Confidential Information other than on behalf of the Company.
-22-
(e) To the best of the Major Shareholders' knowledge, there
has been no publication or public distribution by the Company of any of the
Intellectual Property of the Proprietary Products that would in any way affect
the right of the Company or Parent to seek patent or copyright protection
therefor. Schedule 4.9(e) contains true and correct copies of each form of
license agreement which has been used by the Company, in connection with the
marketing, license and distribution of the Proprietary Products. To the best of
the Major Shareholders' knowledge, each user of the Proprietary Products has
signed a license agreement with respect thereto with the Company. With respect
to any contracts pertaining to the Proprietary Products entered into by the
Company, the Company has licensed the Proprietary Products and not sold them,
thus retaining ownership of the Proprietary Products. None of the Major
Shareholders are aware of any claims actually or purporting to be within the
scope of the warranty coverage afforded to purchasers of any of the Proprietary
Products, or of any errors, omissions or failures to perform other than those
disclosed to Parent in writing prior to the date hereof.
(f) For purposes hereof, "Intellectual Property" shall mean
know-how and other intellectual property, including, without limitation, all
trade secrets and data, information not known to the general public, whether or
not patentable or copyrightable, ideas, concepts, designs, discoveries,
formulae, patents, patent applications, product and service developments,
customer and vendor information, lists and data bases, inventions, improvements,
processes, techniques, methods, disclosures, trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications, biological
materials, targeted antibodies (including fragments, derivatives and variants
thereof), phage technology, antibody identification and other methods, software,
materials, algorithms, prototypes, engineering and design models, apparatus, and
any information relating to any antibody or research program which has either
been identified, researched, developed, acquired or licensed for or by the
Company, and all license agreements (whether as licensor or licensee) relating
thereto.
4.10 Schedules. Schedule 4.10 of the Disclosure Schedule contains a
true, complete and accurate list and description of the following:
(a) all real property, and all buildings and improvements
thereon owned, leased or used by the Company (the "Properties"), together with a
brief description of the effective date, expiration date and any amendment of
each lease, sublease or license under which the Company holds any leasehold or
other interest or right to the use thereof or pursuant to which the Company has
assigned, sublet or granted any rights therein;
(b) all material items of tangible personal property owned,
leased or used by the Company (with vendor, amount, purchase date and
description), except for items having a value of less than $10,000 which do not,
in the aggregate, have a total value of more than $150,000, setting forth with
respect to all such listed property a summary description of all leases relating
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thereto, identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof;
(c) all agreements which provide for, or relate to, the
incurrence by the Company of debt for borrowed money or the extension of credit
by the Company to any other person, firm or other entity, including without
limitation, all guarantees, loan agreements, indentures, mortgages and pledges,
all conditional sale or title retention agreements, and mortgages, security and
pledge agreements, equipment obligations, leases or lease purchase agreements as
to items of personal property, in each case to which the Company is a party or
by which it or any of its assets is bound or under which it has rights and which
are secured by or otherwise relate to any of its assets, properties or rights;
(d) all sales agency, supply, purchase, distribution, dealer,
advertising, promotional, public relations, support, maintenance, outsourcing,
manufacture and fulfillment agreements or franchises and all agreements pursuant
to which a royalty or similar payment shall be payable or providing for the
services of an independent contractor other than those agreements that have an
annualized cost of $10,000 or less and which can be terminated on not more than
thirty (30) days notice by the Company without penalty or consideration;
(e) all contracts for goods or services to be provided by a
third person to the Company which will involve the payment by the Company of
more than $10,000 in 2000 or which extend beyond the expiration of thirty days
after the Closing Date;
(f) all contracts, agreements and commitments, whether or not
fully performed, in respect of the issuance, sale or transfer of the capital
stock, bonds or other securities of the Company or pursuant to which the Company
or any Shareholder has acquired or disposed of any substantial portion of the
capital stock, business or assets of the Company;
(g) all trademarks, trademark registrations, and applications
therefor, service marks, service names, trade names, patents and patent
applications, copyrights and copyright registrations, and applications therefor,
wholly or partially owned, held, licensed or used by the Company, including,
without limitation, all contracts, agreements, commitments or licenses relating
to any of the foregoing (except for the Proprietary Rights Agreements set forth
on Schedule 4.9(c) of the Disclosure Schedule);
(h) all contracts, agreements, commitments, leases, licenses
or other understandings or arrangements to which the Company is a party or by
which it or any of the property thereof is bound or affected, except for the
Proprietary Rights Agreements set forth on Schedule 4.9(c) of the Disclosure
Schedule and excluding contracts entered into in the ordinary course of business
which are terminable by the Company on less than 30 days' notice without any
penalty or consideration and involving payments or receipts during the entire
life of such contracts by the Company of less than $10,000 in the case of any
single contract;
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(i) all contracts that (i) provide for minimum purchase,
royalty or other monetary obligations on the part of the Company except for
those involving annual payments of $10,000 or less and for not more than two (2)
years, (ii) restrict the persons to whom or the territories in which the Company
may sell, market, exploit or use any technology or product or the ability of the
Company (or, after the Closing, the Parent) to engage in the business heretofore
engaged in by the Company, (iii) provides for the Company to make any rebates,
give any credits or price reduction or accept any "in-kind" or non-cash payment,
(iv) materially affects the ability of the Company to engage in the business
heretofore engaged in by the Company anywhere in the world, or (v) limit the
Company (or, after the Closing, the Parent) from competing with any person or
engaging in any other business or activity;
(j) all employment and consulting agreements, and each
retirement, savings, profit sharing, deferred compensation, severance,
termination, reemployment assistance, performance, bonus, incentive, vacation or
holiday pay, sick pay, personal day, education, pension, stock purchase, stock
option, hospitalization or other medical, disability, life, health, dental,
accident and other insurance, and other welfare, benefit and fringe benefit
plans, policies, trusts, understandings, agreements, arrangements, commitments
and/or practices of any kind, to which any of the Company is a party or bound or
which cover or relate to the Company's present or former employees (including
employee loans from the Company); and each employee collective bargaining
agreement and each agreement, understanding or arrangement of any kind, whether
written or oral, with or for the benefit of any present or former officer,
director, employee or consultant (including, without limitation, each
employment, compensation, deferred compensation, severance, termination,
reemployment assistance or consulting agreement or arrangement);
(k) as of a date no earlier than one month prior to the date
hereof all of the Company's receivables (which shall include accounts
receivable, loan receivable and any advances), together with information as to
each such listed receivable which has been outstanding for more than 30 days;
(l) the names and current annual salary rates of all persons
(including independent commission agents) employed or engaged by the Company,
and showing separately for each such person the amounts paid or payable as
salary, bonus payments and any indirect compensation for the year ended December
31, 1999, and on an annualized basis as of June 30, 2000, and the names of all
trustees of profit sharing and similar plans of, maintained by, or contributed
to by, the Company;
(m) all partnership, joint venture or other similar
arrangements or agreements;
(n) all agreements and commitments pursuant to which the
Company has granted or agreed to grant any registration rights, including
piggyback rights, participation or
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preemptive rights, tag along or drag-along rights, rights of co-sale or rights
of first offer or refusal, and any agreement relating to the voting of shares or
management of the Company;
(o) all contracts for any purpose not made in the ordinary
course of the business which are material to the Company, or its business;
(p) a description of each express warranty covering products
or services sold by the Company (for purposes hereof, only one copy of the
standard warranty given by the Company need be included);
(q) all fire, theft, casualty, liability, errors and omissions
and other insurance policies insuring the Company, specifying with respect to
each such policy the name of the insurer, the risk insured against, the limits
of coverage, per event coverage, the deductible amount (if any), the premium
rate and the date through which coverage will continue by virtue of premiums
already paid; and
(r) all credit cards, bank accounts and safe deposit boxes
maintained by the Company, together with the names of all persons who have
signatory authority thereon or access thereto, as the case may be, or holding
any power of attorney from the Company.
True and complete copies of all contracts, agreements, plans,
arrangements, commitments and documents required to be listed pursuant to this
Section 4.11 (to the extent in writing or if not in writing, an accurate summary
thereof), together with any and all amendments thereto, have been delivered to
Parent.
Except as set forth on Schedule 4.10 of the Disclosure Schedule, all
of the contracts, agreements and commitments required to be listed pursuant to
this Section 4.10 (other than those which have been fully performed) are in full
force and effect, do not require the consent or approval of any party to the
transactions contemplated hereby and will be unaffected by the sale of the
Shares to Parent hereunder, and Parent will be entitled to the full benefits
thereof. To the best of the Major Shareholders' knowledge, there is not under
any contract, agreement or commitment required to be listed pursuant to this
Section 4.10, any existing default or event which, after notice or lapse of
time, or both, would constitute a default or result in a right to accelerate or
loss of rights, nor any anticipated termination or material breach or default.
4.11 Litigation. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body or
arbitration tribunal by which the Company, or its securities, assets, properties
or business is bound or subject. Except as set forth on Schedule 4.11 of the
Disclosure Schedule, there are no actions, suits, legal, administrative or
arbitration proceedings or inquiries relating to the Company pending or, to the
Major Shareholders' knowledge, threatened (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against the Company, or
any officer, director or employee of the Company (in his or
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her capacity as such) which involves any of the Intellectual Property of or used
in connection with or necessary to conduct the business of the Company or its
Products, or which could reasonably be expected to result in or have, either
individually or in the aggregate, any Company Material Adverse Effect, or any
change in the current equity ownership of the Company, including, without
limitation, actions pending or threatened involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. No
suit, action, investigation, inquiry or other proceeding by any governmental
body or other person or legal or administrative proceeding has been instituted
or, to the Major Shareholders' knowledge, threatened which questions the
validity or legality of, or otherwise relates to, the transactions contemplated
hereby.
4.12 Compliance with Laws and Other Instruments; Permits. (a) Except
as set forth in Schedule 4.12(a) of the Disclosure Schedule, the Company has
complied, and all of the Properties are in compliance, in all material respects,
with all laws, rules, regulations, ordinances, orders, judgments and decrees
applicable to the Company, any of its employees (as the actions of such
employees relate to the Company), any of the Properties and/or any aspect of its
business, including without limitation, any laws, rules, regulations,
ordinances, codes, orders, judgments or decrees as to zoning, building
requirements or standards, import, export, environmental, health and/or safety
matters, and any rules and related regulations promulgated by the Federal Food
and Drug Administration. Except as set forth on Schedule 4.12(a) of the
Disclosure Schedule, neither the ownership nor use of any of the properties or
assets of the Company nor the conduct or operations of its business, in any
material respect, conflicts with the rights of any person or entity or violates,
or with or without the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to accelerate or loss of
rights under, any terms or provisions of its articles of incorporation or
bylaws, or any law, ordinance, rule or regulation, or any order, judgement or
decree to which the Company is a party or by which it may be bound or affected.
(b) Except as set forth in Schedule 4.12(b) of the Disclosure
Schedule the Company has all approvals, certificates, authorizations, consents,
licenses, franchises, orders and permits necessary to the operation of its
business as presently conducted except for those which failure to have would not
(except in the case of Intellectual Property matters) constitute a Company
Material Adverse Effect ("Licenses and Approvals"). All applications for such
Licenses and Approvals were true and correct when made and continue to be true
and correct as they pertain to its business and operations and the use of the
Company's tangible and intangible properties and assets. None of the operations
of the Company is being conducted in any manner which violates in any material
respect any of the terms or conditions under which such License and Approval was
granted. Each such License and Approval has been duly obtained, is valid and in
full force and effect, and is not subject to any pending or, to the knowledge of
the Major Shareholders, threatened administrative or judicial proceeding to
revoke, cancel or declare such License and Approval invalid in any respect. No
such License and Approval by its terms will terminate or lapse or be subject to
adverse modification by reason of the transactions contemplated by this
Agreement.
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(c) None of the Properties or any assets of the Company is
subject to any governmental decree or order to be sold or is being condemned or
otherwise taken by any public authority, nor has any such sale, condemnation or
taking been proposed to the Company.
4.13 Insurance. The Company (i) is not in default in any material
respect with respect to any provision contained in any insurance policy or
binder, (ii) has not failed to give any notice or present any claim under any
insurance policy or binder in due and timely fashion or (iii) has not received
any notice of cancellation or non-renewal with respect to any such policy or
binder therefor. There are no outstanding unpaid claims under any such policy or
binder which have gone unpaid for more than 45 days or as to which the carrier
has disclaimed liability.
4.14 Absence of Certain Business Practices. Neither the Company nor
any officer, employee or agent of the Company, nor any other person acting on
its behalf, has, directly or indirectly, within the past three (3) years given
or agreed to give any gift or similar benefit to any client, customer,
governmental employee or other person who is or may be in a position to help or
hinder the business of the Company (or assist the Company in connection with any
actual or proposed transaction) which (a) might subject the Company to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (b) if not given in the past, might have had an adverse effect on
the assets, properties, business or operations of the Company, or (c) if not
continued in the future, might adversely affect the Company's assets, operations
or prospects or which might subject the Company to suit or penalty in any
private or governmental litigation or proceeding.
4.15 Environmental Matters.
(a) Except as set forth in Schedule 4.15(a) of the
Disclosure Schedule, no Hazardous Substance (as hereinafter defined) is, or has
been stored, treated, recycled, released, disposed of or discharged on, about,
or from the Property by the Company in any material amounts except in compliance
with applicable laws, rules and regulations, and, to the Knowledge of any of the
Major Shareholders, the Company has no liability which is based upon or related
to the environmental conditions under or about any of the Properties, and there
is no reasonable basis for any such liability arising. The Company is not aware
of any Hazardous Substances located in, at, on, or under the Property that could
reasonably be expected to require investigation, removal, remedial or corrective
action by the Company. The Company has disposed of all wastes in compliance with
all applicable environmental, health and safety laws, ordinances, rules and
regulations.
(b) Except as set forth in Schedule 4.15(b) of the
Disclosure Schedule, the Company has not received (i) notice of any liability or
other correspondence based upon or related to the use, management, handling,
transport, treatment, generation, storage, spill, escape, seepage, leakage,
spillage, emission, release, discharge, remediation or clean-up of any
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Hazardous Substance on or about the Property or caused by the Company or any
affiliate (a "Hazardous Discharge") or (ii) any complaint, order, citation or
notice with regard to an air emission, water or ground discharge, noise
emission, solid or liquid or gas storage or disposal, a Hazardous Substance or
any other environmental health or safety matter affecting the property (an
"Environmental Complaint"), under the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or under any other federal,
state or local law, ordinance, rule or regulation. The Property is not listed,
or proposed for listing, on the National Property List under CERCLA or any
analogous state or foreign list or is the subject of an Environmental Complaint.
(c) To the Knowledge of any of the Major Shareholders, there
are no fuel or gasoline storage tanks presently in use or at any time abandoned
in, on or under the Property.
(d) To the Knowledge of any of the Major Shareholders, the
Property does not contain any asbestos or asbestos-containing materials. To the
knowledge of Major Shareholders, there is no existing practice, action or
activity of the Company and no existing condition of the business of the Company
which is reasonably likely to give rise to any civil or criminal liability
under, or which is reasonably likely to violate or prevent compliance with, or
result in any Environmental Complaint under, any applicable environmental
requirement or any applicable health, occupational safety or other similar Law.
(e) The Company's United States Nuclear Regulatory Commission
Materials License is valid and in full force and effect. The Company has
furnished to Parent true and complete copies of all material safety data sheets
("MSDS") under the Occupational Safety and Health Act and/or the rules and
regulations thereunder (collectively "OSHA") for all Hazardous Substances
stored, processed or otherwise used at any of the Properties in respect of which
an MSDS has been submitted to any governmental agency or authority; a true and
complete copy of the Hazardous Materials Inventory provided to the San Diego
Fire Department, a true and complete copy of the Hazardous Materials Business
Plan required by the San Diego County Department of Health Services, and true
and complete copies of all insurance company and other investigations and
reports relating to any of the matters or conditions referred to in this Section
4.15.
(f) There are no environmental Liens on any asset of the
Company, and to the best Knowledge of any of the Major Shareholders, no
government actions have been taken nor has the Company been informed that such
actions are in process which could subject any of such assets to such Liens.
There are no clean-up or remedial actions currently being undertaken or
contemplated by the Company with respect to any Hazardous Substances on property
leased by the Company.
(g) The term "Hazardous Substance" as used in this Agreement
shall include, without limitation, gasoline, oil and other petroleum products,
explosives, radioactive materials and related and similar materials, and any
other substance or material defined as a
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hazardous, toxic or polluting substance or material by any federal, state or
local law, ordinance, rule or regulation, including asbestos and
asbestos-containing materials.
(h) The Company has delivered to Parent true and complete
copies of all engineering and environmental reports and studies, and all other
reports, evaluations and assessments, relating to any of the Properties and/or
any matter referred to in this Section 4.15.
4.16 Employee Benefits; Employees.
(a) All pension, retirement, savings, profit-sharing, deferred
compensation, severance, termination, reemployment assistance, stock ownership,
stock purchase, stock option, performance, bonus, incentive, vacation or holiday
pay, hospitalization or other medical, vision, dental and other health insurance
plans, all life, disability or other insurance plans or arrangements or
commitments and all other welfare, benefit or fringe benefit plans, policies,
trusts, understandings or arrangement of any kind, whether written or oral,
required to be listed in Schedule 4.10 of the Disclosure Schedule, and all
trusts and insurance contracts maintained in connection therewith (collectively,
"Employee Benefit Plans"), conform to, and the administration thereof is in
material compliance with its terms and all applicable laws and regulations,
including without limitation the Employee Retirement Income Security Act, as
amended ("ERISA") and the Code, and neither the operation or administration of
any Employee Benefit Plan, nor transactions contemplated by this Agreement, will
result in any of the Company, or Parent incurring or suffering any liability, or
have any adverse effect on the financial condition, assets, liabilities,
prospects or results of operations of the Companies or Parent. Each Employee
Benefit Plan which is intended to be qualified within the meaning of Section
401(a) of the Code is so qualified. All contributions required, by law or by
contract, to be made to any Employee Benefit Plan for any plan year, or other
period on the basis of which contributions are required, ending before the date
hereof, have been made as of the date hereof. The Company has complied in all
material respects with all reporting and disclosure requirements with respect to
each Employee Benefit Plan. The Company is not nor will be required to
participate, maintain or contribute or make payment to, or have any liability or
obligation under or with respect to, any single or multi-employer Employee
Benefit Plan (whether by reason of being a member of an affiliated group of
companies, one of which maintains such a plan, or otherwise), nor has it
participated, maintained, contributed or incurred any liability or obligation
with respect to any such plan. There are no unfunded accrued benefits under any
of the Employee Benefit Plans and, no amounts are or will be required to be
contributed by the Company in respect of any plan year under any such Employee
Benefit Plan. With respect to each Employee Benefit Plan, complete copies, if
any, of the last filed tax returns and reports, and all schedules attached
thereto, have been furnished to Parent, and all reports required under any
applicable law or regulation to be filed by the Company with the relevant
governmental authority have been duly filed, and all such returns and reports
were true and correct. No such Employee Benefit Plan (including any trust
created thereunder), nor any trustee or administrator thereof, nor the Company
has engaged in any transaction prohibited by any law or any transaction, which
could subject the Company, Parent or such Plan or trustee or administrator to
any penalty imposed under any law or to any tax
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imposed by any law. The Company has no liability or obligation with respect to
any Employee Benefit Plan or trust related thereto that may have been terminated
prior to the date hereof.
(b) The Company has complied in all material respects with all
applicable laws respecting the employment of labor, including those relating to
employment practices, terms and conditions of employment, hiring and prices,
wages and hours, discrimination in employment, collective bargaining and the
operation of its business and the payment and withholding of taxes, and has
withheld all amounts required by law, regulations or agreement to be withheld
from the wages or salaries of its employees and is not liable for any arrears of
wages or any taxes or penalties for failure to comply with any of the foregoing.
The Company has not engaged in any unfair labor practice, and there is no unfair
labor practice, grievance, arbitration, sexual harassment or other
employment-related complaint pending, or, to the knowledge of any of the Major
Shareholders, threatened against any of the Company or any officer, director or
employee thereof. There do not exist any pending workmen's compensation claims
against the Company that are not adequately provided for by insurance, or any
pending or, to the knowledge of the Major Shareholders, threatened claims that
the workplace of the Company is unsafe or that the Company has engaged in unfair
labor practices, employment discrimination or wrongful discharge. The Major
Shareholders believe that the Company's relations with its employees are
satisfactory. No union, trade, guild or collective bargaining unit represents
any employees of the Company, and no union organizing or election activities
involving any non-union employees of the Company is now in progress nor, to the
best of any Major Shareholder's knowledge, threatened.
(c) Parent has been furnished with true and complete copies
of: (i) the text or a reasonable summary of all Employee Benefit Plans, all
amendments thereto, all current summary plan descriptions, summaries of material
modifications and material communications related to any Employee Benefit Plan;
(ii) any trust or other funding agreements; (iii) all contracts relating to any
Employee Benefit Plans, including insurance contracts, investment management
agreements, and recordkeeping agreements; and (iv) the annual reports, if
required under ERISA, for each of the last three years. No commitments to create
any additional plans or modify or change any existing plans that would affect
any employee or terminated employee.
(d) No liability under Title IV of ERISA has been incurred and
no condition exists that presents a risk of the Company, Parent, or any
Affiliate thereof incurring a liability under Title IV.
(e) Neither the Company nor any affiliate thereof, nor any
Employee Benefit Plan or any trust created thereunder, nor any trustee or
administrator has engaged in any transaction in connection with which the
Company or any affiliate thereof would be subject to a civil penalty assessed
pursuant to Section 409 or 502 of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code. Neither the execution and delivery of this Agreement,
nor the performance of this Agreement or the consummation of the transactions
contemplated herein will entitle any current or former director, officer or
employee of the Company to severance pay, unemployment
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compensation or any other payment, accelerate the time of payment or vesting, or
increase the amount of compensation due any such director, officer or employee.
(f) No Employee Benefit Plan is subject to Section 302 of
ERISA or Section 412 of Code, and no such plan has ever been maintained by the
Company or any affiliate thereof. All contributions required to be made with
respect thereto on or prior to the Closing Date have been timely made. Each plan
which is a group health plan as such term is defined in Section 5000(b)(1) of
the Code has been administered and operated in all material respects in
compliance with the applicable requirements of Sections 601 through 734 of ERISA
and Section 4980B of the Code. Except for ordinary undisputed claims for
benefits there are no claims, appeals of claims (including litigation), or
alleged fiduciary breaches involving any Employee Benefit Plan presently
asserted or which may foreseeably be asserted with respect to benefits under any
Employee Benefit Plan.
(g) Except for the acceleration of Company Stock Options held
by Xxxxx Xxxxxxx (the value of the acceleration of which shall not exceed
$5,000), the Company is not required, by law or by contract, to provide any type
of notice or report in respect of, or obtain any consent or approval from, or
make any filing with, any union, trade, guild or collective bargaining unit or
governmental authority in respect of a change of control of the Company.
(h) To the best Knowledge of any of the Major Shareholders,
none of the Company's employees or advisors is obligated under any contract
(including licenses, covenants, or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's or
advisor's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees or advisors of the Company, nor the conduct of the
Company's business as proposed, will with or without the giving of notice or the
passage of time, or both, conflict with or result in a breach of or permit the
termination of or payment or acceleration of any benefits under the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees or advisors is now
obligated to or for the benefit of the Company.
4.17 Taxes. (a) Except as set forth in Schedule 4.17 of the
Disclosure Schedule, (i) all Tax (as defined below) returns, statements, reports
and forms required to be filed with any Taxing Authority (as defined below) on
or before the date hereof by or on behalf of the Company (collectively, the
"Returns"), have been or will be filed on or before the date hereof in
accordance with all applicable laws or effective extensions have been or will be
filed except where the failure to file a return, statement, report or form could
not reasonably be expected to have a Company Material Adverse Effect; (ii) as of
the time of filing, the Returns correctly reflected, or will correctly reflect,
in all material respects, the facts regarding the income, business, assets,
operations, activities and status of the Company and any other information
required to be shown therein; (iii) the
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Company has timely paid all Taxes that have been shown as due and payable on the
Returns that have been filed; (iv) the Company has made provision for all Taxes
payable for any Taxable Year (as defined below) ending on or before the date
hereof for which no Return has yet been filed and for any Taxes payable for any
Short Period (as defined below); (v) the charges, accruals and reserves for
Taxes (excluding any provision for deferred income taxes) reflected on the books
of the Company (including the Balance Sheet) are adequate in all material
respects to cover the Tax liabilities accruing or payable in respect of Taxable
Years ending on or before the date hereof and any Short Period; (vi) the Company
is not delinquent in the payment of any Tax or has requested any extension of
time within which to file any Return, which Return has not since been filed,
where such delinquency could have a material effect on the Company; (vii) no
deficiency for any Tax or claim for additional Taxes by any Taxing Authority has
been proposed, asserted or assessed in writing against the Company (or any
member of any affiliated or combined group of which the Company is or has been a
member for which the Company could be liable); (viii) the Company has not
granted any extension or waiver of the limitation period applicable to any
Returns, which extension or waiver is currently in effect; (ix) the Company has
not entered into or will not enter into any agreement or consent under Section
341(f) of the Code; (x) there is not currently, nor has there been any audit,
action, suit, proceeding or investigation pending against or with respect to the
Company in respect of any Tax or assessment; (xi) none of the property owned or
used by the Company is subject to a tax benefit transfer lease executed in
accordance with Section 168(f)(8) of the Code; and (xii) there are no liens for
Taxes upon the assets of the Company except liens for current Taxes not yet due.
(b) The Company is not party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment
of, nor is the Company otherwise required or obligated to make a payment that
would constitute, "excess parachute payments" within the meaning of Section 280G
of the Code.
(c) "Tax" (including, with correlative meaning, the terms
"Taxes" and "Taxable") means, with respect to the Company (i) any net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits tax, alternative or add-on
minimum tax, customs duty or other tax, fee, assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition to tax or
additional amount imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax (a "Taxing Authority") and (ii)
any liability for the payment of any amount of the type described in the
immediately preceding clause (i) as a result of the Company being a member of an
affiliated or combined group with any other corporation at any time on or prior
to the date hereof.
(d) "Taxable Year" means, with respect to any Tax of the
Company, the calendar or fiscal year, or shorter period, for which the Tax is
computed and the Return for such Tax is made.
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(e) "Short Period" means, with respect to any Taxable Year of
the Company which begins before the date hereof and ends thereafter, the portion
thereof beginning with the first day of such year and ending on the Closing
Date.
(f) There are no federal income tax attributes of the Company
(net operating loss carry forward or capital loss carry forward) as of December
31, 1999.
4.18 Receivables. Except as set forth on Schedule 4.18 of the
Disclosure Schedule, all receivables of the Company which are reflected in the
Balance Sheet, and all receivables of the Company which have arisen or will have
arisen since the date thereof have and shall have arisen only from bona fide
transactions with unrelated third parties in the ordinary course of business,
and are and shall be collectible in the ordinary course of business (without
resort to litigation, but subject to a reserve for doubtful accounts established
by the Company in accordance with customary practice) and in accordance with
their respective terms and not subject to any set off, defense, reduction or
counterclaim.
4.19 Records. The books of account, minute books, stock certificate
books and stock transfer ledgers of the Company are complete and correct in all
material respects, and there have been no material transactions involving the
business of the Company which properly should have been set forth therein and
which have not been accurately so set forth. The basis for the calculation by
the Company of all research payments paid to it is valid and in accordance with
the applicable agreement with the research sponsor or collaborator, such amounts
have been correctly calculated.
4.20 Brokerage or Finder's Fee. Except as set forth on Schedule 4.20
of the Disclosure Schedule, and no person is entitled to any brokerage
commission or finder's fees or other compensation in connection with the
transactions contemplated by this Agreement as a result of any action taken by
any of the Shareholders, the Company, or any of the affiliates, officers,
directors or employees thereof.
4.21 Disclosure. No representation or warranty by the Company or a
Major Shareholder contained in this Agreement nor any written statement or
certificate furnished or to be furnished by or on behalf of the Company, the
Major Shareholders or Shareholder to Parent or its representatives pursuant to
or in connection with this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make the statements herein or therein contained, under the
circumstances under which made, not misleading. The Major Shareholders have
disclosed to Parent in writing all material adverse facts known to them relating
to any of the foregoing.
4.22 Certain Representations.
(a) To the knowledge of the Company and the Major
Shareholders, each
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of the Shareholders has no plan, intention, or arrangement to
dispose of an amount of the Parent Shares received in the Merger in a manner
that could jeopardize the status of the Merger as a tax-free reorganization for
federal income tax purposes.
(b) The Company operates at least one significant historic
business line, or owns at least a significant portion of its historic business
assets, in each case within the meaning of Treasury Regulation Section
1.368-1(d).
(c) The Company and the Shareholders will pay their respective
expenses, if any, incurred in connection with the Merger.
(d) Prior to the Merger there was no intercorporate
indebtedness existing between Parent and the Company or between Sub and the
Company.
(e) In the Merger, shares of Company stock representing
control of the Company will be exchanged solely for voting stock of Parent. For
purposes of this representation, shares of Company stock exchanged for cash or
other property originating with Parent will be treated as outstanding Company
stock on the date of the Merger. For purposes of this paragraph (e) and
paragraph (g) below, "control" shall have the meaning specified in Section
368(c) of the Code.
(f) The Company is not an investment company within the
meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) At the time of the Merger, the Company will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in the Company that, if
exercised or converted, would affect Parent's acquisition or retention of
control of the Company.
(h) On the date of the Merger, the fair market value of the
Company assets will exceed the sum of its liabilities plus the amount of
liabilities, if any, to which the assets are subject.
(i) The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of section 368(a)(3)(A) of the Code.
(j) To the best of the Company's knowledge, the fair market
value of the Parent Common Stock and other consideration received by the
Shareholders will be approximately equal to the aggregate fair market value of
the Company Shares.
(k) Parent does not own, nor has it owned during the past five
years, directly or indirectly, any of the Company's Shares or rights to acquire
such Shares.
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ARTICLE 5
Representations and Warranties of Each Shareholder
Intentionally omitted.
ARTICLE 6
Representations and Warranties of Parent and Sub
Parent represents and warrants that:
6.1 Organization and Standing. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of California, and each has all
requisite corporate power and corporate authority to enter into this Agreement
and each other agreement, document or instrument to be executed or delivered by
it in connection with this Agreement and to carry out the transactions
contemplated hereby and thereby. Each of Parent and Sub is qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified is reasonably likely to have a material adverse effect on the
condition (financial or otherwise), business, properties, assets, liabilities or
results of operations of Parent and its subsidiaries, taken as a whole (a
"Parent Material Adverse Effect").
6.2 Authority. The execution, delivery and performance of this
Agreement and the agreements and instruments of Parent and Sub relating hereto
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub. This
Agreement has been duly executed by a duly authorized officer of Parent and Sub.
This Agreement constitutes, and when executed and delivered at the Closing, each
other agreement, document and instrument to be executed or delivered by Parent
or Sub ("Parent Documents") will constitute, the legal, valid and binding
obligations of Parent and Sub, enforceable against each of Parent and Sub in
accordance with its terms.
6.3 No Violation. The execution, delivery and performance of this
Agreement and the Parent Documents and the consummation of the transactions
contemplated hereby and thereby, will not (i) conflict with or violate any
provision of the Certificate of Incorporation or By-Laws of Parent or Sub, (ii)
with or without the giving of notice or the passage of time, or both, result in
a breach of, or violate, or be in conflict with, or constitute a default under,
or permit the termination of, or cause or permit acceleration or loss of rights
under, any agreement or instrument or any debt or obligation to which Parent or
Sub is a party or to or by which it or any of its assets is subject or bound, or
result in the loss or adverse modification of any lease, license, franchise, or
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other authorization granted to or otherwise held by Parent or Sub, (iii) require
the consent of any party to any agreement or commitment to which Parent or Sub
is a party, or to or by which it is subject or bound, (iv) result in the
creation or imposition of any Lien upon any of the assets of Parent or Sub, or
(v) violate any law, rule or regulation or any order, judgment, decree or award
of any court, governmental authority or arbitrator to or by which Parent or Sub
is subject or bound.
6.4 Governmental Authorization. The execution, delivery and
performance by Parent and Sub of this Agreement and the consummation by Parent
and Sub of the transactions contemplated by this Agreement require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority other than (a) the filing of an appropriate Certificate of Merger in
such form as required by and executed in accordance with the relevant provisions
of the California General Corporation Law, and state laws relating to takeovers,
if applicable, (b) compliance with any applicable requirements of the Securities
Exchange Act of 1933, as amended (the "Exchange Act"), (c) the filing of a Form
D and compliance with the other provisions of Regulation D of the rules and
regulations under the Securities Act of 1933, (d) compliance with any applicable
state's securities or Blue Sky laws, and (e) filings and notices required to
effect any registration contemplated by Section 8.8(b) or Article 10.
6.5 Financial Statements. The audited consolidated financial
statements of Parent and its subsidiaries as of and for the year ended July 31,
1999 and the notes thereto, which have been delivered to the Company and which
appeared in the Annual Report of Parent on Form 10-K for the year ended July 31,
1999 and the unaudited consolidated financial statements of Parent and its
subsidiaries for the fiscal quarters ended January 31, 2000 and April 30, 2000
and the notes thereto have been delivered to the Company and which appeared in
quarterly reports of Parent on Form 10-Q fairly present in all material
respects, in conformity with generally accepted accounting principles applied on
a basis consistent with past practice with any exceptions stated therein, the
consolidated financial position of Parent and its subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended except that the unaudited financial statements are subject to
normal year-end audit adjustments.
6.6 Validity of Stock. The shares of Parent Common Stock issuable in
exchange for the Shares at the Effective Time in accordance with this Agreement
have been duly authorized and, when issued and delivered as provided by this
Agreement, will be validly issued, fully paid, nonassessable and free of
preemptive rights. Upon issuance in accordance with the terms of this Agreement,
the Shareholders will acquire good and valid title to the shares of Parent
Common Stock to be issued to them pursuant to this Agreement free and clear of
any Lien.
6.7 Changes Since Periodic Reports. There has been no Material
Adverse Change since April 30, 2000 and there are no pending or, to the
knowledge of Parent, threatened developments (not of general public knowledge)
nor any claims, litigation or obligations not disclosed in the Periodic Reports,
in the Proxy Statement or in the Annual Report referred to in Section 5.4 hereof
or not occurring in the ordinary course of business that could reasonably be
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expected to result in or have a material adverse change in the business, assets,
condition (financial or otherwise) or results of operations or prospects of
Parent and its subsidiaries, taken as a whole.
6.8 SEC Filings. Parent has filed with the SEC all notices,
prospectuses, offering statements and registration statements required to be
filed in connection with the offer or sale of securities by Parent under the
Securities Act, and the rules and regulations promulgated thereunder (subject to
the post-closing filing obligations set forth in Section 8.8(b) and Article 10
hereof). All such notices, prospectuses, offering statements and registration
statements comply in all material respects with the requirements of the
Securities Act, and the rules and regulations promulgated thereunder, and such
notices, prospectuses, offering statements and registration statements
(including all exhibits and schedules thereto and documents incorporated by
reference) at the time of effectiveness thereof did not contain an untrue
statement of any material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances under which they were made. In
addition, Parent has filed with the SEC all reports and proxy statements and, to
the knowledge of Parent, forms required to be filed by Parent under the Exchange
Act, and the rules and regulations promulgated thereunder, except where the
failure to file such reports, proxy statements and forms could not reasonably be
expected to have a Material Adverse Effect on the condition (financial or
otherwise) business, properties, assets, liabilities or results of operations of
Parent and such reports and proxy statements as of the date thereof did not
contain an untrue statement of any material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
misleading in light of the circumstances under which they were made.
6.9 Litigation Except as set forth on prospectuses, offering
statements and registration statements filed by Parent with the SEC under the
Securities Act and reports and proxy statements filed by Parent with the SEC
under the Exchange Act, there are no actions, suits, legal, administrative or
arbitration proceedings or inquiries relating to Parent pending or, to the
knowledge of Parent, threatened (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against Parent, or any
officer, director or employee of Parent (in his or her capacity as such) which
could reasonably be expected to result in or have, either individually or in the
aggregate, any Parent Material Adverse Effect.
6.10 Certain Representations
(a) To the best of Parent's knowledge, the fair market value
of the Parent Common Stock and cash in lieu of fractional shares and any
payments to dissenters received by the Shareholders of the Company will be
approximately equal to the aggregate fair market value of the Shares.
(b) Prior to the Merger, Parent will own all of the
outstanding stock of Sub. At all times prior to the Merger, no person other than
Parent has owned, or will own, any of the outstanding stock of Sub.
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(c) Merger Sub was formed by Parent solely for the purpose of
engaging in the transaction contemplated by the Agreement.
(d) There were not as of the date of the Agreement, and there
will not be at the Effective Time, any outstanding or authorized options,
warrants, convertible securities, calls, rights, commitments or any other
agreements of any character that Sub is a party to, or may be bound by, and that
require Sub to issue, to transfer, to sell, to purchase, to redeem or to acquire
any shares of its capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of its capital stock.
(e) As of the date of the Agreement and the Effective Time,
except for obligations or liabilities incurred in connection with (A) its
incorporation or organization and (B) the transactions contemplated thereby and
in the Agreement, Sub has not and will not have incurred, directly or indirectly
through any subsidiary, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered into any
agreement or arrangements with any person or entity.
(f) Prior to the Effective Time, Sub did not own any asset
other than an amount of cash necessary to incorporate Sub and to pay the
expenses of the Merger attributable to Sub and such assets as were necessary to
perform its obligations under this Agreement.
(g) Acquiror, Parent does not own, nor has it owned during the
past five years, directly or indirectly, any shares of the Company's stock or
rights to acquire such stock.
(h) Neither Parent, Sub, nor any "Related Corporation" (as
defined in Treasury Regulations Section 1.368-1(e)) with respect to Parent or
Sub has any plan or intention to reacquire any of the Parent Common Stock issued
in the Merger in a manner that could jeopardize the status of the Merger as a
"reorganization."
(i) Acquiror, Parent has no obligation, understanding,
agreement, plan or intention to cause the Company to issue, and the Company has
no obligation, understanding, agreement or plans to issue, additional shares
after the Merger that would cause Parent to lose control of the Company within
the meaning of Section 368(c) of the Code.
(j) Acquiror, Parent has no plan or intention (i) to liquidate
the Surviving Corporation or to merger the Surviving Corporation with or into
another corporation (other than as described in the Agreement), (ii) to sell or
otherwise to dispose of the stock of the Surviving Corporation except for
transfers of stock to corporations controlled by Parent or (iii) to cause the
Surviving Corporation or any of its subsidiaries to sell or otherwise to dispose
of any of their respective assets or of any of the assets acquired from the
Company, other than as contemplated by the Agreement, except for (A)
dispositions made in the ordinary course of business, (B) transfers of assets to
a corporation controlled by the Surviving Corporation or (C) transfers of assets
by direct
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or indirect wholly-owned subsidiaries of the Surviving Corporation to other
direct or indirect wholly-owned subsidiaries of the Surviving Corporation.
(k) There is no intercorporate indebtedness existing between
Parent and the Company or between Sub and the Company that was issued, acquired
or will be settled at a discount.
(l) Neither Parent nor Sub is an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(m) Neither Parent nor Sub is under the jurisdiction of a
court in a title 11 or similar case within the meaning of Code Section
368(a)(3)(A).
(n) The payment of cash in lieu of fractional shares of Parent
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not represent separately
bargained-for consideration.
(o) Following the Merger, Parent will cause the Company to
continue a historic business of the Company or use a significant portion of the
Company's historic business assets in business, in each case as contemplated by
Treasury Regulations Section 1.368-1(d).
ARTICLE 7
Certain Covenants of the Parties
7.1 Conduct of Business of the Company. During the period from the
date of this Agreement to and including the Effective Time, the Company shall
cause the operations and business of the Company to be conducted in the ordinary
and usual course of business and consistent with past practices. Without
limiting the foregoing, prior to the Effective Time, the Company will not,
except to the extent specifically contemplated by this Agreement or as set forth
on Schedule 7.1 hereto, without the prior written consent of Parent, permit the
Company to:
(a) dissolve, liquidate, merge or consolidate or sell or
otherwise dispose of all or any substantial portion of its assets or obligate
itself to do so;
(b) amend, modify, change, alter, terminate, rescind or waive
any rights or benefits under any contract, agreement or commitment required to
be listed, or enter into any contract, agreement or commitment which, if in
existence as of the date of this Agreement would have been required to be
listed, pursuant to Section 4.9 or 4.10 hereto;
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(c) fail to maintain its assets in good repair and condition,
reasonable and ordinary wear and tear excepted; or cancel any of the insurance
policies or any of the coverage thereunder maintained for the protection of the
Company or the Properties; or
(d) perform, take any action or incur any of the acts,
transactions, events or occurrences of the type described in Section 4.7 hereof
which would have been inconsistent with the representations and warranties set
forth in Section 4.7 hereof had the same occurred after the Balance Sheet Date
and prior to the date hereof; provided, that with respect to clause (v) of
Section 4.7 as it relates to other than Intellectual Property rights, such
termination of rights shall not have a Company Material Adverse Effect.
7.2 Changes in Information. During the period from the date of this
Agreement to the Closing Date, each party shall give the other party prompt
written notice of any change in, or any of the information contained in, the
representations and warranties made in or pursuant to this Agreement or of any
event or circumstance which, if it had occurred on or prior to the date hereof,
would cause any of such representations or warranties not to be true and correct
in all material respects.
7.3 Access to Information. During the period from the date of this
Agreement to the Closing Date, upon prior reasonable notice Parent and its
counsel, accountants and other representatives shall be given full access during
normal business hours to all of the facilities, properties, books, tax returns
and records of the Company and all personnel of the Company and they shall be
furnished with such documents and information with respect to the affairs of the
Company as may from time to time reasonably be requested, subject to the terms
of non-disclosure letter dated April 11, 2000 (the "Non-Disclosure Agreement")
between Parent and the Company. Each of Parent, the Company and the Major
Shareholders shall be obligated to ensure that their respective counsels,
accountants and other representatives have agreed to be bound by the
Non-Disclosure Agreement.
7.4 Preservation of Business. During the period from the date of
this Agreement to the Closing Date, Parent and the Company shall each use their
reasonable best efforts to preserve intact the goodwill of their respective
businesses, the relationships of each party, its licensors, licensees, research
partners, investigators, customers, suppliers, contracting parties, governmental
and regulatory authorities and others having business relations with it.
7.5 Affiliate Agreements. The Company shall, prior to the Closing
Date, deliver to Parent a list, reviewed by its counsel, identifying all persons
who are, in its opinion, at the record date for or at the time submitted for
vote of or consent by the shareholders of the Company, "affiliates" of the
Company for purposes of Rule 145 promulgated by the SEC under the Securities
Act. The Company shall furnish such information and documents as Parent may
reasonably request for the purpose of reviewing such list. The Company shall
cause each person who is identified as an "affiliate" in Schedule 7.5 hereto to
execute a written agreement on or prior to the Closing Date,
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substantially in the form of Exhibit 7.5 hereto (an "Affiliate Agreement"), that
such person will not offer or sell or otherwise dispose of any of the shares of
Parent Common Stock issued to such person pursuant to the Merger in violation of
the rules the Securities Act or the rules and regulations promulgated by the SEC
thereunder.
7.6 Stockholder Approval. The Company, acting through its Board of
Directors, shall, in accordance with applicable law and its Articles of
Incorporation and By-Laws:
(a) as promptly as practicable following the execution of this
Agreement use its best efforts to obtain the requisite shareholder approval of
this Agreement and the Merger and any agreement, contract or arrangement which,
in the absence of such approval, might result in the payment of an "excess
parachute payment" within the meaning of Section 280G of the Code; and
(b) unanimously recommend approval and adoption of this
Agreement and the Merger by the shareholders of the Company and include in any
materials furnished to its shareholders such recommendation.
7.7 Company Officers. Parent shall take all necessary action to
reconstitute the officers of the Surviving Corporation as soon as practicable
after the Effective Time in accordance with Schedule 7.7 hereto.
ARTICLE 8
Further Agreements
8.1 No Shop. From after the date hereof and until the Effective Time
(but in the event conditions to the obligations of Parent pursuant to Section
3.5 shall not be satisfied, or Parent shall have elected not to consummate the
Closing, then until the expiration of the Closing Period):
(a) The Company agrees, directly or indirectly, without the
prior written consent of Parent, that it shall not and shall not permit any
subsidiary or affiliate to (i) offer, convey or license any assets or properties
(including a non-exclusive license or other transfer of patent rights and other
intellectual property, including an antibody or a process related thereto) of or
used by the Company or the business of the Company, (ii) issue, sell or purchase
any shares of any class or series of any of the issued and outstanding capital
stock or other equity of the Company or any subsidiary or any security
convertible into or exchangeable for such stock or other equity interest or any
option or warrant with respect to such stock or other equity interest (except in
the normal course of granting options under existing stock option plans and
shares of capital stock issuable upon the exercise or conversion of options,
rights, or securities presently outstanding), (iii) enter into, extend,
reinstate or acquiesce in the revocation of the termination of any (A) research
agreement or collaboration or other similar allocation of resources to or for
the benefit of any other entity, or (B) any management
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agreement having the effect of transferring the power or authority (whether or
not exercised) to influence control (affirmatively or negatively) over the
Company, a subsidiary or its operations (other than pursuant to existing
covenants in a loan or credit agreement in favor of the holder of the secured
indebtedness of the Company following the Merger), or (iv) merge or consolidate
with another entity, or enter any agreement with respect to the foregoing; and
(b) Neither the Company, Shareholders nor anyone acting on its
or any of their behalf will (i) solicit, entertain or encourage inquiries,
offers or proposals, or enter into, pursue, or carry on any discussions or
negotiations, with respect to any transaction of the type referred to in clause
(a) above of this Section 8.1, with any person or entity other than Parent, or
(ii) furnish to any person or entity (other than Parent and its authorized
representatives) any non-public information concerning the Company or its
business, financial or scientific affairs or prospects for the purpose or with
the intent of permitting such person or entity to evaluate a possible
acquisition of any capital stock or assets of the Company or a possible license
of technology or research arrangement or business combination or reorganization
involving the Company; and
(c) No Shareholder shall sell, transfer, dispose or distribute
any shares of any class or series of capital stock of the Company or any
security convertible into or exchangeable for such stock or grant or sell any
option or other right with respect thereto, or enter into or grant any proxy,
voting trust or other voting arrangement.
Parent may, by written notice of its abandonment of the Merger to the
Representative specifically referring to this Section, release one or more
Shareholders from the provisions of this Section as they pertain to restrictions
on the sale, transfer or other disposition of shares of the Company by such
Shareholder. The provisions of this Section 8.1 shall not be deemed to limit or
negate any other obligations of the Company, the Major Shareholders or other
Shareholders under this Agreement.
8.2 Historic Financial Statements. Prior to the Closing, or within
thirty (30) days thereafter, the Company will cause to be prepared and delivered
to Parent unaudited statements of income and cash flow for the fiscal years
ended December 31, 1997 and 1998 and audited financial statements of income and
cash flow for the fiscal year ended December, 1999 and balance sheets as at the
end of each such period reflecting the results of operations and the assets and
liabilities of the Company (the "Historic Financials"), which Historic
Financials shall be prepared in accordance with generally accepted accounting
principles consistently applied in compliance with rules and regulation of the
SEC for inclusion of such statements in a registration statement on Form S-1,
and shall be audited by the independent certified public accounting firm of
Xxxxxx Xxxxxxxx LLP, and shall be accompanied by the customary certification and
report of the Company's accounting firm as to such audit and such financials,
and a consent from such accounting firm for such Historic Financial to be
utilized in the reports of Parent required under the Exchange Act. Prior to the
audit, such accounting firm shall issue to Parent and the Company an "agreed
upon procedures letter" relating to procedures to be performed during such
audit, such procedures to be adequate to support the conclusions reached. The
scope of such audit shall be agreed upon by such accounting firm, the
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Company, Xxxxxx Xxxxxxxx LLP and Parent prior to the commencement off field
work, such scope to be reflected in an engagement letter from Xxxxxx Xxxxxxxx
LLP. The Historic Financials, when delivered to Parent, shall be deemed
"Financial Statements" for purposes of Section 4.5 hereof and the
representations and warranties set forth in Section 4.5 hereof shall be deemed
to apply with equal force and effect as of the date of such delivery and as of
the Closing Date to the Historic Financials.
8.3 Break-up Fee. (a) Subject to and upon the occurrence of a
"Break-up Event" (as defined in Section 8.3(b) below), the Company shall pay, in
immediately available funds, to Parent at the offices of Parent in New Haven,
Connecticut, the "Break-up Fee" specified in Section 8.3(c) hereof.
(b) A "Break-up Event" shall be deemed to have occurred if the
Company or any subsidiary or Shareholder (or any successor, assign, trustee or
custodian thereof) shall enter into or the Board of Directors of the Company or
any subsidiary or Shareholder shall do or authorize or approve (with or without
and whether or not subject to, diligence, financing or other conditions), or
publicly announce or confirm an agreement with any group, entity or person other
than Parent in violation of or with respect to any of the matters referred to in
Section 8.1 of this Agreement.
(c) If a Break-up Event shall have occurred prior to the
expiration of the Closing Period, then the Break-up Fee shall be $3.5 million;
provided, that the obligation of the Company under this subsection (c) to pay
such Break-up Fee shall be subject to the satisfaction of the following
conditions:
(i) Parent shall not have theretofore exercised any
right or stated in writing its intent to terminate the Merger, except as a
consequence of the failure of the Company, a Shareholder or other party to
perform its obligations under Section 8.1(b);
(ii) the representations and warranties of Parent
contained in this Agreement shall have been true and correct in all material
respects and Parent shall have performed all of its obligations under this
Agreement to the extent required to be performed on or prior to the date of the
Break-up Event; and
(iii) consummation of the transaction contemplated
hereby shall not have been prevented by the failure of any condition to the
obligations of the Company set forth in this Agreement to have been satisfied as
a consequence of any act or omission by Parent.
(d) The obligations of the Company to pay the Break-up Fee
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a Shareholder may have
against Parent or Sub or any principal thereof, or anyone else. Neither Parent
nor any principal thereof shall be required to mitigate its or his damages.
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(e) If a Break-up Event occurs, Parent shall nevertheless
continue to be entitled to make competing bids for any or all of the business of
the Company or other selling party (and to present the relative merits of bids
it may make to parties in interest) but in the event that Parent is the
successful bidder, then Parent shall not be entitled to the Break-up Fee.
8.4 Non-Solicitation of Employees. In the event the Closing does not
occur, the Company, a Major Shareholder and Parent shall not, during a period of
one (1) year following the expiration of the Closing Period, solicit, raid,
entice or induce any person who presently is an employee of or consultant to the
other to become employed by or to become a consultant to any other person or
entity.
8.5 Listing of Parent Common Stock. Parent shall use best efforts to
cause the Parent Shares to be approved for listing by NASDAQ; such listing to be
effective upon the effective date of the registration statement under Section
10.4 hereof.
8.6 Rule 144. During the two (2) year period from and after the
Closing Date, Parent will use its best efforts to comply with the provisions of
Rule 144(c) under the Securities Act and file with the SEC in a timely manner
all reports required of Parent under the Exchange Act in order that all persons
who may be deemed to be affiliates of the Company (as that term is used in Rule
145 under the Securities Act), and who will become the beneficial owner of
Parent Common Stock pursuant to the Merger, may resell Parent Common Stock
pursuant to Rule 145 under the Securities Act or pursuant to a Registration
Statement (as hereinafter defined) under Section 10.4.
8.7 Public Announcements. None of the Company, any Shareholder or
Parent shall disclose the existence or content of this Agreement to any third
party without the prior written consent of Parent and the Company. Parent and
the Company shall use all reasonable efforts to develop a joint communications
plan and each party shall use all reasonable efforts (i) to ensure that all
press releases and other public statements with respect to the transactions
contemplated hereby shall be consistent with such joint communications plan, and
(ii) unless otherwise required by applicable law or by obligations pursuant to
any listing agreement with or rules of any securities exchange or quotation
system, to consult with each other before issuing any press release or otherwise
making any public statement with respect to this Agreement or the transactions
contemplated hereby.
8.8 Employee Stock Options; Incentive and Benefit Plans. (a) The
Company represents that it has not accelerated the vesting or exercisability of
or otherwise modified, and, except as provided in this Section 8.8 and except as
may occur by reason of the execution of this Agreement and consummation of the
Merger, from the date hereof the Company will not accelerate the vesting or
exercisability of or otherwise modify, the terms and conditions applicable to
the Company Stock Options, whether set forth in the governing stock option plans
of the Company, option agreements with employees or otherwise. Prior to the
Effective Time, the Company shall take all actions as may be required to cause
each Company Stock Option which is outstanding and
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unexercised at the Effective Time to be converted automatically or exchanged
into an option to purchase Parent Shares in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the 1999
Plan).
(b) Parent shall assume all outstanding option grants of the
Company disclosed on Schedule 4.3, in accordance with their current terms.
Specifically:
Each option to purchase Shares of the Company that was granted
pursuant to the 1999 Plan prior to the Closing and which remains outstanding
immediately prior to the Closing shall be converted or exchanged, at the
Closing, into an option to acquire, on the same terms and conditions as were
applicable under the Company Stock Option, that number of shares of Parent
Common Stock determined by multiplying the number of Shares of the Company
subject to such Company Stock Option by the Exchange Ratio, rounded, if
necessary, up to the nearest whole share of Parent Common Stock, at a price per
share equal to the per share exercise price specified in such Company Stock
Option divided by the Exchange Ratio, rounded if necessary, up to the nearest
whole cent; provided however, that in the case of any Company Stock Option to
which section 421 of the Code applies by reason of its qualification under
section 422 of the Code, the option price, the number of shares subject to such
option and the terms and conditions of exercise of such option shall be
determined in a manner consistent with the requirements of section 424(a) of the
Code. The duration and other terms of the assumed option shall be the same as
the original option, except that all references to the Company shall be deemed
to be references to Parent.
(b) Parent agrees to register the shares of Parent Common
Stock issuable upon exercise of the outstanding options to purchase Parent
Common Stock into which options to purchase shares of the Company have been
converted or for which exchanged, by filing with the SEC a registration
statement on Form S-8 or amending its existing registration statement on Form
S-8 under the Securities Act, converting such shares, as Parent shall deem
appropriate. Parent shall file such registration statement or amendment, with
respect to fifty percent (50%) of the shares of Parent Common Stock issuable
upon exercise of such options, within three business days after the
effectiveness of the Registration Statement referred to in Section 10.4 below
covering the first fifty percent (50%) of such shares and within three business
days after the effectiveness of the Registration Statement covering the
remaining fifty percent (50%) of such Parent Common Stock.
8.9 Reverse Break-up Fee. (a) Subject to and upon the occurrence of
a "Reverse Break-up Event" (as defined in Section 8.9(b) below), Parent shall
pay in immediately available funds, to the Company at the offices of the Company
in San Diego, California, the "Reverse Break-up Fee" of $1,000,000.
(b) A "Reverse Break-up Event" shall be deemed to have
occurred if (i) Parent shall elect not to close the Merger and (ii) Shareholders
and the Company shall have fulfilled all of the Parent's conditions precedent to
Parent's obligations hereunder, other than the conditions set forth in
subsection (i), (k), (l) and (o) of Section 3.5 (such conditions to be fulfilled
by the
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Company and Shareholders being referred to as "Company Controlled Conditions"),
to the extent the fulfillment of such conditions precedent are not within the
Company's or a Shareholder's control). It is specifically understood that no
Reverse Break-up Fee shall be payable in the event any of the Company Controlled
Conditions shall not be fulfilled, including without limitation if there shall
be an action, suit, legal, administrative or arbitration proceeding or inquiry
relating to or threatened against the Company or Parent or any officer, director
or employee of the Company or Parent which involves any of the Intellectual
Property of or used in connection with or necessary to conduct the services of
the Company or its Products (a "Material Litigation").
8.10 Stockholder Voting Agreements. Concurrently herewith, Parent is
entering into the Stockholder Voting Agreements, with each of the Major
Shareholders, substantially in the form of Exhibit 8.10.
ARTICLE 9
Indemnification
9.1 Obligation to Indemnify. (a) On the terms and subject to the
limitations set forth herein, Parent hereby assumes and agrees to save,
indemnify and hold harmless Shareholders from and against, and shall on demand
reimburse Shareholders for:
(i) any and all loss, liability, damage or deficiency
suffered or incurred by Shareholders by reason of any misrepresentation or
breach of warranty by Parent or nonfulfillment of any covenant or agreement to
be performed or complied with by Parent under this Agreement or in any
agreement, certificate, document or instrument executed by Parent and delivered
to the Company pursuant to or in connection with this Agreement; and
(ii) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, settlement payments, awards, fines, penalties,
costs and expenses, including reasonable attorneys' fees, incident to any of the
foregoing, or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing any of the obligations under this
Section 9.1(a).
(b) On the terms and subject to (i) the limitations set forth
herein, and (ii) the Disclosure Schedules attached hereto, the Major
Shareholders hereby jointly and severally assume and agree to save, indemnify
and hold harmless Parent and its Affiliates and their respective directors,
officers, shareholders, agents, successors and assigns, including after the
Closing, the Company (collectively, "Parent Indemnitees") from, against and in
respect of, and shall on demand reimburse Parent for:
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(i) any and all loss, liability, damage or deficiency
suffered or incurred by Parent or by reason of any misrepresentation, breach of
warranty or nonfulfillment of any covenant or agreement to be performed or
complied with by any of the Company, any Major Shareholder under this Agreement
or any agreement, certificate, document or instrument executed by any of the
Company or a Major Shareholder and delivered to Parent pursuant to or in
connection with this Agreement;
(ii) any and all Taxes which are due or payable by
Company, or arise out of the operation of Company's business on or prior to the
Closing Date, except to the extent reflected on the Closing Balance Sheet;
(iii) any and all loss, liability, damage, cost or
expense suffered or incurred by the Company and/or Parent by reason of any
claims of or entitlements to severance pay, termination pay and/or other
benefits arising or accruing or claimed to arise or accrue with respect to any
employee of Company, by reason of the transactions contemplated by this
Agreement;
(iv) any and all loss, liability, damage, cost or
expense suffered or incurred by the Company and/or Parent by reason of any claim
or entitlement by any person or entity for any finder's fee, commission or other
compensation in connection with the transactions contemplated by this Agreement
and arising out of any contact by any Major Shareholder or by the Company with
any such claimant; and
(v) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, settlement payments, awards, fines, penalties,
costs and expenses, including, without limitation, reasonable attorneys' fees,
incident to any of the foregoing or incurred in investigating or attempting to
avoid the reasonable possibility of the same or to oppose the imposition
thereof, or in enforcing any of the obligations under this Section 9.1(b).
9.2 Liability of Major Shareholders. Each representation, warranty,
indemnity, covenant and agreement made in this Agreement or in any agreement,
certificate or instrument delivered by or on behalf of the Company or any of the
Major Shareholders to Parent pursuant to or in connection with this Agreement,
are, and shall be deemed, joint and several representations, warranties,
indemnities and covenants of each of the Major Shareholders. Notwithstanding the
foregoing to the contrary, (i) with respect to the covenant set forth in Section
8.4, each Major Shareholder will only be liable for such covenant to the extent
breached by such Shareholder; provided, however, that the Liability Cushion
(defined below) shall not apply to or include any losses, liabilities, damages
and expenses in respect the misrepresentation or breach of any matter in a
Purchaser's Questionnaire or letter of transmittal, and (ii) Parent shall use
reasonable efforts to collect from all Major Shareholders any and all
liabilities hereunder (which efforts shall require Parent to make a demand of
all Major Shareholders for its liabilities hereunder but shall not require
Parent to institute a suit or obtain a judgment or exhaust any other remedies
against any one or more Major Shareholders).
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9.3 Survival; Limitations. (a) Each of (i) the respective
representations and warranties of the Shareholders and Major Shareholders
contained in this Agreement or in any instrument or document delivered pursuant
hereto and indemnification in respect thereof and (ii) the indemnification
obligations set forth in Section 9.1(b)(i), (iii), (iv) and (v) (other than with
respect to clause (ii))shall survive the Effective Time for a period of thirteen
(13) months except for the following representations and warranties and
indemnification in respect thereof: Sections 4.3, 4.4, 4.16, 4.17, 4.19 and 4.20
which shall survive for sixty (60) days beyond the full period of all applicable
statutes of limitations (giving effect to any waiver, mitigation or extension
thereof). Notwithstanding the foregoing, individual representations and
warranties referred to in this Section 9.3(a) shall survive the periods
specified with respect to the subject matter of the notice if notice of
misrepresentation or breach thereof giving rise to such right of indemnity shall
have been given as herein provided to the parties or parties against whom such
indemnity may be sought prior to the expiration of such periods, and the
covenants and agreements of the parties hereto contained in this Agreement or in
any instrument or document delivered pursuant hereto and the indemnification in
respect thereof shall survive the Effective Time without time limit.
(b) No party hereto shall have an indemnification obligation
pursuant to this Article 9 in respect of any representation, warranty or
covenant unless such party shall have received from the party seeking
indemnification written notice of the existence of the claim, or if amounts are
to be incurred in avoiding the reasonable possibility of the claim, written
notice of the reasonable possibility of the claim, for or in respect of which
indemnification in respect of such representation or warranty is sought.
Excluding claims under Section 9.6, such notice shall set forth with reasonable
specificity (i) the basis under this Agreement, and the facts that otherwise
form the basis, of such claim, (ii) an estimate of the amount of such claim
(which estimate shall not be conclusive of the final amount of such claim) and
an explanation of the calculation of such estimate, including a statement of any
significant assumptions employed therein, and (iii) the date on and manner in
which the party delivering such notice became aware of the existence of such
claim.
(c) Any payment under this Article 9 required to be made by a
Shareholder may, in the discretion of such Shareholder, be made in Parent Common
Stock, and any payment required to be made by Parent shall be made in Parent
Common Stock, in each case at the Average Price.
(d) Any action to be taken by the Major Shareholders pursuant
to this Article 9 may be taken by those Major Shareholders who, immediately
prior to the Closing Date, held a majority of the Shares held by all Major
Shareholders.
(e) Notwithstanding anything to the contrary contained in this
Agreement, none of the Major Shareholders shall be required hereunder to
indemnify or hold Parent or any affiliate thereof harmless against damages or
other losses until such time as the aggregate amount of all damages, or other
losses shall exceed $500,000 (the "Liability Cushion"), at which
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time the Major Shareholders shall be responsible without regard to such
threshold; provided, however, that such Liability Cushion shall not apply to or
include (A) any obligations of the Company or a Major Shareholder under Sections
7.1, 8.3, 8.4 or 8.7 hereof, or any other covenant or agreement of a Major
Shareholder (as opposed to its representations and warranties) relating to a
period after the Effective Time contained in this Agreement or in any instrument
or document delivered pursuant hereto, or (B) any losses, liabilities, damages
and expenses in respect of misrepresentations or breaches of warranty under
Section 4.3 or 4.4(a) or in any instrument or document delivered pursuant
hereto; provided, further, however, that in no event shall the aggregate
liability of the Major Shareholders under this Agreement to Parent exceed $20
million (the "Cap").
9.4 Covered Proceedings. (a) (i) If any action or proceeding is
commenced by a third party against a party entitled to indemnification under
Section 9.1 hereof (an "Indemnitee") in respect of which the Indemnitee proposes
to hold any party or parties obligated to provide such indemnification with
respect thereto (the "Indemnitor(s)") liable under the provisions of this
Section 9.1 hereof (a "Covered Proceeding"), the Indemnitee shall give the
Indemnitor(s) prompt written notice of such Covered Proceeding and copies of all
pleadings filed relating thereto within twenty (20) days after the Indemnitee's
receipt thereof.
(ii) If the Indemnitor(s) shall, at its (their) option,
elect by prompt written notice to each Indemnitee to contest or defend any such
Covered Proceeding, the Indemnitor(s) shall, subject to the provisions of this
Section 9.4, be entitled, at its or their sole cost and expense, to contest or
defend the same with counsel of its or their own choosing, but reasonably
satisfactory to the Indemnitee, and in such event the Indemnitee shall not
settle, compromise, pay or discharge the same without the prior written consent
of the Indemnitor(s) (which consent shall, however, not be unreasonably withheld
or delayed), so long as the Indemnitor(s) is (are) actively contesting and
defending the same in good faith.
(iii) Notwithstanding the foregoing provisions of this
Section 9.4(a), if the Covered Proceeding does not seek only monetary damages,
but seeks any injunction or other equitable relief or specific performance
against any Indemnitee, then the Indemnitee shall be entitled to elect not to
contest, and shall be entitled to settle and discharge, any claim arising
thereunder; provided that if the Indemnitee shall elect not to contest, but
rather to settle and discharge any such particular claim, the indemnity
obligation of the Indemnitor(s) with respect thereto shall be limited to that
portion of the liability arising from the election of the Indemnitee not to
contest but rather to settle and discharge the same (without the consent of the
Indemnitor(s)) which is reasonable after taking into account the substantive
merits of the position taken by the Indemnitor(s) in opposing such claim, as
compared to the risks of litigation or other opposition.
(iv) Notwithstanding anything to the contrary contained
in this Section 9.4(a):
(A) Even if the Indemnitee fails to give
the Indemnitor(s)
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timely notice of a Covered Proceeding or otherwise defaults in its obligations
under this Section 9.4(a), the sole remedy of the Indemnitor(s) for such default
shall be to offset against the indemnification liability otherwise payable by
the Indemnitor(s) to the Indemnitee the amount of damages actually suffered by
the Indemnitor(s) as a result of such default.
(B) In the event the Indemnitor(s)
elect(s) (and is (are) entitled as provided herein) to defend a Covered
Proceeding, the Indemnitee shall be entitled to participate in the defense
thereof with its own separate counsel and receive copies of all pleadings and
other papers in connection therewith. In such event, the fees and expenses of
such Indemnitee's counsel shall, except as otherwise provided in Section 9.1
hereof, be borne by the Indemnitee, unless the Indemnitee reasonably determines
that it may have one or more defenses available to it which are different from
or in additional to those available to the Indemnitor or the Covered Proceeding
also involves or could reasonably be expected to have an effect upon matters
beyond the scope of the indemnification obligations set forth in this Agreement.
In such event, the Indemnitor shall not have the right to direct the defense
thereof.
(C) Whether or not the Indemnitee shall
participate in the defense of any Covered Proceeding, the Indemnitor(s) shall
keep the Indemnitee informed at all stages of any and all Covered Proceedings.
(D) If the Indemnitor(s) do(es) not (or
is (are) not entitled to) elect to contest or defend a Covered Proceeding, or
after so electing do(es) not actively contest and defend the same in good faith,
and in conformity with the requirements of Section 9.4(a), the Indemnitee shall
be entitled to contest, defend and/or settle such Covered Proceeding on such
terms and with such counsel as the Indemnitee reasonably deems appropriate, and
at the sole cost and expense of the Indemnitor(s).
(E) If the Indemnitor(s) is (are)
otherwise entitled to control the settlement of a Covered Proceeding (subject to
the requirements and limitations of this Section 9.4(a)), the Indemnitor(s) will
be entitled to control such settlement only if (I) the terms of such settlement
require no more than the payment of money (i.e., such settlement does not
require the Indemnitee to admit any wrongdoing or take or refrain from taking
any action), (II) the full amount of such monetary settlement is paid by the
Indemnitor(s), and (III) the Indemnitee receives as part of such settlement a
legally binding and enforceable unconditional satisfaction and/or release, in
form and substance reasonably satisfactory to the Indemnitee, providing that the
Covered Proceeding and any claimed liability or obligation of the Indemnitee
with respect thereto is being fully satisfied by reason of such settlement and
that the Indemnitee is being released from any and all obligations or
liabilities it may have with respect thereto.
(F) No Indemnitor shall have any right to
defend any Covered Proceeding unless each Indemnitor unconditionally
acknowledges in writing, within a reasonable period of time after any Indemnitee
gives notice of such Covered Proceeding, that each
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Indemnitor is obligated to indemnify each Indemnitee in full with respect to
such Covered Proceeding as provided in this Section 9.4, and no Indemnitor has
defaulted or breached any material obligation under or pursuant to this
Agreement.
9.5 Contribution. (a) If the indemnification provided for in Section
9.1(a) or (b) is unavailable to an indemnified party in respect of any losses,
claims, expenses, damages or liabilities referred to herein, then each such
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of Parent and the Major Shareholders
in connection with the statements, omissions or transactions that resulted in
such losses, claims, expenses, damages or liabilities, as well as any other
relevant equitable considerations (including, without limitation, the failure of
any Major Shareholder to comply with the provisions of Section 8.1). The
relative fault of Parent and the Major Shareholders shall be determined by
reference to, among other things, whether the omission or alleged omission to
state a material fact relates to information supplied by such party, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission and the observance of the
provisions of this Agreement.
(b) In order to provide for just and equitable contribution in
circumstances, if any, in which a Major Shareholder (a "Responsible Major
Shareholder") shall become responsible to indemnify Parent or shall in respect
of such indemnification pay to Parent an indemnification payment in an amount in
excess of such Major Shareholder's proportionate share thereof, then each other
Major Shareholder ("Other Major Shareholder") shall contribute and pay to the
Responsible Major Shareholder, or reimburse the Responsible Major Shareholder,
an amount which shall equal its proportionate share of such excess payment. If,
however, such allocation is not permitted by applicable law, then each Other
Major Shareholder shall contribute to such amounts paid or payable by the
Responsible Major Shareholder in respect of any amount for which such
indemnification would otherwise be available in such proportion as is
appropriate to reflect the relative benefits received by each Other Major
Shareholder, as the case may be, on the one hand, and the Responsible Major
Shareholder, on the other, as well as the relative fault of the Other Major
Shareholders, as the case may be, on the one hand, and the Responsible Major
Shareholder, on the other, pursuant to the event in connection with which such
indemnification has arisen.
(c) Parent and each Major Shareholder agree that it would not
be just and equitable if contribution pursuant to this Section were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in such of the two
immediately preceding paragraphs as shall be applicable. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the immediately two preceding paragraphs shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim. No person guilty of
fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation
(d) The obligations of the parties under this Section 9.5
shall be subject to the Liability Cushion and the Cap, in accordance with
Section 9.7.
9.6 Administration of Claims. The procedure for administration of
indemnification claims shall be as follows:
(a) Claim Notice. If Parent determines that a Parent
Indemnitee is entitled to indemnification hereunder, then Parent shall deliver
to the Representatives a written notice thereof (a "Claim Notice") setting forth
(i) a brief description of the circumstances supporting Parent's belief that
such entitlement to indemnification exists and (ii) to the extent possible, a
non-binding, preliminary estimate of the aggregate dollar amount of all loss,
liability, damage, cost or expense (collectively "Damages") that have arisen or
may arise therefrom or are otherwise associated therewith (such aggregate amount
being referred to as the "Claim Amount").
(b) Response Notice. Within thirty (30) days after the
delivery of a Claim Notice to the Representatives, the Representatives shall
either (i) pay or cause to be paid to Parent (A) the entire Claim Amount set
forth in such Claim Notice or (B) a specified portion (but not the entire
amount) of the Claim Amount set forth in such Claim Notice and deliver to Parent
a written notice (a "Response Notice") containing a statement that the remaining
portion of such Claim Amount is being disputed; or (iii) deliver to Parent a
Response Notice containing a statement that the entire Claim Amount set forth in
such Claim Notice is being disputed. If payment under clause (i) above is to be
made from an escrow of shares ("Escrow Shares") of Parent Common Stock
established by the Major Shareholder, then the Representatives shall deliver to
Parent, within thirty days after the delivery of the Claim Notice in the case of
clause (A) above or as part of the Response Notice in the case of clause (B)
above, a copy of instructions to the escrow agent for the Escrow Shares to
release, transfer, assign and deliver to Parent the appropriate number of shares
of Parent Common Stock. The Representatives may contest the payment of a Claim
Amount set forth in such Claim Notice only based upon a good faith belief that
such portion of the Claim Amount does not constitute an amount for which any
Parent Indemnitee is entitled to seek indemnification under the Merger Agreement
and the related Response Notice shall set forth in reasonable detail the basis
on which the Representatives contest such Claim Amount or a statement that they
do not have sufficient information to determine whether the Major Shareholders
are required to pay such Claim Amount. If no Response Notice is received by
Parent from a Representative within thirty (30) days after the delivery of a
Claim Notice to the Representatives, then the Representatives shall be deemed to
have agreed on behalf of the Major Shareholders that the entire Claim Amount set
forth in the Claim Notice shall be due and payable to Parent and, with respect
to the Escrow Shares, shall be deemed to have given instructions to the escrow
agent to release, transfer, assign and delivery to Parent the appropriate number
of shares of Parent Common Stock.
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(c) Contested Amounts. In the event that any Response Notice
indicates that there is a dispute as to all or any portion of a Claim Amount (a
"Contested Amount"), the Representatives and Parent shall for a period of not
more than thirty (30) days attempt in good faith to resolve such Contested
Amount.
(d) Arbitration. If no such resolution can be reached within
such thirty (30) day period, either Parent or the Representatives may demand
arbitration of the matter through binding and nonappealable arbitration in New
York County, New York, before a panel of three arbitrators (with one designated
by Parent and one designated by the Representatives, and the third arbitrator
designated by the first two) pursuant to the rules of the American Arbitration
Association. Any arbitrator designated by Parent or the Representatives must be
an "Independent Person." For the purpose of this subsection (d), an "Independent
Person" shall be an individual who is not and has not been (i) a director,
officer, employee, agent or shareholder (either as a holder of a legal or a
beneficial interest) of any party hereof, (ii) a consultant to any party hereto,
(iii) a person with a direct or indirect financial interest in any contract with
any party hereto; (iv) a director, officer or key employee of a company at a
time when such company was party to a contract with any party hereto, or (v) a
relative of any person referred to in clauses (i), (ii), (iii) or (iv) above. As
used in the immediately preceding sentence, the term "any party hereto" shall be
deemed to include any affiliates of the parties hereto and any Shareholders and
their affiliates. Arbitration shall be commenced by either Parent or the
Representatives giving written notice to the other party hereto that such
dispute has been referred to arbitration under this subsection (d). The third
arbitrator shall be selected as prescribed above, but if the first two
arbitrators do not so agree within 30 days after the date of the notice referred
to above, the selection shall be made pursuant to the rules of the American
Arbitration Association from the Commercial Arbitration Panel maintained by such
Association.
There shall be limited discovery prior to the arbitration hearing,
subject to the discretion of the arbitrators, as follows: (a) exchange of
witness lists and copies of documentary evidence and documents related to or
arising out of the issues to be arbitrated, (b) depositions of all party
witnesses, and (c) such other depositions as may be allowed by the arbitrators
upon a showing of good cause. The arbitrators shall decide the matter to be
arbitrated pursuant hereto within sixty (60) days after the appointment of the
arbitrators.
The arbitrators' decision shall relate solely to whether Parent is
entitled to receive indemnification for the Contested Amount (or a portion
thereof) pursuant to the applicable terms of the Merger Agreement. The final
decision of the arbitrator shall be furnished to Parent and the Representatives
in writing and shall constitute a conclusive determination of the issue in
question, binding upon Parent, the Major Shareholders, the Representatives and
the Escrow Fund, and shall not be contested by any of them; provided, however,
that any such award shall be accompanied by a written opinion of the arbitrators
giving the reasons for the award. Such decision may be used in a court of law
only for the purpose of seeking enforcement of the arbitrator's award. In making
such award, the arbitrators shall be authorized to award interest on any amount
awarded. This provision
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for arbitration shall be specifically enforceable by the Representatives and
Parent and the decision of the arbitrators in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. Each of the Major
Shareholders and Parent shall pay their or its own expenses of arbitration and
the expenses of the arbitrators shall be equally shared (one-half by Parent and
one-half by the Major Shareholders); provided, however, that if in the opinion
of the arbitrators any claim for indemnification or any defense or objection
thereto was frivolous or in bad faith, the arbitrators may assess, as part of
the award, all or any part of the arbitration expenses of the other party
(including reasonable attorneys' fees) and of the arbitrators against the party
raising such unreasonable claim, defense or objection.
To the extent that arbitration may not be legally permitted
hereunder and the Representatives and Parent do not at the time of such dispute
or claim mutually agree to submit such dispute or claim to arbitration either
the Representatives or Parent may commence a civil action in a court of
appropriate jurisdiction to solve disputes or claims hereunder. Nothing
contained in this subsection (d) shall prevent the Representatives and Parent
from settling any dispute or claim by mutual agreement at any time.
No party shall be precluded hereby from seeking, from the courts of
any jurisdiction, provisional or equitable remedies of a type not available in
arbitration, including without limitation, temporary restraining orders and
preliminary or permanent injunctions, nor shall the pursuit of such provisional
or equitable relief constitute a waiver or modification or such party's right
and obligation to arbitrate any related and unrelated dispute which is otherwise
subject to arbitration under this Agreement, unless such waiver is expressed in
writing and signed by such party. In the event any person not a party in this
Agreement shall commence any interpleader or similar action which either
directly or indirectly raises issues which are subject to arbitration hereunder,
the Representatives and Parent shall seek a stay of such proceedings pending
arbitration in accordance with this Agreement.
In the event of any third-party claim where the indemnifying party
does not assume the defense of such third-party claim, nothing in this
subsection (d) shall prevent the indemnifying party from impleading the
indemnifying party or otherwise joining the indemnifying party to any litigation
relating to such third-party claim.
After delivery of a Response Notice that the Claim Amount is
contested, the Major Shareholders shall cause Escrow Shares having a value,
based on the Average Price, equal to the Contested Amount to continue to be held
in the escrow so established, notwithstanding the occurrence of a date on which
the Escrow Shares shall otherwise be releasable from such escrow, until (i)
delivery of a copy of a settlement agreement executed by Parent and the
Representatives setting forth instructions as to the release of Escrow Shares
that shall be made with respect to the Contested Amount or (ii) delivery of a
copy of the final award of the arbitrators setting forth instructions as to the
release of Escrow Shares that shall be made with respect to the Contested
Amount. In no event shall Parent have any liability for any decline in value of
the Escrow Shares while such shares are being held in escrow.
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(e) Indemnity Registration Request. If the Major Shareholders
send to Parent a Response Notice acknowledging and agreeing that all or a
portion of the Claim Amount set forth in the Claim Notice is due and payable by
them and requesting that a specified number of shares of Parent Common Stock be
included in the Registration Statement contemplated by Section 10.4 (an
Indemnity Registration Request), then Parent shall amend such Registration
Statement to include the requested shares of Parent Common Stock, upon the
following conditions:
(i) the most recent closing price of Parent Common Stock
shall be at least 120% of the Average Price;
(ii) no shares of Parent Common Stock shall be
registered under an Indemnity Registration Request if and to the extent that (A)
such shares can be sold under Rule 145, or (B) the value of (1) shares owned by
the Major Shareholders at any time covered by such Registration Statement, at
the most recent closing price of Parent Common Stock preceding the date of the
Indemnity Registration Request, (2) proceeds of Parent Shares sold without
registration and (3) the Parent Shares subject to the Indemnity Registration
Request, at such closing price, shall exceed the Claim Amounts set forth in all
Claim Notices at the most recent closing price of Parent Common Stock; and
(iii) Parent shall have received an undertaking of the
Major Shareholders, in form and substance satisfactory to Parent, agreeing to
sell the shares of Parent Common Stock covered by the Indemnity Registration
Request through a broker designated therein and directing the broker that the
proceeds of such sale be paid directly to Parent, and acknowledged in writing by
such broker.
(f) Parent acknowledges that the Major Shareholders may desire
to establish the escrow described above through the deposit of the certificates
representing their Parent Shares with the escrow agent, the re-registration of
such certificates in the name of the escrow agent upon deposit with the escrow
agent and the re-registration of such certificates in the names of the Major
Shareholders upon release from escrow. Parent agrees (i) upon surrender of
certificates in the name of the Major Shareholders for depositing into escrow,
to issue or cause to be issued a certificate or certificates as requested by the
Representatives, and (ii) and upon surrender of certificates for release to the
Major Shareholders, to issue or cause to be issued certificates in such names as
shall be requested by the escrow agent (remaining shares, if any, to be held as
Escrow Shares and re-certificated in the name of the escrow agent; provided,
that prior to any such re-certification, Parent and its transfer agent shall
receive all such documentation as shall be reasonably requested by it and as
required under this Agreement; and provided, further, Parent shall not be
required to re-certificate any shares in violation of federal or state
securities laws, or are which the subject of a pending Claim Notice.
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9.7 Exclusive Remedy. The parties hereto acknowledge and agree that
the indemnification and contribution rights of the parties under Article 9 of
this Agreement constitute the exclusive remedy of Parent or the Shareholders for
any claim (in contract, tort or otherwise seeking monetary or non-monetary
relief) under this Agreement, other than to the extent of fraud, and other than
other specific rights granted hereunder, including without limitation, the right
to specific performance or to the Break-up Fee or Reverse Break-up Fee. For
purpose of this Article 9, the calculation of the Liability Cushion and the Cap
shall be made on an aggregate basis, including amounts payable under Section 9.1
and Section 9.5.
ARTICLE 10
Restrictions on Transfer; Registration
Under the Securities Act
10.1 Restrictions on Transfer. The Parent Common Stock delivered
pursuant hereto shall not be transferable except upon the conditions specified
in this Article, which conditions are intended to ensure compliance with the
provisions of the Securities Act in respect of the transfer of any such Parent
Common Stock. Each Shareholder will cause any proposed transferee of such Parent
Common Stock held by such Shareholder, other than a transferee who purchases (a)
in accordance with the provisions of Section 10.4 pursuant to an effective
registration statement satisfying the requirements of the Securities Act or (b)
pursuant to Rule 145 under the Securities Act, as amended from time to time, to
agree to take and hold such Parent Common Stock subject to the provisions and
upon the conditions specified in this Article.
10.2 Restrictive Legend. Each certificate for shares of Parent
Common Stock delivered pursuant hereto issued to a Shareholder or to a
subsequent transferee shall (unless otherwise permitted by the provisions of
Section 10.3 or 10.4) include a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT AND THE RULES AND
REGULATIONS THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS
CERTIFICATE AGREES TO COMPLY IN ALL RESPECTS WITH ARTICLE 10 OF THE
AGREEMENT AND PLAN OF MERGER DATED AS OF SEPTEMBER 22, 2000 IN
RELATION TO WHICH THESE SHARES WERE ISSUED. COPIES OF SUCH ARTICLE
10 MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THIS COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICES.
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10.3 Notice of Proposed Transfers; Rule 144. (a) Each Shareholder
agrees to comply in all respects with the provisions of this Section. Prior to
any proposed sale, transfer or other disposition of Parent Common Stock
delivered pursuant hereto (except for transfers between Shareholders and other
than under the circumstances described in paragraph (b) below with respect to
termination of restrictions on transfers pursuant to Rule 144(k) under the
Securities Act, as amended from time to time ("Rule 144(k)") or in Section
10.4), the affected Shareholders shall give written notice to Parent of such
Shareholder's intention to effect such sale, transfer or other disposition. Each
such notice shall describe the manner and circumstances of the proposed sale,
transfer or other disposition in reasonable detail, and shall be accompanied by
either (i) an opinion of counsel, and in form and substance, reasonable
acceptable to Parent addressed to Parent, to the effect that the proposed sale,
transfer or other disposition of such Parent Common Stock may be effected
without registration under the Securities Act, or (ii) a "no action" letter, in
form and substance reasonably acceptable to Parent, from the SEC to the effect
that such sale, transfer or other disposition of such Parent Common Stock
without registration will not result in a recommendation by the staff of the SEC
that action be taken with respect thereto, whereupon the holder of such Parent
Common Stock shall be entitled to transfer such Parent Common Stock in
accordance with the terms of the notice delivered by the Shareholders to Parent;
provided, however, that no such notice or opinion of counsel shall be required
for a transfer by will or interstate succession from any Shareholder to his or
her spouse or family members, if the transferee agrees in writing to be subject
to the terms hereof to the same extent as if such transferee were an original
Shareholder hereunder. The provisions of this Section 10.3(a) shall not be
applicable to a bona fide pledge of Parent Common Stock to any bank, registered
broker/dealer or other financial institution.
(b) Notwithstanding the foregoing, no opinion of counsel shall
be required for (i) any sale, transfer or other disposition of such Parent
Common Stock or the removal of the above legend from the certificates therefor
or (ii) the removal of the above legend based upon the termination of
restrictions on sales of such stock pursuant to Rule 144(k), if the Shareholder
holding such shares of Parent Common Stock shall deliver to Parent in its stead
a certificate stating that such shares are (i) eligible for sale pursuant to
Rule 144, as amended from time to time, under the Securities Act and
representing and warranting to Parent that such sale will be made in accordance
with such Rule, or (ii) eligible for termination of restrictions on sale
pursuant to Rule 144(k), as amended from time to time, under the Securities Act
and representing and warranting to Parent that such shares are so eligible in
accordance with such Rule, in each case together with a summary of the bases for
such statements, unless within ten (10) days after receipt of such a certificate
Parent shall reasonably determine in good faith that an opinion of counsel is
required to ensure compliance with the Securities Act and shall so notify such
Shareholder.
10.4 Registration of Stock; Restriction on Sales. (a) Parent agrees
to prepare and, subject to the Shareholders providing the requisite information
pursuant to Section 10.6 and the completion of the audited financial statements
of the Company for 1997, 1998 and 1999, file a registration statement (the
"Registration Statement"), including a prospectus (the "Prospectus"), with
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the SEC under the Securities Act and satisfy such filing, registration and
qualification requirements of the relevant state securities (blue sky) laws of
such states as the Shareholders may reasonably request, (i) within fifteen (15)
days after publication of its consolidated financial statements for the period
ending on the last day of the fiscal quarter in which the Effective Time falls,
covering the sale of fifty percent (50%) of the Parent Shares delivered to
Shareholders and (ii) on or before the end of the fiscal quarter of Parent
following the end of the fiscal quarter of Parent in which the Registration
Statement in clause (i) shall be filed, covering the remaining fifty percent
(50%); provided that Parent will not be required to (x) qualify generally to do
business in any such jurisdiction where it would not otherwise be required to
qualify but for this Agreement, (y) subject itself to taxation in any such
jurisdiction or (z) consent to general service of process in any such
jurisdiction (unless Parent is already subject to service of process in such
jurisdiction). Parent further agrees to use its best efforts to cause the
Registration Statement and such registration and qualification to become
effective as soon as practicable after filing. The Registration Statement shall
be on Form S-3; provided that, if such form ceases at any time to be available,
the Registration Statement shall be on such other form for the general
registration of securities as Parent may deem appropriate. Parent shall furnish
the Representatives with an initial draft of the Registration Statement upon its
completion and prior to filing such Registration Statement or any amendment or
supplement thereto (other than any documents incorporated by reference therein),
furnish to the Shareholders copies thereof. Parent represents and warrants to
the Shareholders that currently it meets all of the registrant's requirements
of, and qualifies to use, Form S-3.
(b) Except as provided in subsections (c) and (d), at any time
during the period the Registration Statement is effective, prior to any proposed
sale, transfer or other disposition of any Parent Common Stock delivered
pursuant hereto, the affected Shareholder shall give at least seven (7) days'
written notice to Parent of such Shareholder's intention to effect such sale,
transfer or other disposition. Such notice shall state that such sale, transfer
or other disposition is intended to be made pursuant to such Registration
Statement and the Prospectus and that such Shareholder has a bona fide intention
of making such sale, transfer or other disposition. Subject to the provisions of
Subsections (c), (d) and (e) below, such Shareholder shall be permitted to
effect such sale, transfer or other disposition without further notice to Parent
during the twenty-one day period following the expiration of such seven-day
period.
(c) Notwithstanding anything contained in subsection (b), if
at any time after receipt of any such notice from any Shareholder and prior to
such sale, transfer or other disposition, Parent shall furnish to such
Shareholder a certificate signed by its Chief Executive Officer, stating that in
his good faith judgement it would be seriously detrimental to Parent or its
shareholders for such sale, transfer or other disposition to be made at such
time (including, without limitation, by reason of any disclosure which Parent
may be required to make for such purpose), such Shareholder shall not effect
such sale, transfer or other disposition except during the twenty-one day period
following the expiration of the sooner of (i) a period of ninety (90) days from
the date of receipt of such written notice from such officer of Parent or (ii)
the receipt of written notice from Parent stating that such Shareholder is
permitted to effect such sale, transfer or other disposition.
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If prior to such ninety (90) day period there shall no longer be any basis for
such a certificate to be issued, Parent shall promptly under the circumstances
notify such Shareholder to the effect provided in clause (ii) above. Parent
shall not be entitled to defer any such Shareholder sales during any such
twenty-one-day period. Each other Shareholder shall also be entitled to sell,
transfer or otherwise dispose of Parent Common Stock during any twenty-one-day
period referred to in this subsection if such selling Shareholder gives notice
to Parent of such intended sale prior to the expiration of such twenty-one-day
period.
(d) Notwithstanding anything contained in subsections (b) and
(c), the Shareholders shall be permitted, without notice to Parent and free from
any right of Parent to defer such sales as herein provided, to sell, transfer or
otherwise dispose of Parent Common Stock pursuant to the Registration Statement
and the Prospectus during the two periods of 90 days following (i) the date the
Registration Statement first becomes effective and (ii) the date Parent first
announces to the public its financial results inclusive of the Company covering
a period of at least 30 days of post-Closing Date combined operations. Parent
shall notify the Shareholders promptly following the date on which it makes such
announcement to the public.
(e) Parent will, upon delivery to it or its agent of
certificates for the Parent Common Stock containing the legend set forth in
Section 10.2 hereof by a Shareholder for registration of the transfer of such
stock in accordance with the provisions of this Section, cause certificates
without such legend representing the number of shares of Parent Common Stock
equal to the number of shares of Parent Common Stock being transferred and new
certificates with such legend representing the number of remaining shares not
being so transferred, if any, to be issued in exchange for such legended
certificates.
10.5 Registration Procedures and Expenses. Parent agrees that after
the filing of the Registration Statement it will:
(a) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective until the Parent Common Stock so
registered and qualified is no longer owned by any Shareholder or until the
expiration of a period of 15 months after the Effective Time, whichever is
earlier; provided that, if as result of the exercise by Parent of its rights
pursuant to the first sentence of Section 10.4(c), any such twenty-one-day
period shall end at any time after such 15-month period, the period during which
the Registration Statement shall remain effective shall be extended to the end
of such twenty-one-day period;
(b) if the Registration Statement ceases for any reason to be
effective during the period referred to in clause (a), use its best efforts to
either make such Registration Statement effective or to file another
registration statement (which for purposes of this Agreement shall be the
"Registration Statement" and the related prospectus shall be the "Prospectus")
and use its best efforts to cause such Registration Statement to become
effective as soon as practicable and
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remain effective for the period referred to in clause (a);
(c) deliver to each Shareholder, as soon as it is available, a
conformed copy of the Registration Statement (including any preliminary
prospectus) as originally filed and of each amendment thereto (including
exhibits and documents incorporated by reference therein);
(d) furnish to each Shareholder selling Parent Common Stock so
registered under the Securities Act such number of copies of the Prospectus and
any amendments or supplements thereto (including all Exhibits thereto and all
documents incorporated by reference therein) and the Prospectus included in such
Registration Statement (including each preliminary prospectus) as the
Shareholders may reasonably request in order to effect the offering and sale of
the shares of Parent Common Stock to be offered and sold);
(e) pay all fees and expenses (including without limitation
registration and filing fees and legal (limited to a single law firm retained by
Shareholders), accounting (limited to the accountants retained by the Company)
and printing fees and expenses but excluding selling fees, discounts and
commissions with respect to the sale of Parent Common Stock and any
out-of-pocket expenses of the Shareholders) in connection with such registration
or qualification; and
(f) if during the period that the Registration Statement is
required to be kept effective, any other shares of Parent Common Stock shall be
issued in respect of the Parent Common Stock delivered pursuant hereto (by
reason of any stock split, stock dividend, reclassification, recapitalization or
similar event), Parent agrees to use its best efforts to cause such additional
shares of Parent Common Stock to be registered pursuant to the Registration
Statement or another registration statement (which other Registration Statement
shall be deemed for purposes of this Agreement to be a "Registration Statement"
and the related prospectus shall be a "Prospectus") and, except as provided in
clauses (i), (ii) and (iii) of Section 10.4(a), registered or qualified under
the relevant state securities laws.
10.6 Accuracy of Information. Parent may require each Shareholder
promptly to furnish in writing to Parent such information regarding such
Shareholder, the plan of distribution of the Parent Common Stock and other
information as Parent may from time to time reasonably request or as may be
legally required in connection with such registration. The information with
respect to the Company or Shareholders that the Company or any Shareholder
furnishes to Parent in writing specifically for use in any registration
statement used in connection with the registration of the Parent Common Stock
will not contain, at the time such registration statement becomes effective, any
fact required to be stated therein or necessary in order to make the statements
made therein not misleading.
10.7 Certain Notifications. During the period of effectiveness of
the Registration Statement, Parent shall promptly notify each of the
Shareholders of:
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(a) the effectiveness of the Registration Statement, the
receipt of any comments from the SEC relating to statements set forth in the
Registration Statement that relate to the Shareholders, and the issuance (or any
threatened issuance of which Parent shall be aware) by the SEC of any stop order
suspending the effectiveness of the Registration Statement or of any amendment
thereto (in which case, the Shareholders will not sell, transfer or otherwise
dispose of any Parent Common Stock during the pendency of such stop order), and
Parent shall take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered; and
(b) its intention to file any amendment to the Registration
Statement (other than documents incorporated by reference therein) which shall
amend the statements referred to in Section 10.6.
10.8 Indemnification by Parent. Parent shall indemnify and hold
harmless each Shareholder from and against any and all losses, claims, expenses,
damages and liabilities, joint or several, caused by (a) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus (as amended or supplemented if Parent shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
(b) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (c) any violation by Parent of the Securities Act, the Exchange Act, any
state securities laws or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities laws, in each case, except insofar
as such losses, claims, expenses, damages or liabilities (i) are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information, relating to the Shareholders, the plan of distribution or any
other matter furnished in writing to Parent by or on behalf of any Shareholder
expressly for use therein and (ii) relate to any sale, transfer or other
disposition that is effected at a time or in any manner that is inconsistent
with the provisions of Section 10.4 or any applicable law, rule or regulation;
provided that the foregoing indemnity agreement with respect to any prospectus
or preliminary prospectus shall not inure to the benefit of the Shareholders if
a copy of the most current prospectus at the time of the delivery of the Parent
Common Stock was not provided to the purchaser thereof and such current
prospectus would have cured the defect giving rise to such loss, claim, damage
or liability.
10.9 Indemnification by the Shareholders. Each Shareholder shall
indemnify and hold harmless Parent, its officers and directors, and each Person,
if any, who controls Parent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Parent to the Shareholders, but only with reference to
(i) information relating to such Shareholder, the plan of distribution or any
other matter furnished in writing by or on behalf of such Shareholder expressly
for use in the Registration Statement or Prospectus, or any amendment or
supplement thereto, or any preliminary prospectus and (ii) any sale, transfer or
other disposition by such Shareholder that is effected at a time or in a manner
that is inconsistent with the provisions of Section 10.4. Notwithstanding the
foregoing, each Shareholder's liability under this Section 10.9 shall not exceed
the proceeds such Shareholder
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receives from its sale of Parent Common Stock pursuant to the Registration
Statement.
10.10 Conduct of Indemnification Proceedings. In case any proceeding
or claim (including any governmental investigation) shall be instituted or
asserted involving any person in respect of which indemnity may be sought
pursuant to Section 10.8 or Section 10.9, such person (the "Indemnified Party")
shall promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment.
10.11 Contribution. If the indemnification provided for in Section
10.8 or Section 10.9 is unavailable to an Indemnified Party in respect of any
losses, claims, expenses, damages or liabilities referred to herein, then each
such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by Parent and the
Shareholders from the offering of the securities and the relative fault of
Parent and the Shareholders in connection with the statements, omissions or
transactions that resulted in such losses, claims, expenses, damages or
liabilities, as well as any other relevant equitable considerations (including,
without limitation, the failure of any Shareholder to comply with the provisions
of Section 10.4). The relative benefits received by Parent and the Shareholders
shall be deemed to be in the same respective proportions as the total proceeds
from the offering (net of underwriting discounts and commissions but before
deducting expenses) received by Parent and the Shareholders bear to the
aggregate public offering price of the securities. The relative fault of Parent
and the Shareholders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission
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to state a material fact relates to information supplied by such party, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission and the observance of the
provisions of this Agreement. Parent and each Shareholder agree that it would
not be just and equitable if contribution pursuant to this Section were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
ARTICLE 11
Miscellaneous
11.1 Specific Performance. The Company and the Shareholders agree
that the Company is a unique business and the Shares are unique property that
cannot be readily obtained on the open market and that Parent will be
irreparably injured if this Agreement is not specifically enforced. Therefore,
Parent shall have the right specifically to enforce the performance of the
Company and Shareholders and the Company under this Agreement without the
necessity of posting any bond or other security, and the Major Shareholders and
the Company hereby waive the defense in any such suit that Parent has an
adequate remedy at law and agree not to interpose any opposition, legal or
otherwise, as to the propriety of specific performance as a remedy. The remedy
of specifically enforcing any or all of the provisions of this Agreement in
accordance with this Section 11.1 shall not be exclusive of any other rights
which Parent may have to terminate this Agreement, or of any other rights or
remedies which Parent may otherwise have under this Agreement or otherwise, all
of which rights and remedies shall be cumulative.
11.2 Binding Agreement; Assignment. All the terms and provisions of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective heirs, legal
representatives, successors and assigns. This Agreement and all rights of Parent
shall be assignable to one or more subsidiaries or affiliates of Parent. Such
assignment shall not relieve Parent of its obligations hereunder.
11.3 Law To Govern. This Agreement shall be construed and enforced
in accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws. Parent, the Company and Shareholders also hereby
irrevocably and unconditionally consent to submit to the non-exclusive
jurisdiction of the courts of the State of New York of the United States of
America for the Southern District of New York for any actions, suits or
proceedings arising
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out of or relating to this Agreement and the transactions contemplated hereby
(and the Company and Major Shareholders agree not to commence any action, suit
or proceeding relating thereto except in such courts), and further agree that
service of any process, summons, notice or document by U.S. registered mail to
its address set forth below shall be effective service of process for any
action, suit or proceeding brought against it in any such court. The Company and
Major Shareholders hereby irrevocably and unconditionally waive any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in the courts of the State of
New York or the United States of America for the Southern District of New York,
and hereby further irrevocably and unconditionally waive and agree not to plead
or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum. It is further
understood and agreed that no failure or delay in exercising any right, power or
privilege under this Agreement will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
11.4 Notices. All notices shall be in writing and shall be deemed to
have been duly given if delivered personally or when deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid to the other party hereto at the following addresses:
if to the Company or the Shareholders, to:
Xxxx X. Xxxxxx, Shareholders' Representative
Xxxxxxxx & Xxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
and to:
Xx. Xxxxxxxxx Xxxxxxx
Prolifaron, Inc.
00000 Xxxxxxx Xxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 X. Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: G. Xxxxxx Xxxxxxxxx, Esq.
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if to Parent or Sub, to:
Alexion Pharmaceuticals, Inc.
00 Xxxxxxx Xxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxx, MD, President
with a copy to:
Golenbock, Eiseman, Assor & Xxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxx, Esq.
or to such other address as any such party may designate in writing in
accordance with this Section 11.4.
11.5 Fees and Expenses. Except as expressly set forth in this
Agreement, each of the parties shall pay its own fees and expenses with respect
to the transactions contemplated hereby, provided, however, the Company will
pay, either before or after the Closing Date all reasonable fees and expenses of
Xxxxxx Xxxxxxxx LLP and HEWM with respect to the Merger incurred by the Company
or by any of the Shareholders in connection with the Merger. The fees and
expenses of any separate counsel engaged by any Shareholder, as well as fees and
expenses of HEWM for any estate planning and other non-Merger-related work,
shall be borne by such Shareholder.
11.6 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto in respect of the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect to such subject matter; provided, that the Non-Disclosure Agreement
shall continue in effect in accordance with its terms. This Agreement may not be
modified, amended or terminated except by a written agreement specifically
referring to this Agreement signed by all of the parties hereto.
11.7 Waivers. Any failure by any party to this Agreement to comply
with any of its obligations hereunder may be waived by Shareholders in the case
of a default by Parent and by Parent in case of a default by Shareholders. No
waiver shall be effective unless in writing and signed by the party granting
such waiver, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
11.8 No Third-Party Beneficiaries. Nothing herein, express or
implied, is intended or shall be construed to confer upon or give to any person,
firm, corporation or legal entity, other
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than the parties hereto, any rights, remedies or other benefits under or by
reason of this Agreement or any documents executed in connection with this
Agreement.
11.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.
11.10 Headings. The Section and paragraph headings contained herein
are for the purposes of convenience only and are not intended to define or limit
the contents of said Sections and paragraphs.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
PROLIFARON, INC. ALEXION PHARMACEUTICALS, INC.
By: /s/ Xxxxxxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxx
------------------------------- --------------------------------------
Name: Xxxxxxxxx Xxxxxxx Name: Xxxxxxx Xxxx
Title: Chief Executive Officer Title: President
SHAREHOLDERS: PI ACQUISITION COMPANY, INC.
/s/ Xxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxxxx
--------------------------------- --------------------------------------
Xxxx Xxxxxx Name: Xxxxxxx Xxxxxxx
Title: President
/s/ Xxxxxxx Xxxx Xxxxxx /s/ Xxxxx X. Xxxxxxx
--------------------------------- ----------------------------------------
Xxxxxxx Xxxx Xxxxxx Xxxxx X. Xxxxxxx
/s/ Xxxxxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxx
--------------------------------- ----------------------------------------
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx /s/ Xxxxxx Xxxxxx
--------------------------------- ----------------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxxx
/s/ Xxxxxx X. Matricaria
---------------------------------
Xxxxxx X. Matricaria
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TABLE OF CONTENTS
Page No.
--------
ARTICLE 1......................................................................1
1.1 THE MERGER..........................................................1
1.2 EFFECTIVE TIME OF THE MERGER........................................2
1.3 CERTIFICATE OF INCORPORATION........................................2
1.4 BY-LAWS.............................................................2
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.....................2
ARTICLE 2......................................................................2
2.1 EXCHANGE RATIO......................................................3
2.2 REPRESENTATIVES.....................................................4
2.3 PURCHASER'S QUESTIONNAIRE...........................................4
2.4 EMPLOYMENT AND CONSULTING AGREEMENTS................................5
2.5 EXCHANGE OF CERTIFICATES REPRESENTING SHARES........................5
2.6 DIVIDENDS; VOTING RIGHTS; TRANSFER TAXES............................6
2.7 NO FRACTIONAL SECURITIES............................................6
2.8 CLOSING OF THE COMPANY TRANSFER BOOKS...............................7
2.9 LOST, STOLEN OR DESTROYED CERTIFICATES..............................7
2.10 WITHHOLDING RIGHTS.................................................7
ARTICLE 3......................................................................8
3.1 CLOSING.............................................................8
3.2 SELLERS' DELIVERIES.................................................9
3.3 BUYER'S DELIVERIES.................................................11
3.4 FURTHER ASSURANCES.................................................11
3.5 BUYER'S CONDITIONS PRECEDENT.......................................11
3.6 SELLERS' CONDITIONS PRECEDENT......................................14
ARTICLE 4.....................................................................14
4.1 ORGANIZATION, STANDING AND QUALIFICATION; NO SUBSIDIARIES..........15
4.2 RELATED TRANSACTIONS...............................................15
4.3 CAPITALIZATION.....................................................16
4.4 AUTHORITY; NO VIOLATION............................................16
4.5 FINANCIAL STATEMENTS...............................................17
4.6 ABSENCE OF UNDISCLOSED LIABILITIES; GUARANTEES.....................18
4.7 ABSENCE OF CHANGES OR EVENTS.......................................18
4.8 TITLE TO AND CONDITION OF THE COMPANY'S ASSETS.....................21
4.9 INTELLECTUAL PROPERTY..............................................21
4.10 SCHEDULES..........................................................24
4.11 LITIGATION.........................................................27
4.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS; PERMITS................27
4.13 INSURANCE..........................................................28
4.14 ABSENCE OF CERTAIN BUSINESS PRACTICES..............................28
i
4.15 ENVIRONMENTAL MATTERS..............................................29
4.16 EMPLOYEE BENEFITS; EMPLOYEES.......................................30
4.17 TAXES..............................................................33
4.18 RECEIVABLES........................................................34
4.19 RECORDS............................................................35
4.20 BROKERAGE OR FINDER'S FEE..........................................35
4.21 DISCLOSURE.........................................................35
4.22 CERTAIN REPRESENTATIONS............................................35
ARTICLE 5.....................................................................36
ARTICLE 6.....................................................................37
6.1 ORGANIZATION AND STANDING..........................................37
6.2 AUTHORITY..........................................................37
6.3 NO VIOLATION.......................................................37
6.4 GOVERNMENTAL AUTHORIZATION.........................................38
6.5 FINANCIAL STATEMENTS...............................................38
6.6 VALIDITY OF STOCK..................................................38
6.7 CHANGES SINCE 10-K REPORT..........................................38
6.8 SEC FILINGS........................................................39
6.9 LITIGATION.........................................................39
6.10 CERTAIN REPRESENTATIONS............................................39
ARTICLE 7.....................................................................41
7.1 CONDUCT OF BUSINESS................................................41
7.2 CHANGES IN INFORMATION.............................................42
7.3 ACCESS TO INFORMATION..............................................42
7.4 PRESERVATION OF BUSINESS...........................................42
7.5 AFFILIATE AGREEMENTS...............................................42
7.6 STOCKHOLDER APPROVAL...............................................43
7.7 COMPANY OFFICERS...................................................43
ARTICLE 8.....................................................................43
8.1 NO SHOP............................................................43
8.2 HISTORIC FINANCIAL STATEMENTS......................................44
8.3 BREAK-UP FEE.......................................................45
8.4 NON-SOLICITATION OF EMPLOYEES......................................46
8.5 LISTING OF PARENT COMMON STOCK.....................................46
8.6 RULE 144...........................................................46
8.7 PUBLIC ANNOUNCEMENTS...............................................46
8.8 EMPLOYEE STOCK OPTIONS; INCENTIVE AND BENEFIT PLANS................46
8.9 REVERSE BREAK-UP FEE...............................................47
8.10 STOCKHOLDER VOTING AGREEMENTS......................................48
ARTICLE 9.....................................................................48
9.1 OBLIGATION TO INDEMNIFY............................................48
9.2 LIABILITY OF SELLERS...............................................49
9.3 SURVIVAL; LIMITATIONS..............................................50
9.4 COVERED PROCEEDINGS................................................51
9.5 CONTRIBUTION.......................................................53
9.6 ADMINISTRATION OF CLAIMS...........................................54
9.7 EXCLUSIVE REMEDY...................................................58
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ARTICLE 10....................................................................58
10.1 RESTRICTIONS ON TRANSFER...........................................58
10.2 RESTRICTIVE LEGEND.................................................58
10.3 NOTICE OF PROPOSED TRANSFERS; RULE 144.............................59
10.4 REGISTRATION OF STOCK; RESTRICTION ON SALES........................60
10.5 REGISTRATION PROCEDURES AND EXPENSES...............................61
10.6 ACCURACY OF INFORMATION RELATING TO SELLERS........................62
10.7 CERTAIN NOTIFICATIONS..............................................63
10.8 INDEMNIFICATION BY PARENT..........................................63
10.9 INDEMNIFICATION BY THE SHAREHOLDERS................................63
10.10 CONDUCT OF INDEMNIFICATION PROCEEDINGS.............................64
10.11 CONTRIBUTION.......................................................64
ARTICLE 11....................................................................65
11.1 SPECIFIC PERFORMANCE...............................................65
11.2 BINDING AGREEMENT; ASSIGNMENT......................................66
11.3 LAW TO GOVERN......................................................66
11.4 NOTICES............................................................66
11.5 FEES AND EXPENSES..................................................67
11.6 ENTIRE AGREEMENT...................................................68
11.7 WAIVERS............................................................68
11.8 NO THIRD-PARTY BENEFICIARIES.......................................68
11.9 COUNTERPARTS.......................................................68
11.10 HEADINGS...........................................................68
iii
SCHEDULE A
Defined Terms
Term Section
---- -------
"1999 Plan" 4.3(d)
"Affiliate Agreements" 7.5
"Annual Report"
"Average Price" 2.1(a)
"Balance Sheet Date" 4.7
"Balance Sheet" 4.5
"Break-up Event" 8.3(b)
"Break-up Fee" 8.3(a)
"Centocor Research Agreement" 3.1(a)
"CERCLA" 4.15(b)
"Closing Amount" 2.3
"Closing Date" 3.1(a)
"Closing Period" 3.1(a)
"Closing"
"Code" Preamble
"Common Stock" Preamble
"Company Documents" 4.4(a)
"Company Material Adverse Effect"" 4.1(a)
"Company Stock Options" 2.1(a)
"Company" Preamble
"Consulting Agreement" 2.6
"Covered Proceeding" 9.4(a)
"Effective Time" 1.2
"Employee Benefit Plans" 4.16(a)
"Employee-Scientists" 2.5
"Employment Agreement" 2.5
"Environmental Complaint" 4.15(b)
"ERISA" 4.16(a)
"Exchange Agent" 2.6(a)
"Exchange Fund" 2.6(a)
"Exchange Ratio" 2.1(a)
"Financial Statements" 4.5
"GCL" 1.1
"Hazardous Discharge" 4.15(b)
"Hazardous Substance" 4.15(g)
"HEWM" 3.2(l)
1
Term Section
---- -------
"Historic Financials" 8.2
"Indemnifying Party" 10.10
"Indemnitee" 9.4(a)
"Indemnitor" 9.4(a)
"Intellectual Property" 4.9(f)
"Knowledge of any Major Shareholders" 4
"Liability Cushion" 9.3(e)
"Licenses and Approvals" 4.12(b)
"Liens" 4.4(b)
"Major Shareholders" 4
"Material Litigation" 8.9(b)
Merger Consideration Preamble
"MSDS" 2.1(a)
"Option Reserve" 2.1(a)
"OSHA" 4.15(e)
"Other Shareholder" 9.5(b)
"Parent" Preamble
"Parent Common Stock" 2.1(b)
"Parent Shares" 2.1(a)
"Periodic Reports" 5.4(c)
"Properties" 4.10(a)
"Proprietary Products" 4.9(d)
"Proprietary Rights Agreements" 4.9(c)
"Prospectus" 10.4(a)
"Proxy Statement" 5.4(c)
"Purchase Price" 2.1
"Purchaser's Questionnaire" 2.5
"Registration Statement" 10.4(a)
"Representatives" 2.2
"Responsible Shareholder" 9.5(b)
"Returns" 4.17(a)
"Reverse Break-up Event" 8.10(b)
"Reverse Break-up Fee" 8.9(a)
"Rule 144" 5.4(a)
"Securities Act" 5.4(a)
"Shareholder Documents" 5.2
"Shareholder" Preamble
"Shareholder Voting Agreements" Preamble
"Shares" Preamble
"Short Period" Preamble
2
Term Section
---- -------
"Sub" Preamble
"Sub Common Stock" Preamble
"Surviving Corporation" 1.1
"Tax" 4.17(b)
"Taxable Year" 2.1(c)
"Taxing Authority" 4.17(b)
"Termination Date" 11.1(b)
3
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 TO THE AGREEMENT AND PLAN OF MERGER (the "Amendment")
is made as of September 22, 2000 by and among Alexion Pharmaceuticals, Inc., a
Delaware corporation ("Parent"), PI Acquisition Company, Inc., a California
corporation and a wholly owned subsidiary of Parent ("Sub"), Prolifaron Inc., a
California corporation (the "Company"), and certain major shareholders of the
Company (the "Major Shareholders").
W I T N E S S E T H:
WHEREAS, Parent, Sub, the Company and the Major Shareholders entered into
the Agreement and Plan of Merger on September 22, 2000 (the "Agreement") and the
parties thereto delivered all documents required thereunder to close such
merger, to provide for the merger (the "Merger") of Sub with and into the
Company upon the terms and subject to the conditions set forth therein, except
that the original certificates and related documents submitted for filing on
September 22nd in the State of California were not recorded as filed on such
date, and the failure of such documents to be accepted for filing on such date
was not the fault of any party; and
WHEREAS, the determination of the amount of the Merger Consideration in
the Agreement is based on the Effective Time occurring on either September 22nd
or 25th or thereafter, but the State of California will make the Effective Time
of the Merger on Saturday, September 23, 2000, a date that was not specifically
accounted for in the determination of the Merger Consideration; and
WHEREAS, Parent, Sub, the Company and the Major Shareholders desire to
amend the Agreement in order to give effect to the parties intention that if the
closing of the Merger occurs on September 22, 2000, and if the Effective Time is
prior to Monday, September 25th, the Merger Consideration will be 400,000 shares
of Parent Common Stock and the pricing of the Merger will not change;
NOW, THEREFORE, in consideration of the foregoing and the respective
agreements set forth herein and in the Agreement, the parties hereto agree as
follows:
1. Merger Consideration. The definition of "Merger Consideration" set
forth in Section 2.1(a) of the Agreement is hereby amended in its entirety to
read as follows:
The "Merger Consideration" shall be the aggregate number of shares of
Parent Common Stock to be issued in respect of the Shares and the
aggregate number of shares of Parent Common Stock issuable upon exercise
of all Company Stock Options, determined by dividing $36.0 million by the
Average Price (defined below); provided, that the number of shares of
Parent Common Stock to comprise the Merger Consideration shall not be less
than 400,000 shares (except in accordance with the next proviso) nor more
than 500,000 shares;
1
provided, further, that (i) if the Effective Time occurs on or prior to
September 23, 2000 and the Average Price shall be greater than $99.00,
then the Merger Consideration shall equal 400,000 shares of Parent Common
Stock; and (ii) if the Effective Time occurs after September 23, 2000 and
the Average Price shall be greater than $99.00, then Parent may elect to,
and the Company shall (x) consummate the Merger with Merger Consideration
equal to the number of shares of Parent Common Stock equal to $39.6
million divided by the Average Price or (y) not consummate the Merger, in
which case the Company is also not obligated to consummate the Merger,
except that if the Effective Time occurs on September 25, 2000 and the
Average Price shall be greater than $99.00, then the Merger Consideration
shall equal 394,000 shares of Parent Common Stock; provided, further, that
if the Average Price shall be less than $64.80, then (i) Parent may at its
own discretion increase the number of shares of Parent Common Stock above
500,000 shares to provide a total value, based on the Average Price, of
$32.4 million, and if Parent shall determine not to so increase the number
of shares then (ii) the Company may determine not (and shall not be
obligated) to consummate the Merger in which case Parent is also not
obligated to consummate the Merger.
2. Average Price. The definition of "Average Price" set forth in Section
2.1(a) of the Agreement is hereby amended in its entirety to read as follows:
"Average Price" means the simple average of closing prices of Parent
Common Stock for the 10 trading days ending on the fourth trading day
prior to the Effective Time.
3. Defined Terms. Capitalized terms used in this Amendment but not defined
shall have the meanings ascribed to them in the Agreement.
4. Effectiveness; Continuity of Terms. Pursuant to Section 11.6 of the
Agreement, this Amendment shall be effective when executed by Parent, Sub, the
Company and each of the Major Shareholders. All other terms and provisions of
the Agreement shall remain in full force and effect.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same document.
[Rest of Page Intentionally Blank]
2
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first above written.
PROLIFARON, INC. ALEXION PHARMACEUTICALS, INC.
By: /s/ Xxxxxxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxx
----------------------------- ----------------------------
Name: Xxxxxxxxx Xxxxxxx Name: Xxxxxxx Xxxx
Title: Title: President
SHAREHOLDERS: PI ACQUISITION COMPANY, INC.
/s/ Xxxx X. Xxxxxx By: /s/ Xxxxxxx Xxxxxxx
----------------------------- ----------------------------
Xxxx X. Xxxxxx Name: Xxxxxxx Xxxxxxx
Title: President
/s/ Xxxxxxx Xxxx Xxxxxx /s/ Xxxxx X. Xxxxxxx
----------------------------- ----------------------------
Xxxxxxx Xxxx Xxxxxx Xxxxx X. Xxxxxxx
/s/ Xxxxxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxx
----------------------------- ----------------------------
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxx /s/ Xxxxxx Xxxxxx
----------------------------- ----------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxxxx
----------------------------
Xxxxxx Xxxxxxxxxx
[Signature Page to Amendment of Agreement and Plan of Merger]
3
