EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
AVANT IMMUNOTHERAPEUTICS, INC.,
AVANT ACQUISITION CORP.
and
MEGAN HEALTH, INC.
Dated as of November 20, 2000
TABLE OF CONTENTS
PAGE
ARTICLE 1. THE MERGER........................................................2
1.1 The Merger........................................................2
1.2 The Closing.......................................................2
1.3 Effective Time....................................................2
1.4 Ancillary Agreements..............................................2
1.5 Actions at the Closing............................................2
1.6 Stockholders' Representative......................................3
ARTICLE 2. CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION....................................6
2.1 Charter...........................................................6
2.2 Bylaws............................................................6
ARTICLE 3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION...............6
3.1 Directors of Surviving Corporation................................6
3.2 Officers of Surviving Corporation.................................6
ARTICLE 4. CONVERSION OF STOCK...............................................6
4.1 Outstanding Common Stock of Acquisition Sub.......................6
4.2 Conversion of Megan Securities....................................6
4.3 Exchange of Certificates Representing Megan Common
Stock and Megan Preferred Stock.................................9
4.4 Return of Exchange Fund..........................................11
4.5 Lost or Stolen Certificates......................................11
4.6 Escrow...........................................................11
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF MEGAN..........................12
5.1 Existence; Good Standing; Authority..............................12
5.2 Authorization, Validity and Effect of Agreements.................13
5.3 Capitalization...................................................13
5.4 Subsidiaries.....................................................14
5.5 Other Interests..................................................14
5.6 No Violation.....................................................14
5.7 Financial Statements.............................................15
5.8 Undisclosed Liabilities..........................................15
5.9 Litigation.......................................................16
5.10 Absence of Certain Changes.......................................16
5.11 Tax Matters......................................................17
5.12 Books and Records................................................18
5.13 Assets...........................................................18
5.14 Owned Real Property..............................................19
5.15 Real Property Leases.............................................19
(i)
5.16 Intellectual Property............................................19
5.17 Inventory........................................................23
5.18 Contracts........................................................23
5.19 Accounts Receivable..............................................25
5.20 Powers of Attorney...............................................25
5.21 Insurance........................................................25
5.22 Warranties.......................................................26
5.23 Compliance with Law; Permits; Environmental Matters..............26
5.24 Employees........................................................28
5.25 Employee Matters.................................................28
5.26 No Brokers.......................................................29
5.27 Acquisition Proposals............................................29
5.28 Customers and Suppliers..........................................29
5.29 Certain Business Relationships with Affiliates...................29
5.30 Certain Business Practices.......................................30
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF AVANT AND ACQUISITION SUB......30
6.1 Existence; Good Standing; Authority..............................30
6.2 Authorization, Validity and Effect of Agreements.................31
6.3 Capitalization...................................................31
6.4 Subsidiaries.....................................................31
6.5 Authorization of Transaction.....................................31
6.6 Noncontravention.................................................32
6.7 Reports and Financial Statements.................................32
6.8 Absence of Material Adverse Change...............................33
6.9 Investment Company...............................................33
6.10 Litigation.......................................................33
6.11 Interim Operations of the Acquisition Sub........................33
6.12 Brokers' Fees....................................................33
ARTICLE 7. COVENANTS........................................................33
7.1 Acquisition Proposals............................................33
7.2 Conduct of Businesses by AVANT and Megan.........................34
7.3 Reorganization...................................................35
7.4 Listing Application..............................................36
7.5 Filings; Other Action............................................36
7.6 Access to Information; Confidentiality...........................36
7.7 Expenses.........................................................37
7.8 Restricted Securities............................................38
7.9 Registration Rights..............................................39
7.10 Stockholder Consents.............................................42
7.11 Form D...........................................................42
7.12 State Securities Laws............................................42
ARTICLE 8. INDEMNIFICATION..................................................42
8.1 Indemnification by the Stockholders..............................42
(ii)
8.2 Megan Stockholder Claims.........................................43
8.3 Indemnification by AVANT.........................................43
8.4 Indemnification Claims...........................................44
8.5 Survival of Representations and Warranties.......................46
8.6 Limitations......................................................47
ARTICLE 9. CONDITIONS.......................................................49
9.1 Conditions to Each Party's Obligation to Effect the Merger.......49
9.2 Conditions to Obligations of Megan to Effect the Merger..........49
9.3 Conditions to Obligation of AVANT and Acquisition Sub
to Effect the Merger...........................................50
ARTICLE 10. TERMINATION; AMENDMENT; WAIVER...................................51
10.1 Termination......................................................51
10.2 Effect of Termination............................................52
ARTICLE 11. GENERAL PROVISIONS...............................................52
11.1 Notices..........................................................52
11.2 Assignment; Binding Effect; Benefit..............................53
11.3 Entire Agreement.................................................54
11.4 Amendment........................................................54
11.5 Governing Law....................................................54
11.6 Counterparts.....................................................54
11.7 Headings.........................................................54
11.8 Interpretation...................................................54
11.9 Waivers..........................................................55
11.10 Incorporation....................................................55
11.11 Severability.....................................................55
11.12 Enforcement of Agreement.........................................55
11.13 Certain Definitions..............................................55
SCHEDULES
Schedule A........Committed Stockholders
Schedule B........Principal Stockholders
Schedule C........Washington University Intellectual Property Matters
Schedule D........RADS Intellectual Property Matters
Schedule E........Ineligible Stockholders
EXHIBITS
Exhibit A.........Form of Approval of Merger Agreement
Exhibit B.........Form of Principal Stockholders Agreement
Exhibit C.........Form of Escrow Agreement
Exhibit D.........Form of Confidentiality Agreement
Exhibit E.........Opinion of Buyer's Counsel
Exhibit F.........Opinion of Seller's Counsel
(iii)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 20, 2000 by and among AVANT Immunotherapeutics, Inc., a
Delaware corporation ("AVANT"), AVANT Acquisition Corp., a Delaware corporation
("Acquisition Sub"), and Megan Health, Inc., a Delaware corporation ("Megan").
RECITALS
WHEREAS, the boards of directors of AVANT, Acquisition Sub and Megan have
each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which Acquisition Sub would merge
with and into Megan and Megan would become a wholly-owned subsidiary of AVANT
(the "Merger");
WHEREAS, the boards of directors of AVANT, Acquisition Sub and Megan have
determined that the Merger is in the best interests of their respective
companies and presents an opportunity for their respective companies to achieve
long-term strategic and financial benefits, and accordingly have agreed to
effect the transactions provided for herein and in the Ancillary Agreements (as
hereinafter defined) upon the terms and subject to the conditions set forth
herein and therein;
WHEREAS, contemporaneously with the execution of this Agreement, each of
the stockholders of Megan listed on Schedule A hereto (the "Committed
Stockholders") is entering into a separate agreement in the form attached hereto
as EXHIBIT A (each, an "Approval of Merger Agreement") with Megan, AVANT and
Acquisition Sub pursuant to which such Committed Stockholder, among other
things, votes his, her or its shares of common stock, par value $.001 per share,
of Megan (the "Megan Common Stock"), and his, her or its shares of preferred
stock, par value $.001 per share of Megan (the "Megan Preferred Stock") (the
Megan Common Stock and the Megan Preferred Stock together, the "Megan Stock"),
in favor of the Merger. Megan Preferred Stock consists entirely of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock;
WHEREAS, contemporaneously with the execution of this Agreement, the
stockholders of Megan listed on Schedule B hereto, whose representatives or
designees are members of the Board of Directors of Megan, (the "Principal
Stockholders") are entering into an agreement in the form attached hereto as
EXHIBIT B (the "Principal Stockholders Agreement") with Megan, AVANT and
Acquisition Sub; and
WHEREAS, AVANT, Acquisition Sub and Megan desire to make certain
representations, warranties and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1. THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), Acquisition Sub shall be merged
with and into Megan in accordance with this Agreement, and the separate
corporate existence of Acquisition Sub shall thereupon cease. Megan shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"). The Merger shall have the effects specified in Section
259 of the Delaware General Corporation Law (the "DGCL"). Assuming that the
representations of Megan contained in Section 5.3 are true and correct, the
Merger shall constitute a "liquidation" of Megan under Article IV, Section 3 of
the certificate of incorporation of Megan, resulting in the Common Stock
Exchange Ratio and the Preferred Stock Exchange Ratio set forth in Sections
4.2(a) and 4.2(b) hereof.
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at the offices of
Xxxxxxx, Procter & Xxxx LLP, Exchange Place, Boston, Massachusetts, at 9:00
a.m., local time, on the later of (i) December 1, 2000 or (ii) the first
business day following the day on which the last of the conditions set forth in
Article 9 shall be fulfilled or waived in accordance herewith, or at such other
time, date or place as the parties hereto may agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
1.3 EFFECTIVE TIME. If all of the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 10, the parties
hereto shall promptly cause a certificate of merger satisfying the requirements
of the DGCL (the "Certificate of Merger") to be properly executed, verified and
delivered for filing in accordance with the DGCL on the Closing Date. The Merger
shall become effective upon the acceptance for record of the Certificate of
Merger by the Secretary of State of Delaware in accordance with the DGCL or at
such later time which the parties hereto shall have agreed upon and designated
in such filing in accordance with applicable law as the effective time of the
Merger (the "Effective Time").
1.4 ANCILLARY AGREEMENTS. As an inducement to AVANT and Acquisition Sub to
enter into this Agreement, the Approval of Merger Agreements, the Principal
Stockholders Agreement and the Escrow Agreement (as hereinafter defined)
(collectively the "Ancillary Agreements") have been executed contemporaneously
with the execution of this Agreement by Megan, the Committed Stockholders and
the Principal Stockholders, as the case may be.
1.5 ACTIONS AT THE CLOSING. At the Closing:
(a) Megan shall deliver to AVANT and Acquisition Sub the various
certificates, instruments and documents referred to in Section 9.3;
(b) AVANT and the Acquisition Sub shall deliver to Megan the various
certificates, instruments and documents referred to in Section 9.2;
(c) the Surviving Corporation shall file with the Secretary of State
of the State of Delaware the Certificate of Merger;
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(d) AVANT shall deliver a certificate for 1,574,713 shares of AVANT
Common Stock (as hereinafter defined) to a bank trust company or other entity
reasonably satisfactory to Megan appointed by AVANT to act as the exchange agent
(the "Exchange Agent") in accordance with Section 4.3;
(e) AVANT shall deliver a check for $172,764.44 to the Exchange Agent
in accordance with Section 4.3, representing (i) $172,381.98 in cash to be paid
to Ineligible Stockholders (as hereinafter defined) in lieu of AVANT Common
Stock, and (ii) $382.46 in cash to be paid in lieu of Fractional Shares (as
hereinafter defined);
(f) AVANT, the Stockholders' Representatives (as defined below) and
U.S. Bank Trust, N.A. or another nationally recognized financial institution
(the "Escrow Agent") shall execute and deliver the Escrow Agreement attached
hereto as EXHIBIT C (the "Escrow Agreement") and AVANT shall deliver to the
Escrow Agent a certificate for 262,055 shares of AVANT Common Stock,
representing the Escrow Shares (as defined in Section 4.2(d)(ii)), that are
being placed in escrow on the Closing Date pursuant to Section 4.6; and
(g) AVANT shall deliver a check for $100,000 to Xxxxxxxxx
Xxxxxxxx LLP, as trustee, to be placed in a trust account (the "Expense
Account") for the purpose of paying (i) all of the reasonable fees and expenses
incurred by the Stockholders' Representatives in performing their duties under
Section 1.6 hereof and (ii) all of the reasonable fees and expenses incurred by
the Principal Stockholders pursuant to or in connection with the Principal
Stockholders Agreement. The Expense Account shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party, and shall be held and disbursed
solely for the purposes and in accordance with the terms of this Agreement.
1.6 STOCKHOLDERS' REPRESENTATIVES.
The execution of this Agreement, the approval of the Merger by the Megan
Stockholders and the acceptance of the Merger Consideration by the Megan
Stockholders shall constitute approval of the appointment of the Stockholders'
Representatives, who shall have authority to take the actions expressly set
forth below and elsewhere in this Agreement on behalf of the Megan Stockholders.
(a) In order to administer efficiently the implementation of the
Agreement by or on behalf of the Megan Stockholders, Xxxxx X. Xxxxxxxxx and Xxxx
X. Xxxxx, are hereby designated as the co-representatives of the Megan
Stockholders (together, the "Stockholders' Representatives"). All decisions and
actions by the Stockholders' Representatives involving amounts in excess of
$10,000 shall require the joint approval of the Stockholders' Representatives.
Each Stockholders' Representative, acting alone, shall be authorized and
empowered to make decisions and actions with respect to matters involving
amounts less than $10,000. Notices to the Stockholders' Representatives shall be
effective when given pursuant to Section 11.1 to either of the Stockholders'
Representatives. The Principal Stockholders may authorize the payment of
reasonable compensation to the Stockholders' Representatives.
3
(b) The Stockholders' Representatives are hereby authorized (i) to
take all action necessary in connection with the implementation of this
Agreement and the Ancillary Agreements on behalf of the Megan Stockholders, (ii)
to make any determinations with AVANT as required pursuant to Section 4.3, (iii)
to waive any condition to the obligations of the Megan Stockholders to
consummate the transactions contemplated hereby, (iv) to settle any dispute
related to the rights and/or obligations of the Megan Stockholders related to
this Agreement or any Ancillary Agreement, (v) to give and receive all notices
required to be given to the Megan Stockholders under this Agreement or any
Ancillary Agreement, (vi) to take any and all additional action as is
contemplated or reasonably necessary to be taken by or on behalf of the Megan
Stockholders by the terms of this Agreement or any Ancillary Agreement,
including without limitation, pursuant to Article 8 hereof and (vii) to engage
and pay attorneys, accountants, consultants and other professional advisors and
to pay all reasonably necessary expenses in connection with matters relating to
the rights and obligations of the Megan Stockholders under this Agreement and
any Ancillary Agreement.
(c) In the event that one of the Stockholders' Representatives dies,
becomes legally incapacitated or resigns from such position, then the remaining
Stockholders' Representative, after consultation with the Principal
Stockholders, shall fill such vacancy and such newly appointed person shall be
deemed to be one of the Stockholders' Representatives for all purposes of this
Agreement and the Ancillary Agreement; however, no change in the Stockholders'
Representatives shall be effective until AVANT receives notice.
(d) All decisions and actions by the Stockholders' Representatives
shall be binding upon all of the Megan Stockholders, and no Megan Stockholder
shall have the right to object, dissent, protest or otherwise contest the same.
(e) By their adoption of this Agreement, approval of the Merger and
acceptance of the Merger Consideration, the Megan Stockholders agree that:
(i) AVANT and Acquisition Sub shall be able to rely
conclusively on the instructions and decisions of the
Stockholders' Representatives as to any actions required or
permitted to be taken by the Megan Stockholders or the
Stockholders' Representatives hereunder, and no party
hereunder shall have any cause of action against AVANT or
Acquisition Sub for any action taken by AVANT or
Acquisition Sub in reliance upon the instructions or
decisions of the Stockholders' Representatives;
(ii) all actions, decisions and instructions of the
Stockholders' Representatives shall be conclusive and
binding upon all of the Megan Stockholders and no Megan
Stockholder shall have any cause of action against the
Stockholders' Representatives for any action taken,
decision made or instruction given by the Stockholders'
Representatives under this Agreement, except for fraud or
willful breach of this Agreement by the Stockholders'
Representatives;
4
(iii) remedies available at law for any breach of the provisions
of this Section 1.6 are inadequate; therefore, AVANT and
Acquisition Sub shall be entitled to temporary and
permanent injunctive relief without the necessity of
proving damages if AVANT or Acquisition Sub brings an
action to enforce the provisions of this Section 1.6;
(iv) the provisions of this Section 1.6 are independent and
severable, shall constitute an irrevocable power of
attorney, coupled with an interest and surviving death,
granted by the Megan Stockholders to the Stockholders'
Representatives and shall be binding upon the executors,
heirs, legal representatives and successors of each Megan
Stockholder; and
(v) all reasonable fees and expenses incurred by the
Stockholders' Representatives in performing their
duties hereunder and all of the reasonable fees and
expenses incurred by the Principal Stockholders pursuant to
or in connection with the Principal Stockholders Agreement
shall, upon the presentation of reasonable supporting
detail, be paid (A) first, out of the Expense Account and
(B) second, by the Principal Stockholders; PROVIDED,
HOWEVER, that if there any funds remaining in the Expense
Account after the payment of all such fees and expenses,
then such remaining funds shall be distributed to the Megan
Stockholders in accordance with Article IV, Section 3 of
Megan's certificate of incorporation (i.e., as if such
remaining funds were part of the "liquidation" of Megan
resulting from the Merger); PROVIDED FURTHER that if the
Principal Stockholders directly paid any of the fees and
expenses of the Stockholders' Representatives or any of the
fees and expenses of the Principal Stockholders pursuant to
or in connection with the Principal Stockholders Agreement
and there are any Escrow Shares remaining in escrow, and
both AVANT and the Principal Stockholders have satisfied
their indemnification claims pursuant to Article 8 hereof,
the Principal Stockholders shall have the right to such
remaining Escrow Shares to the extent necessary to
reimburse themselves for such fees and expenses.
(f) Notwithstanding anything herein to the contrary, the Stockholders'
Representatives shall have no authority to bind any Principal Stockholder if and
to the extent that any action of the Stockholders' Representatives would create
a direct liability of such Principal Stockholder under the Principal
Stockholders Agreement (as opposed to an indirect liability created by way of a
claim against the Escrow Shares).
5
ARTICLE 2. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1 CHARTER. The certificate of incorporation of Acquisition Sub in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law (the "Surviving Corporation Certificate").
2.2 BYLAWS. The bylaws of Acquisition Sub in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law (the "Surviving Corporation Bylaws").
ARTICLE 3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS OF SURVIVING CORPORATION. The director or directors of
Acquisition Sub immediately prior to the Effective Time shall be the director or
directors of the Surviving Corporation immediately after the Effective Time
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation Certificate and the Surviving Corporation Bylaws.
3.2 OFFICERS OF SURVIVING CORPORATION. The officers of the Surviving
Corporation immediately after the Effective Time shall be as set forth in the
Certificate of Merger.
ARTICLE 4. CONVERSION OF STOCK
4.1 OUTSTANDING COMMON STOCK OF ACQUISITION SUB. At and after the Effective
Time, each share of common stock of Acquisition Sub outstanding immediately
prior to the Effective Time shall be converted into and become one share of the
common stock of the Surviving Corporation.
4.2 CONVERSION OF MEGAN SECURITIES.
(a) Subject to Section 4.2(c) and 4.2(d)(ii), at the Effective Time,
each share of Megan Common Stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Megan, AVANT or Acquisition Sub or the holders of any of the securities of
any of such corporations, be converted into the right to receive 0.08115304
shares (the "Common Stock Exchange Ratio") of common stock, par value $.001, of
AVANT (together with all rights attached to such common stock, "AVANT Common
Stock").
(b) Subject to Section 4.2(c) and 4.2(d)(ii), at the Effective Time,
each share of Megan Preferred Stock issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of Megan, AVANT or Acquisition Sub or the holders of any of the securities
of any of such corporations, be converted into the right to receive 0.763542977
shares (the "Preferred Stock Exchange Ratio") of AVANT Common Stock.
6
(c) Notwithstanding Sections 4.2(a) and 4.2(b), and subject to Section
4.3(g), a holder of Megan Stock shall be deemed ineligible to receive AVANT
Common Stock in exchange for such holder's shares of Megan Stock unless such
holder completes and delivers to Megan by the Closing Date an Accredited
Investor Questionnaire (as hereinafter defined) pursuant to which such holder
represents that he, she or it is an "Accredited Investor" pursuant to Rule 501
of the Securities Act of 1933, as amended (the "Securities Act"). Accordingly,
each holder of Megan Stock who either (i) has not completed and delivered to
Megan an Accredited Investor Questionnaire by the Closing Date or (ii) has
completed and delivered to Megan an Accredited Investor Questionnaire pursuant
to which such holder has represented that he, she or it is NOT an "Accredited
Investor" pursuant to Rule 501 of the Securities Act (each holder in either
clause (i) or (ii), an "Ineligible Stockholder") shall be deemed ineligible to
receive AVANT Common Stock in exchange for such holder's shares of Megan Stock,
and in lieu thereof shall be entitled to receive in the Merger cash in an amount
equal to the product of (X) the number of shares of AVANT Common Stock such
holder would otherwise be entitled to receive pursuant to this Section 4.2 and
(Y) $9.54. For purposes of this Agreement, an "Accredited Investor
Questionnaire" shall mean a questionnaire provided to the holders of Megan
Stock, by which such stockholder indicates whether or not such holder is an
"Accredited Investor" within the definition set forth in Rule 501 of the
Securities Act.
(d) (i) The aggregate number of shares of AVANT Common Stock into
which the shares of Megan Stock are converted pursuant to
this Section 4.2 is referred to herein as the "AVANT Merger
Shares" and the number of AVANT Merger Shares minus the
Escrow Shares is referred to herein as the "Initial
Shares." The term "Merger Consideration" shall mean,
collectively, the AVANT Merger Shares, the cash to be
delivered to Ineligible Stockholders pursuant to Section
4.2(c) (the "Cash Consideration") and the cash to be
delivered in lieu of Fractional Shares (as defined herein)
pursuant to Section 4.3(e).
(ii) Stockholders of record of Megan immediately prior to the
Effective Time (the "Megan Stockholders") shall be entitled
to receive, in the aggregate, such number of shares of
AVANT Common Stock as is equal to the total number of AVANT
Merger Shares into which their shares of Megan Stock are
converted pursuant to this Section 4.2; PROVIDED THAT such
number of shares of AVANT Common Stock as is equal to
14.2672% of the total number of AVANT Merger Shares,
rounded to the nearest whole number (the "Escrow Shares"),
shall be set aside, PRO RATA, from the AVANT Merger Shares
otherwise distributable to each of the Megan Stockholders
entitled to receive AVANT Merger Shares and deposited in
the escrow described in Section 4.6 for the purposes of
securing the indemnification obligations of the Megan
Stockholders set forth in this Agreement and the Principal
Stockholders Agreement.
(e) As a result of the Merger and without any action on the part of
the holders thereof, all shares of Megan Stock shall cease to be outstanding,
shall be canceled and retired and shall cease to exist and each holder of a
certificate (a "Certificate" and, collectively, the "Certificates") representing
any shares of Megan Stock shall thereafter cease to have any rights with respect
to such shares of Megan Stock, except, where applicable, the right to receive,
7
without interest, the appropriate Merger Consideration and dividend(s) payable
in accordance with Section 4.3(c), if any, upon the surrender of such
Certificate.
(f) (i) At the Effective Time, each outstanding option to purchase
Megan Common Stock (a "Megan Stock Option") granted under
Megan's Stock Option Plan (the "Megan Stock Option Plan")
shall be assumed by AVANT and deemed to constitute an
option to acquire, on the same terms and conditions as were
applicable under such Megan Stock Option prior to the
Effective Time, that number of whole shares of AVANT Common
Stock equal to the product of the number of shares of Megan
Common Stock covered by such Megan Stock Option immediately
prior to the Effective Time multiplied by the Common Stock
Exchange Ratio (rounded down to the nearest whole number of
shares of AVANT Common Stock), provided that following such
assumption and adjustment, (A) all references to Megan
shall be deemed to be references to AVANT and (B) the
exercise price per share of AVANT Common Stock under each
Megan Stock Option shall be equal to the exercise price per
share of Megan Common Stock under such Megan Stock Option
immediately prior to the Effective Time divided by the
Common Stock Exchange Ratio (rounded down to the nearest
cent). Effective as of the Effective Time, all such Megan
Stock Options shall become fully vested in accordance with
the terms of the Megan Stock Option Plan.
(ii) As soon as practicable after the Effective Time, AVANT
shall deliver to each holder of an outstanding Megan Stock
Option an appropriate notice setting forth such holder's
rights pursuant thereto, and such Megan Stock Option shall
continue in effect on the same terms and conditions
(including antidilution provisions). AVANT shall take such
actions within its control that are reasonably necessary to
ensure that each Megan Stock Option that qualifies as an
incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"),
prior to the Effective Time will continue to qualify as an
incentive stock option under Section 422 of the Code.
(iii) AVANT shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of AVANT Common
Stock for delivery pursuant to the terms set forth in this
Section 4.2(f).
(iv) Subject to any applicable limitations under the Securities
Act, as soon as practicable after the Effective Time, AVANT
shall file a registration statement on Form S-8 (or any
successor form) with respect to the shares of AVANT Common
Stock issuable upon exercise of the Megan Stock Options and
shall use all reasonable efforts to maintain the
effectiveness of such registration statement (and maintain
the current status of the prospectus relating thereto) for
so long as any Megan Stock Options shall remain
outstanding.
(v) Megan will take all necessary actions pursuant to the Megan
Stock Option Plan and the instruments evidencing the Megan
Stock Options to provide for the conversion and assumption
of the Megan Stock Options in accordance with this Section
4.2(f).
(g) In the event that subsequent to the date of this Agreement, but
prior to the Effective Time, the outstanding shares of AVANT Common Stock or the
outstanding shares of Megan Stock shall have been increased, decreased, changed
into or exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification,
8
stock dividend, stock split, reverse stock split, or other changes in AVANT's or
Megan's capitalization (a "Recapitalization"), as the case may be, then an
appropriate and proportionate adjustment shall be made to the Exchange Ratios so
that each Megan Stockholder and each holder of options to acquire Megan Common
Stock outstanding immediately prior to the Effective Time shall receive,
pursuant to this Section 4.2, the equivalent equity interest in AVANT that such
Megan Stockholder or holder of options or warrants of Megan would have received
had no such Recapitalization occurred.
4.3 EXCHANGE OF CERTIFICATES REPRESENTING MEGAN STOCK.
(a) As of the Effective Time, AVANT shall deposit, or shall cause to
be deposited, with the Exchange Agent, for the benefit of the holders of shares
of Megan Stock, for exchange in accordance with this Article 4, (i) a
certificate representing the Initial Shares, (ii) the Cash Consideration, and
(iii) cash in lieu of fractional shares of AVANT Common Stock (the "Fractional
Shares") to be paid pursuant to this Section 4.3, in exchange for outstanding
shares of Megan Stock (the Initial Shares, the Cash Consideration and the cash
in lieu of Fractional Shares shall hereinafter be referred to as the "Exchange
Fund").
(b) Promptly after the Effective Time, AVANT shall cause the Exchange
Agent to mail to each holder of record of a Certificate or Certificates a notice
and letter of transmittal which shall advise such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent such
Certificates in exchange for Initial Shares or Cash Consideration, as
applicable, plus cash in lieu of Fractional Shares, and shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as AVANT may reasonably specify.
Upon surrender of a Certificate for cancellation to the Exchange Agent and
delivery of such letter of transmittal, duly executed and completed in
accordance with the instructions thereto to the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor (X) Initial
Shares or Cash Consideration, as applicable, issuable or payable to such holder
pursuant to Section 4.2, and (Y) a check for the cash to be paid in lieu of
Fractional Shares, if any, due such holder pursuant to Section 4.3(e), plus the
amount of any dividends or distributions, pursuant to Section 4.3(c), if any,
after giving effect to any required withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the Cash Consideration, the amount payable in lieu of Fractional Shares, if any,
or on the dividends or distributions, if any, due and payable to holders of
Certificates pursuant to this Section 4.3. In the event of a transfer of
ownership of Megan Stock which is not registered in the stock transfer records
of Megan, certificates representing the proper number of Initial Shares or, in
the case of Ineligible Stockholders, a check for the appropriate amount of Cash
Consideration, together with a check for the cash to be paid in lieu of
Fractional Shares, if any, pursuant to Section 4.3(e), plus, to the extent
applicable, the amount of any dividends or distributions, if any, due and
payable pursuant to Section 4.3(c), may be issued to such a transferee if the
Certificate representing shares of such Megan Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
(c) Notwithstanding any other provisions of this Agreement, dividends
or other distributions on shares of AVANT Common Stock after the Effective Time
with respect to
9
any shares of Megan Stock represented by a Certificate that has not been
surrendered for exchange shall be paid only as provided herein. Following
surrender of any such Certificate, the holder thereof shall be entitled, subject
to the provisions and effect of applicable abandoned property, escheat or
similar laws, to receive for the whole shares of AVANT Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of AVANT
Common Stock and not paid, less the amount of any withholding taxes which may be
required thereon; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such shares of AVANT Common Stock, less the amount of any withholding
taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers on
the stock transfer books of Megan of the shares of Megan Stock which were
outstanding immediately prior to the Effective Time and if, after the Effective
Time, Certificates are presented for transfer, they shall be canceled against
delivery of the Merger Consideration as hereinabove provided.
(e) No Fractional Shares shall be issued pursuant hereto. In lieu of
the issuance of any Fractional Shares pursuant to this Agreement, each holder of
Megan Stock upon surrender of a Certificate for exchange shall be paid an amount
in cash (without interest), rounded to the nearest cent, determined by
multiplying (i) $9.54 by (ii) the fractional amount of the shares of AVANT
Common Stock, which such holder would otherwise be entitled to receive under
this Article 4.
(f) All Merger Consideration issued or paid, as the case may be, upon
the surrender for exchange of Certificates representing shares of Megan Stock in
accordance with the terms of this Article 4 shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of Megan
Stock exchanged for Merger Consideration theretofore represented by such
Certificates.
(g) If, in connection with an Ineligible Stockholder's surrender for
exchange of Certificates representing shares of Megan Stock in accordance with
this Article 4 during the three (3) month period following the Effective Time,
such Ineligible Stockholder provides documentation evidencing the fact that he,
she or it is actually an Accredited Investor, AVANT shall be obligated to
exchange the cash it had deposited in the Exchange Fund and reserved for such
stockholder for AVANT Common Stock to be paid to such stockholder. The number of
shares of AVANT Common Stock to be so exchanged shall be equal to the number of
shares of AVANT Common Stock such Megan Stockholder would have been entitled to
receive pursuant to Section 4.2 if such Megan Stockholder had represented that
he, she or it was an Accredited Investor prior to the Closing Date. If such
Megan Stockholder provides such documentation after the three (3) month period
following the Effective Time, then AVANT shall have the right but not the
obligation to give such Megan Stockholder shares of AVANT Common Stock (the
number of shares to be determined in accordance with the preceding sentence)
rather than cash upon surrender of his, her or its Certificates. The Exchange
Agent shall be obligated to return the cash reserved for such Megan Stockholder
to AVANT and to deliver the AVANT Common Stock in lieu of cash to such Megan
Stockholder.
10
(h) Approximately two (2) months following the Effective Time, AVANT
shall use commercially reasonable efforts to cause the Exchange Agent to send a
follow-up notice to those Megan Stockholders who have not tendered their
Certificates. AVANT shall also use commercially reasonable efforts to cause the
Exchange Agent to re-mail returned notices for which a new address was provided.
The parties shall cooperate to ensure that any questions and discrepancies with
respect to tendered Certificates and Accredited Investor Questionnaires are
timely resolved.
4.4 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund (including
any Initial Shares, Cash Consideration and any cash payable in lieu of
Fractional Shares) that remains unclaimed by the former stockholders of Megan
one year after the Effective Time shall be returned to AVANT (provided that
AVANT shall issue such shares of AVANT Common Stock and/or pay such cash in
accordance with this Article 4 to former stockholders of Megan who thereafter
surrender their Certificates), subject to the provisions and effect of
applicable abandoned property, escheat or similar laws. Any former stockholders
of Megan who have not theretofore complied with this Article 4 shall thereafter
look only to AVANT for issuance or payment of that portion of their Megan Stock
representing Initial Shares or Cash Consideration (for Ineligible Stockholders)
and cash in lieu of Fractional Shares, if any, as determined pursuant to this
Agreement, without any interest THEREON. None of XXXXX, Xxxxx, the Exchange
Agent, the Stockholders' Representatives or any other person shall be liable to
any former holder of shares of Megan Stock for any shares of stock or cash
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
4.5 LOST OR STOLEN CERTIFICATES. In the event any Certificate 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, if
required by AVANT, the posting by such person of a bond in such reasonable
amount as AVANT may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent or AVANT will
issue in exchange for such lost, stolen or destroyed Certificate the Initial
Shares or Cash Consideration (for Ineligible Shareholders),and cash in lieu of
Fractional Shares, if any, to which such person is entitled under Section 4.3(b)
(and to the extent applicable, dividends and distributions payable pursuant to
Section 4.3(c)).
4.6 ESCROW.
(a) On the Closing Date, AVANT shall deliver to the Escrow Agent a
certificate (issued in the name of the Escrow Agent or its nominee) representing
the Escrow Shares. The Escrow Shares shall be held by the Escrow Agent for the
purposes of securing the indemnification obligations of the Megan Stockholders
set forth in this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement pursuant to the terms thereof and this Agreement. The
Escrow Shares shall be held as a trust fund and shall not be subject to any
lien, attachment, trustee process or any other judicial process of any creditor
of any party, and shall be held and disbursed solely for the purposes and in
accordance with the terms of this Agreement and the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the Merger by
the Megan Stockholders shall constitute approval of the Escrow Agreement and of
all of the
11
arrangements relating thereto, including without limitation the placement of the
Escrow Shares in escrow and the appointment of the Stockholders' Representatives
to deal with all matters relating to the Escrow Agreement and the Escrow Shares.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF MEGAN
Megan represents and warrants to AVANT that the statements contained in
this Article 5 are true and correct, except as set forth in the disclosure
letter delivered at or prior to the execution hereof to AVANT (the "Megan
Disclosure Letter"). The Megan Disclosure Letter shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
5, and the disclosures in any paragraph of the Megan Disclosure Letter shall
qualify only the corresponding paragraph in this Article 5. For purposes of this
Article 5 the phrase "to the knowledge of Megan" or any phrase of similar import
shall be deemed to refer to the actual knowledge of the executive officers of
Megan, as well as any other knowledge which such executive officers would have
possessed had they made reasonable inquiry of appropriate employees and agents
of Megan with respect to the matter in question.
5.1 EXISTENCE; GOOD STANDING; AUTHORITY.
(a) Megan is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. Megan is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which the transaction of its business makes
such qualification necessary, except where the failure to be so licensed or
qualified would not reasonably be expected to have a material adverse effect on
the business, assets, prospects, results of operations or financial condition of
Megan (other than changes that are the effect of economic factors affecting the
economy as a whole or changes that are the effect of factors generally affecting
the specific markets in which Megan competes) (a "Megan Material Adverse
Effect"); PROVIDED, HOWEVER, that a "Megan Material Adverse Effect" shall not
include any adverse effect primarily arising out of or resulting primarily from
actions contemplated by the parties in connection with, or that is primarily
attributable to, the announcement or performance of this Agreement and the
transactions contemplated hereby. Megan has all requisite corporate power and
authority to carry on its business as now conducted.
(b) Copies of the Megan certificate of incorporation and Megan bylaws
(and in each such case, all amendments thereto) have previously been delivered
to AVANT and its counsel and such copies are true, correct and complete.
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
(a) Megan has the requisite power and authority to enter into and
perform the transactions contemplated hereby and to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party. The Board of
Directors of Megan has unanimously approved this Agreement, the Merger, the
Ancillary Agreements to which Megan is a party and the other transactions
contemplated by this Agreement and has resolved to recommend that the holders of
Megan Stock adopt and approve this Agreement. As of the date hereof, all of the
directors and executive officers of Megan and the other Committed Stockholders
have indicated that they presently intend to vote all Megan Stock which they own
or the voting of which they control to
12
approve the adoption of this Agreement and the Merger. The Committed
Stockholders have the requisite number of votes of each class or series of Megan
Stock entitled to vote thereon to approve such transactions. No other approval
by any class or series of Megan Stock or by any other single Megan Stockholder
or group of Megan Stockholders is required to approve the Merger, this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby. The execution by Megan of this Agreement and the Ancillary Agreements
to which it is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of Megan. Assuming the written consent of the Committed Stockholders
has been obtained in accordance with Section 7.10, this Agreement constitutes
and the Ancillary Agreements to which Megan is a party (when executed and
delivered pursuant hereto) will constitute, the valid and legally binding
obligations of Megan, enforceable against Megan in accordance with their
respective terms, and will not require prior notice to or the convening of a
meeting of the stockholders of Megan to consider and vote upon the Merger and
the other transactions contemplated hereby.
5.3 CAPITALIZATION. The authorized capital stock of Megan consists of (a)
5,301,659 shares of Megan Common Stock, of which, as of the date of this
Agreement, 1,016,601 shares are issued and outstanding, no shares are held in
the treasury of Megan, and 620,635 shares are reserved for issuance under the
Megan Stock Option Plan, (b) 2,321,254 shares of Megan Preferred Stock, of which
(i) 687,345 shares have been designated as Series A Preferred Stock, all of
which were issued and outstanding as of the date of this Agreement, (ii) 332,250
shares have been designated as Series B Preferred Stock, all of which were
issued and outstanding as of the date of this Agreement, (iii)1,000,000 shares
have been designated as Series C Preferred Stock, all of which were issued and
outstanding as of the date of this Agreement and (iv) 301,659 shares have been
designated as Series D Preferred Stock, all of which were issued and outstanding
as of the date of this Agreement. The Merger shall constitute a "liquidation" of
Megan under Article IV, Section 3 of the certificate of incorporation of Megan
and, accordingly, upon the Merger, each share of Preferred Stock will be
entitled to receive in preference to the holders of any other stock of Megan, an
amount equal to $6.63 per share, then the holders of Megan Common Stock will be
entitled to receive an amount equal to $.12 per share, and then any remaining
assets will be distributed ratably to the holders of the Megan Common Stock and
the Preferred Stock on an as-converted basis. Insofar as one share of AVANT
Common Stock has a value of $9.54, the foregoing provisions result in the Common
Stock Exchange Ratio and the Preferred Stock Exchange Ratio, as set forth in
Sections 4.2(a) and 4.2(b) respectively. Section 5.3(i) of the Megan Disclosure
Letter sets forth a complete and accurate list of (i) all stockholders of Megan,
indicating the number and class or series of Megan Stock held by each
stockholder and (for Megan Preferred Stock) the number of shares of Megan Common
Stock (if any) into which such shares of Megan Preferred Stock are convertible,
(ii) all outstanding Megan Stock Options, indicating (A) the holder thereof, (B)
the number and class or series of shares of Megan Stock subject to each Megan
Stock Option, (C) the exercise price, date of grant, vesting schedule and
expiration date for each Megan Stock Option, and (D) any terms regarding the
acceleration of vesting, and (iii) all stock option plans and other stock or
equity-related plans of Megan. All of the issued and outstanding shares of Megan
Stock are, and all shares of Megan Stock that may be issued upon exercise of
Megan Stock Options will be (upon issuance in accordance with their terms), duly
authorized, validly issued, fully paid, non-assessable and free of all
preemptive rights. Other than the Megan Stock Options listed in Section 5.3(ii)
of the Megan Disclosure Letter, there are no outstanding or authorized options,
warrants, rights, agreements or commitments to which Megan is a party or which
are binding upon Megan
13
providing for the issuance or redemption of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Megan. Other than the agreements listed and described in Section
5.3(iii) of the Megan Disclosure Letter, there are no agreements to which Megan
is a party or by which it is bound with respect to the voting (including without
limitation voting trusts or proxies), registration under the Securities Act, or
sale or transfer (including without limitation agreements relating to preemptive
rights, rights of first refusal, co-sale rights or "drag-along" rights) of any
securities of Megan. To the knowledge of Megan, except as disclosed in Section
5.3 of the Megan Disclosure Letter, there are no agreements among other parties,
to which Megan is not a party and by which it is not bound, with respect to the
voting (including without limitation voting trusts or proxies) or sale or
transfer (including without limitation agreements relating to rights of first
refusal, co-sale rights or "drag-along" rights) of any securities of Megan. All
of the issued and outstanding shares of Megan Stock were issued in compliance
with applicable federal and state securities laws.
5.4 SUBSIDIARIES. Megan has no subsidiaries and does not control, directly
or indirectly, or have any loans, to any corporation, partnership, joint
venture, association, business or other entity.
5.5 OTHER INTERESTS. Except as set forth in Section 5.5 of the Megan
Disclosure Letter, Megan does not own directly or indirectly any interest or
investment (whether equity or indebtedness for borrowed money of $10,000 or more
per interest or investment, or $25,000 in the aggregate) in any corporation,
partnership, joint venture, business, trust or other entity (other than
investments in short-term investment securities).
5.6 NO VIOLATION. Except as set forth in Section 5.6 of the Megan
Disclosure Letter, neither the execution, delivery and performance by Megan of
this Agreement or the Ancillary Agreements to which it is a party, nor the
consummation by Megan of the transactions contemplated by this Agreement and the
Ancillary Agreements to which it is a party in accordance with their respective
terms, will: (i) violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under the Megan certificate of incorporation
or the Megan bylaws; (ii) result in a breach or violation of, a default under,
or the triggering of any payment or other material obligation pursuant to, or
accelerate vesting under, any stock option plan or option issued by Megan or any
grant or award under any of the foregoing; (iii) violate, conflict with or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Megan under, or result in being declared void, voidable or without further
binding effect pursuant to, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment or obligation
to which Megan is a party, or by which Megan is bound or affected, except for
any of the foregoing matters which, individually or in the aggregate, would not
reasonably be expected to have a Megan Material Adverse Effect and would not
prevent or materially delay the consummation of the transactions contemplated
hereby or by the Ancillary Agreements; (iv) violate, conflict with or result in
a breach of any laws of the United States or
14
any state or other jurisdiction applicable to Megan, except for any of the
foregoing matters which would not reasonably be expected to have a Megan
Material Adverse Effect; or (v) other than the filings provided for in Article 1
hereof and any filings required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act or applicable state securities
and "blue sky" laws, require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, except where the failure to obtain any such consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, would not reasonably be expected to have a Megan
Material Adverse Effect and would not prevent or materially delay the
consummation of the transactions contemplated hereby or by the Ancillary
Agreements.
5.7 FINANCIAL STATEMENTS. Megan has provided to AVANT (a) the audited
consolidated balance sheets and statements of income, changes in stockholders'
equity and cash flows of Megan as of and for each of the last three fiscal
years, accompanied by a signed report of Xxxxxx Xxxxxxxx LLP, independent public
accountants; and (b) the unaudited consolidated balance sheet and statements of
income, changes in stockholders' equity and cash flows as of and for the nine
months ended as of September 30, 2000 (the "Most Recent Balance Sheet Date"),
certified by Megan's Chief Executive Officer, Secretary and Treasurer. Except as
listed in Section 5.7 of the Megan Disclosure Letter such financial statements
(collectively, the "Financial Statements") have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby (except that the
unaudited Financial Statements do not contain all of the notes required under
GAAP), fairly present the financial condition, results of operations and cash
flows of Megan as of the respective dates thereof and for the periods referred
to therein and are consistent with the books and records of Megan. Nothing has
come to the attention of Megan since the date of the Most Recent Balance Sheet
(as defined below) which would indicate that such financial statements were not
true and representative of Megan's financial position in all material respects
as of the Most Recent Balance Sheet Date. The Financial Statements are attached
as an exhibit to the Megan Disclosure Letter.
5.8 UNDISCLOSED LIABILITIES. Except as listed in Section 5.8 of the Megan
Disclosure Letter, Megan has no liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated and whether due or to
become due), except for (a) liabilities shown on the balance sheet referred to
in clause (b) of Section 5.7 (the "Most Recent Balance Sheet"), (b) liabilities
which have arisen since the Most Recent Balance Sheet Date in the ordinary
course of business and which are similar in nature and amount to the liabilities
which arose during the comparable period of time in the immediately preceding
fiscal period and (c) contractual and other liabilities incurred in the ordinary
course of business which are not required by GAAP to be reflected on a balance
sheet.
5.9 LITIGATION. Except as set forth in the Megan Disclosure Letter, there
are (i) no continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which Megan is a party or by which it is bound or, to
the knowledge of Megan, to which any of Megan's directors, officers, employees
or agents, in such capacity, is a party or, to the knowledge of Megan,
15
by which any of them is bound, and (ii) no actions, suits, investigations or
proceedings pending against Megan or, to the knowledge of Megan, against any of
Megan's directors, officers, employees or agents, in such capacities, or, to the
knowledge of Megan, threatened against Megan or against any of its directors,
officers, employees or agents, in such capacities, at law or in equity, or
before or by any federal, state or local commission, board, bureau, agency or
instrumentality, that would, individually or in the aggregate, reasonably be
expected to have a Megan Material Adverse Effect.
5.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section 5.10 of the
Megan Disclosure Letter, since June 30, 2000 Megan has conducted its business
only in the ordinary course of such business and there has not been:
(a) any Megan Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of Megan or any direct or
indirect redemption, purchase or other acquisition by Megan of its own capital
stock;
(c) any material commitment or contractual obligation (each, a
"Commitment") entered into by Megan outside the ordinary course of business
except for Commitments incurred in connection with the Merger and the
transactions contemplated hereby and thereby;
(d) any material change in Megan's accounting principles, practices or
methods;
(e) any material contingent liability incurred by Megan as guarantor
or otherwise with respect to the obligations of others or any cancellation of
any material debt or claim owing to, or waiver of any material right of, Megan;
(f) any mortgage, encumbrance or lien placed on any of the material
properties of Megan which remains in existence on the date hereof;
(g) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
businesses of Megan;
(h) any change in the compensation payable or to become payable by
Megan to any of its officers or key employees, other than normal merit increases
in accordance with its usual practices; or any bonus payment or arrangement made
to or with any of such officers or key employees; or
(i) any change with respect to the officers or key employees of Megan
which would reasonably be expected to have a Megan Material Adverse Effect.
5.11 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other
similar assessments or liabilities, including without
limitation income,
16
gross receipts, ad valorem, premium, value-added, excise,
real property, personal property, sales, use, transfer,
withholding, employment, unemployment insurance, social
security, business license, business organization,
environmental, workers compensation, payroll, profits,
license, lease, service, service use, severance, stamp,
occupation, windfall profits, customs, duties, franchise
and other taxes imposed by the United States of America or
any state, local or foreign government, or any agency
thereof, or other political subdivision of the United
States or any such government and any interest, fines,
penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or
any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to
a taxing authority in connection with Taxes.
(b) Megan has filed on a timely basis (taking into account any
extension of time within which to file) all Tax Returns that it was required to
file, and all such Tax Returns were complete and accurate in all material
respects. Megan is not and has never been a member of a group of corporations
with which it has filed (or been required to file) consolidated, combined or
unitary Tax Returns. Megan has paid on a timely basis all Taxes that were due
and payable, except in each case with respect to matters contested in good
faith, which matters are set forth on Section 5.11(b) of the Megan Disclosure
Letter. The unpaid Taxes of Megan for tax periods through the Most Recent
Balance Sheet Date do not exceed the accruals and reserves for Taxes (excluding
accruals and reserves for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the Most Recent Balance
Sheet. Megan has never had any actual or potential liability for any Tax
obligation of any taxpayer (including without limitation any affiliated group of
corporations or other entities that included Megan during a prior period). All
Taxes that Megan is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
governmental entity.
(c) Megan has delivered to AVANT complete and accurate copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by Megan listed in Section 5.11(c) of the Megan
Disclosure Letter. Megan has made available to AVANT complete and accurate
copies of all other Tax Returns of Megan together with all related examination
reports and statements of deficiency filed or issued during the last three (3)
years. No examination or audit of any Tax Return of Megan by any governmental
entity is currently in progress or, to the knowledge of Megan, threatened or
contemplated. Megan has not been informed by any jurisdiction that the
jurisdiction believes that Megan was required to file any Tax Return that was
not filed. Megan has not waived any statute of limitations with respect to Taxes
or agreed to an extension of time with respect to a Tax assessment or
deficiency.
(d) Megan: (i) is not a "consenting corporation" within the meaning of
Section 341(f) of the Code, and none of the assets of Megan are subject to an
election under
17
Section 341(f) of the Code; (ii) has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (iii)
has not made any payments, is not obligated to make any payments, and is not a
party to any agreement that could obligate it to make any payments that may be
treated as an "excess parachute payment" under Section 280G of the Code; (iv)
does not have any actual or potential liability for any Taxes of any person
(other than Megan) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise; or (v) is not and has never been required
to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b)
or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of Megan: (i) are "tax-exempt use property"
within the meaning of Section 168(h) of the Code; or (ii) directly or indirectly
secure any debt the interest on which is tax exempt under Section 103(a) of the
Code.
(f) Megan has not undergone a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of the
Code.
5.12 BOOKS AND RECORDS. Except as set forth in Section 5.12 of the Megan
Disclosure Letter:
(a) The books of account and other financial records of Megan are
true, complete and correct in all material respects, have been maintained in all
material respects in accordance with good business practices, and are accurately
reflected to the extent required in all material respects in the Financial
Statements.
(b) The minute books and other records of Megan have been made
available to AVANT or its representatives, contain in all material respects
accurate records of all meetings and accurately reflect in all material respects
all other corporate action of the stockholders and directors and any committees
of the Board of Directors of Megan.
5.13 ASSETS. Megan owns or leases all tangible assets reasonably necessary
for the conduct of its businesses as presently conducted. Each such tangible
asset is free from material defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used. Except as listed in Section 5.13 of the Megan Disclosure Letter no asset
of Megan (tangible or intangible) is subject to any security interest.
5.14 OWNED REAL PROPERTY. Megan does not own any real property.
5.15 REAL PROPERTY LEASES. Section 5.15 of the Megan Disclosure Letter
lists all real property leased or subleased to or by Megan and lists the term of
such lease, any extension and expansion options, and the rent payable
thereunder. Megan has delivered to AVANT complete and accurate copies of the
leases and subleases (as amended to date) listed in Section 5.15 of the Megan
Disclosure Letter. With respect to each lease and sublease listed in Section
5.15 of the Megan Disclosure Letter:
18
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing;
(c) Megan is not, nor, to the knowledge of Megan is any other party,
in breach or violation of, or default under, any such lease or sublease, and no
event has occurred, is pending or, to the knowledge of Megan, is threatened,
which, after the giving of notice, with lapse of time, or otherwise, would
constitute a breach or default by Megan or, to the knowledge of Megan, any other
party under such lease or sublease;
(d) Megan has not assigned, transferred, conveyed, mortgaged, deeded
in trust or encumbered any interest in the leasehold or subleasehold; and
(e) Megan is not aware of any security interest, easement, covenant or
other restriction applicable to the real property subject to such lease, except
for recorded easements, covenants and other restrictions which do not materially
impair the current uses or the occupancy by Megan of the property subject
thereto.
5.16 INTELLECTUAL PROPERTY.
(a) Set forth in Section 5.16(a) of the Megan Disclosure Letter is a
complete list of each of the following items:
(A) all patents and applications therefor, registrations of
trademarks (including service marks) and applications therefor, and
registrations of copyrights and applications therefor that are owned by Megan or
licensed to Megan (collectively, "Megan Intellectual Property Rights");
(B) all licenses, sublicenses, agreements and contracts relating
to the Megan Intellectual Property pursuant to which Megan is granted rights to
use any Megan Intellectual Property owned by any third party ("Third Party
Intellectual Property Licenses"), excluding freely or commercially available
computer software licenses where the total license fees for such software do not
exceed $10,000 per license per calendar year, used in the normal course of
business ("Commercial Software Licenses"); and
(C) all agreements under which Megan has granted any third party
rights to use any Megan Intellectual Property (as defined below).
(b) Except as set forth in Section 5.16(b) of the Megan Disclosure
Letter, Megan is the legal and beneficial owner or licensee of all intellectual
property, including, without limitation, all Megan Intellectual Property Rights,
patents and patent applications, supplementary protection certificates and
patent extensions, trademarks and trademark applications, service xxxx and
service xxxx registrations, logos, commercial symbols, business name
registrations, trade names, copyrights and copyright registrations, computer
software, mask
19
works and mask work registration applications, industrial designs and
applications for registration of such industrial designs, including, without
limitation, any and all applications for renewal, extensions, reexaminations and
reissues of any of the foregoing intellectual property rights where applicable,
inventions, biological materials, trade secrets, formulae, know-how, technical
information, research data, research raw data, laboratory notebooks, procedures,
designs, proprietary technology and information held or used in the Megan Active
Programs (as defined below), except where the failure to be the owner or
licensee of such property, individually or in the aggregate, would not
reasonably be expected to have a Megan Material Adverse Effect (the "Megan
Intellectual Property"). "Megan Active Programs" shall mean Megan's activities
with respect to the following products or product candidates: MeganVac 1,
MeganEgg, MeganVac 2 and vaccines against infections by E.COLI and
CAMPYLOBACTER.
(c) Except as set forth in Section 5.16(c) of the Megan Disclosure
Letter, Megan has not entered into any agreements or licenses or created any
encumbrances, leases, equities, options, restrictions, rights of first refusal,
title retention agreements or other exceptions to title which grant or provide
for the future grant to third parties ownership or other rights to use any of
the Megan Intellectual Property or restrict the use by Megan of Megan
Intellectual Property in any way.
(d) All Third Party Intellectual Property Licenses, Commercial
Software Licenses and agreements referenced in Section 5.16 of the Megan
Disclosure Letter are valid and are in full force and effect and constitute
legal, valid and binding obligations of Megan and, to the knowledge of Megan, of
the other parties, and are enforceable in accordance with their respective
terms. Megan has no knowledge of any notice or threat to terminate any such
licenses or other agreements. Neither Megan nor, to the knowledge of Megan, any
other party to any such license or other agreements, is in default in complying
with any provisions of any such licenses or other agreements, and no condition
or event or fact exists which, with notice, lapse of time or both, would
constitute a default thereunder on the part of Megan, except for any such
default, condition, event or fact that, individually or in the aggregate, would
not reasonably be expected to have a Megan Material Adverse Effect.
(e) Megan is not, and will not be as a result of the execution,
delivery or performance of this Agreement or the consummation of the Merger or
the other transactions contemplated hereby, in breach, violation or default of
any Third Party Intellectual Property Licenses. The rights of Megan to the Megan
Intellectual Property will not be affected by the execution, delivery or
performance of this Agreement or the consummation of the Merger or the other
transactions contemplated hereby.
(f) Except as set forth in Section 5.16(f) of the Megan Disclosure
Letter, Megan has the right to license to third parties the use of Megan
Intellectual Property Rights.
(g) To the knowledge of Megan, all Megan Intellectual Property is
valid and subsisting; all registrations and filings relating to Megan
Intellectual Property Rights are in good standing; and all maintenance and
renewal fees that are due on or prior to the 30th day after the date of this
Agreement and are necessary to preserve the rights of Megan in respect of Megan
Intellectual Property Rights have been made. Except as set forth in Section
5.16(g) of the Megan Disclosure Letter, to the knowledge of Megan, the
registrations and filings relating to Megan
20
Intellectual Property Rights are proceeding and there are no facts of which
Megan has knowledge which could materially undermine those registrations or
filings or reduce to a material extent the scope of protection of any patents
arising from such applications, other than facts disclosed in or as part of the
prosecution of such application.
(h) Except as set forth in Section 5.16(h) of the Megan Disclosure
Letter, the manufacturing, marketing, distribution or sale of any product
included within the Megan Active Program which currently is or is currently
proposed to be manufactured, marketed, distributed or sold by Megan, its
licensees or sublicensees in the countries where Megan currently conducts or
proposes to conduct such activities, to the knowledge of Megan, does not
infringe, induce infringement or contributorily infringe the patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, copyrights, copyright applications, and proprietary trade names,
publication rights, computer programs (including source code and object code),
inventions, know-how, trade secrets, technology, processes, confidential
information and all other intellectual property rights throughout the world
(collectively, "Intellectual Property Rights") of any third party. For purposes
of this Section 5.16(h), no representation or warranty is made with respect to
Intellectual Property Rights that are not public as of the date of this
Agreement.
For purposes of this Section 5.16(h), if a third party makes a claim for
alleged infringement, the making of such claim shall be sufficient to allow
AVANT to claim indemnification for breach of a representation or warranty in
accordance with Article 8 hereof, if such claim is covered by a Claim Notice (as
defined in Section 8.4) given before the Indemnification Expiration Date (as
defined in Section 8.5), except that Damages shall be indemnifiable only if such
infringement claim is ultimately resolved against an AVANT Indemnified Party by
a court of competent jurisdiction or otherwise in accordance with Article 8
hereof.
(i) Except as set forth in Section 5.16(i) of the Megan Disclosure
Letter, to the knowledge of Megan, there are no allegations, claims or
proceedings instituted or pending which challenge the rights possessed by Megan
to use the Megan Intellectual Property or the validity or effectiveness of the
Megan Intellectual Property, including without limitation any interference,
oppositions, cancellations or other contested proceedings.
(j) Except as set forth in Section 5.16(j) of the Megan Disclosure
Letter, to the knowledge of Megan, there are no outstanding claims or
proceedings instituted or pending by any third party challenging the ownership,
priority, scope or validity or effectiveness of any Megan Intellectual Property.
(k) Except as set forth in Section 5.16(k) of the Megan Disclosure
Letter, to the knowledge of Megan, there are no Intellectual Property Rights of
any third party that would be infringed by the continued practice of any
technologies previously used or presently in use by Megan. For purposes of this
Section 5.16(k), no representation or warranty is made with respect to
Intellectual Property Rights that are not public as of the date of this
Agreement.
For purposes of this Section 5.16(k), if a third party makes a claim for
alleged infringement, the making of such claim shall be sufficient to allow
AVANT to claim
21
indemnification for breach of a representation or warranty in accordance with
Article 8 hereof, if such claim is covered by a Claim Notice given before the
Indemnification Expiration Date, except that Damages shall be indemnifiable only
if such infringement claim is ultimately resolved against an AVANT Indemnified
Party by a court of competent jurisdiction or otherwise in accordance with
Article 8 hereof.
(l) To the knowledge of Megan, there is no unauthorized use,
infringement or misappropriation of the Megan Intellectual Property by any third
party, including any employee or former employee of Megan.
(m) Except as set forth in Sections 5.16(a) or 5.16(m) of the Megan
Disclosure Letter, Megan has not granted to any third party any license,
immunity, option or other right to the Megan Intellectual Property which could
provide such third party with a defense to patent infringement proceedings
brought by Megan against such third party, whether domestic or foreign.
(n) Megan has taken commercially reasonable measures to maintain the
confidentiality of the inventions, trade secrets, formulae, know-how, technical
information, research data, research raw data, laboratory notebooks, procedures,
designs, proprietary technology and information of Megan, and all other
information the value of which to Megan is contingent upon maintenance of the
confidentiality thereof. Without limiting the generality of the foregoing, (A)
each employee of Megan and each consultant to Megan who has had access to
proprietary information with respect to Megan has entered into an agreement in
the form attached to this Agreement as EXHIBIT D to this Agreement suitable to
vest ownership rights to any inventions, creations, developments, and works in
Megan and has entered into an agreement for maintaining the confidential
information of Megan and (B) each officer and director of Megan has entered into
an agreement to maintain the confidential information of Megan, except for those
individuals listed in Section 5.16(n) of the Megan Disclosure Letter whose
involvement in the business of Megan is described with specificity therein.
(o) Megan has taken commercially reasonable steps and implemented
commercially reasonable procedures to ensure that its internal computer systems
(consisting of hardware, software, databases or embedded control systems, or
"Systems") are free from any disabling codes or instructions and any virus or
other intentionally created, contaminant, and Megan has in place appropriate
disaster recovery plans, procedures and facilities and has taken reasonable
steps to safeguard its Systems and restrict unauthorized access thereto, except
for any such failure to do so that, individually or in the aggregate, would not
reasonably be expected to have a Megan Material Adverse Effect.
(p) To Megan's knowledge, all products that Megan has distributed
(whether pursuant to a pre-commercial evaluation or otherwise) to third parties
or that have been designed by Megan for commercial distribution (whether or not
Megan has released pre-commercial versions to third parties, either for
evaluation and testing or otherwise) perform in all material respects in
accordance with their respective package inserts. Such products are in
compliance with all applicable industry standards and laws and regulations,
except for such noncompliance which, individually or in the aggregate, would not
have a Megan Material Adverse Effect.
22
5.17 INVENTORY. Except as disclosed in Section 5.17 of the Megan Disclosure
Letter, all inventory items shown on the Most Recent Balance Sheet or existing
at the date hereof are and all inventories existing on the Closing Date will
then be of a quality and quantity saleable in the ordinary course of business of
Megan at profit margins consistent with Megan's experience in prior years. All
inventory items disclosed on Section 5.17 of the Megan Disclosure Letter as
exceptions pursuant to the immediately preceding sentence reflect write-downs to
realizable values in the case of items which have become obsolete or unsalable
through regular distribution channels in the ordinary course of the business of
Megan. The values of the inventories stated in the Most Recent Balance Sheet
included in the unaudited Financial Statements reflect the normal inventory
valuation policies of Megan consistent with past practices and were determined
in accordance with GAAP, practices and methods consistently applied.
5.18 CONTRACTS.
(a) Section 5.18 of the Megan Disclosure Letter lists any agreement
described in the following paragraphs, written or oral, where the aggregate
commitments, liabilities or obligations of Megan exceed $10,000 or which are not
terminable by Megan upon thirty (30) days notice or less without penalty, to
which Megan is a party as of the date of this Agreement. If a particular
contract is described or disclosed in a section of the Megan Disclosure Letter
other than Section 5.18 and such contract would also be required to be disclosed
in Section 5.18 of the Megan Disclosure Letter, then such contract shall be
deemed to have been disclosed in Section 5.18 of the Megan Disclosure Letter
without the need for an express cross-reference:
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or
receipt of services or in which Megan has granted
manufacturing rights, "most favored nation" pricing
provisions or marketing or distribution rights relating to
any products or territory or has agreed to purchase a
minimum quantity of goods or services or has agreed to
purchase goods or services exclusively from a certain
party;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) or under which it has
imposed (or may impose) a security interest on any of its
assets, tangible or intangible;
(v) any agreement requiring Megan to keep information
confidential, and any non-competition agreement (whether
restricting Megan's ability to compete with other parties
or another party's ability to compete with Megan) or any
agreement restricting Megan's or a successor's ability to
hire employees or retain agents or contractors;
23
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director or
stockholder of Megan or any affiliate (an "Affiliate"), as
defined in Rule 12b-2 under the Exchange Act, thereof;
(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Megan
Material Adverse Effect;
(ix) any agreement which contains any provisions requiring Megan
to indemnify any other party thereto (excluding indemnities
contained in agreements for the purchase, sale or license
of products entered into in the ordinary course of
business);
(x) any agreement which contains a "change in control" or
similar provision. A "change of control" provision shall
mean a provision that purports to alter the parties' rights
under such agreement in the event of (i) a merger,
consolidation or other transaction in which securities
possessing a certain percentage of the total combined
voting power of Megan's outstanding securities are
transferred to a person or persons different from the
persons holding those securities immediately prior to such
transaction, or (ii) the sale, transfer or other
disposition of all or substantially all of Megan's assets;
and
(xi) any other material agreement (or group of related
agreements) or any other agreement not entered into in the
ordinary course of business.
(b) Megan has delivered to AVANT a complete and accurate copy of each
agreement listed in Section 5.16 or Section 5.18 of the Megan Disclosure Letter.
With respect to each agreement so listed: (i) the agreement is legal, valid,
binding and enforceable and in full force and effect; (ii) the agreement will
continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect immediately prior to the Closing (other than those listed in Section
5.18(a) of the Megan Disclosure Letter with respect to "change of control" or
similar provisions); and (iii) neither Megan, nor, to the knowledge of Megan,
any other party is in breach or violation of, or default under, any such
agreement, and no event has occurred, is pending or, to the knowledge of Megan,
is threatened, which, after the giving of notice, with lapse of time, or
otherwise, would constitute a breach or default by Megan or, to the knowledge of
Megan, any other party under such contract.
5.19 ACCOUNTS RECEIVABLE. Except as set forth on Section 5.19 of the Megan
Disclosure Letter, all accounts receivable of Megan reflected on the Most Recent
Balance Sheet
24
are valid receivables subject to no setoffs or counterclaims and are current and
collectible (within 60 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. All accounts receivable reflected in the financial or accounting records
of Megan that have arisen since the Most Recent Balance Sheet Date are valid
receivables subject to no setoffs or counterclaims and, to the knowledge of
Megan, are collectible (within 60 days after the date on which it first became
due and payable), net of a reserve for bad debts in an amount proportionate to
the reserve shown on the Most Recent Balance Sheet.
5.20 POWERS OF ATTORNEY. Except for routine powers of attorney related to
the prosecution of intellectual property applications, there are no outstanding
powers of attorney executed on behalf of Megan.
5.21 INSURANCE. Section 5.21 of the Megan Disclosure Letter lists each
insurance policy (including fire, theft, casualty, product liability, general
liability, workers compensation, business interruption, environmental, product
liability and automobile insurance policies and bond and surety arrangements) to
which Megan is a party. Megan maintains insurance coverage that is in character
and amount customary for persons engaged in similar businesses and subject to
the same or similar perils or hazards, except for any such failures to maintain
insurance policies that, individually or in the aggregate, would not reasonably
be expected to have a Megan Material Adverse Effect. Megan has not received any
notice that any policies have been or will be canceled prior to its scheduled
termination date, or would not be renewed substantially on the same terms now in
effect if the insured party requested renewal, or has received notice from any
of its insurance carriers that any insurance premiums will be subject to
increase in an amount materially disproportionate to the amount of any increases
with respect thereto (or with respect to similar insurance) in prior years
except for such instances that would not, individually or in the aggregate,
reasonably be expected to have a Megan Material Adverse Effect.
5.22 WARRANTIES. No product or service manufactured, sold, leased, licensed
or delivered by Megan is subject to any guaranty, warranty, right of return,
right of credit or other indemnity other than (i) the applicable standard terms
and conditions of sale or lease of, which are set forth in Section 5.22(i) of
the Megan Disclosure Letter and (ii) manufacturers' warranties for which Megan
does not have any liability. Section 5.22(ii) of the Megan Disclosure Letter
sets forth the aggregate expenses incurred by Megan in fulfilling its
obligations under its guaranty, warranty, right of return and indemnity
provisions during each of the fiscal years and the interim period covered by the
Financial Statements; and Megan does not know of any reason why such expenses
should significantly increase as a percentage of sales in the future.
5.23 COMPLIANCE WITH LAW; PERMITS; ENVIRONMENTAL MATTERS. Except as set
forth in Section 5.23 of the Megan Disclosure Letter:
(a) Neither Megan nor the conduct and operations of Megan's business
is in violation of any order of any court, governmental authority or arbitration
board or tribunal, or any law, ordinance, governmental rule or regulation to
which Megan or any of its properties or assets is subject, except for such
violations which, individually or in the aggregate, would not reasonably be
expected to have a Megan Material Adverse Effect. Megan has obtained all
licenses, permits and other authorizations and has taken all actions required by
applicable law or
25
governmental regulations in connection with its businesses as now or previously
conducted, except for failures to obtain such authorization or take such actions
which, individually or in the aggregate, would not reasonably be expected to
have a Megan Material Adverse Effect.
(b) (i) Megan has filed, and to Megan's knowledge Maine Biological
Laboratories, Inc. ("MBL") has filed, with the U.S.
Department of Agriculture (the "USDA"), and all applicable
foreign, state and local regulatory bodies for and received
approval of all registrations, applications, licenses,
requests for exemptions, permits and other regulatory
authorizations (collectively, the "Permits") material to
the conduct of Megan's businesses as presently conducted,
except for failures which would not reasonably be expected
to have a Megan Material Adverse Effect. Megan, and to
Megan's knowledge MBL, is in compliance with such Permits,
except for such instances of noncompliance which,
individually and in the aggregate, would not reasonably be
expected to have a Megan Material Adverse Effect and has
no reason to believe that there exists a reasonable basis
for the revocation or suspension of any such Permits. To
the knowledge of Megan, no party which granted any such
Permit is considering revocation or suspension thereof.
(ii) The clinical trials, animal studies and other preclinical
tests conducted by Megan or in which Megan has
participated, and such studies and tests conducted on
behalf of Megan, were and, if still pending, are being
conducted in all material respects in accordance with
experimental protocols, procedures and controls generally
used by qualified experts in the preclinical or clinical
study of products comparable to those being developed by
Megan; neither Megan nor any agent or representative of
Megan has received any notices or correspondence from the
USDA or any other governmental agency requiring the
termination, suspension or modification (other than such
modifications as are normal in the regulatory process) of
any animal studies, preclinical tests or clinical trials
conducted by or on behalf of Megan or in which Megan has
participated, except for such terminations, suspensions or
modifications which, individually or in the aggregate,
would not reasonably be expected to have a Megan Material
Adverse Effect.
(iii) The conduct of Megan's business as presently conducted,
including the clinical trials, animal studies and other
preclinical tests conducted by Megan or in which Megan has
participated, and such studies and tests conducted on
behalf of Megan, does not and has not required any filings
with the U.S. Food and Drug Administration (the "FDA"), and
neither Megan nor any agent or representative of Megan has
received any notices or correspondence from the FDA
requiring such filings.
(c) Megan has complied with all applicable Environmental Laws (as
defined below), except for violations of Environmental Laws that would not,
individually or in the aggregate, reasonably be expected to have a Megan
Material Adverse Effect. There is no pending or, to the knowledge of Megan,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any governmental entity, relating to any Environmental Law involving Megan,
except for litigation, notices of violations, formal administrative proceedings
or investigations, inquiries or information requests that would not,
individually or in the aggregate, reasonably be expected to have a Megan
Material Adverse Effect. For purposes of the Agreement, "Environmental Law"
26
means any federal, state or local law, statute, rule or regulation or the common
law relating to the environment or occupational health and safety.
(d) To the knowledge of Megan, there have been no releases of any
Materials of Environmental Concern (as defined below) into the environment at
any parcel of real property or any facility formerly or currently owned,
operated or controlled by Megan, other than releases that would not,
individually or in the aggregate, reasonably be expected to have a Megan
Material Adverse Effect. Except as set forth in Section 5.23(d) of the Megan
Disclosure Letter and except for any matter, which if the outcome were adverse,
would not reasonably be expected to have a Megan Material Adverse Effect,
neither Megan nor, to the knowledge of Megan, any legal predecessor, affiliate
or former affiliate of Megan, has received any notice that it is potentially
responsible under any Environmental Law for response costs or natural resource
damages, as those terms are defined under the Environmental Laws, at any
location and, to the knowledge of Megan, Megan has not transported or disposed
of, or allowed or arranged for any third party to transport or dispose of, any
waste containing Hazardous Materials at any location including, but not limited
to, those in the National Priorities List, as defined under the United States
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA),
or any location proposed for inclusion on that list or at any location on any
analogous state or other list. Set forth in Section 5.23 of the Megan Disclosure
Letter is a list of all of the solid and hazardous waste transporters and
treatment, storage and disposal facilities that have been utilized by Megan.
Megan is not aware of any material environmental liability of any such
transporter or facility. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act ("RCRA"), toxic materials, oil or petroleum and
petroleum products, or any other material subject to regulation under any
Environmental Law.
5.24 EMPLOYEES.
(a) Section 5.24(a) of the Megan Disclosure Letter contains a list of
all employees of Megan and their respective positions. The list of each
employees' respective annual rate of compensation provided to AVANT is complete
and accurate in all respects. Each person employed by Megan over the past five
(5) years entered into a customary confidentiality, non-disclosure and
intellectual property agreement with Megan, substantially in the form of EXHIBIT
D attached hereto. To the knowledge of Megan, no employee of Megan is in breach
of any non-competition, non-disclosure or confidentiality agreement with Megan
or with any third party. To the knowledge of Megan, except as disclosed in
Section 5.24 of the Megan Disclosure Letter, no key employee or group of
employees has any plans to terminate employment with Megan.
(b) Megan is not a party to or bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor has Megan experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. Megan has no
knowledge of any organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union with respect to
employees of Megan.
27
5.25 EMPLOYEE MATTERS. Section 5.25 of the Megan Disclosure Letter sets
forth a list of (i) all employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and (ii) all stock option plans, bonus or incentive award plans,
severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements and arrangements (including any informal arrangements) not
described in (i) above, including, without limitation, any arrangement intended
to comply with Section 120, 125, 127 or 129 of the Code, in each case maintained
for the benefit of any current or former employee, officer or director of Megan
or any Affiliate (as hereinafter defined) of Megan (the "Megan Benefit Plans").
An entity is an "Affiliate" of Megan if it would have ever been considered a
single employer with Megan under ERISA Section 4001(b) or part of the same
"controlled group" as Megan for purposes of ERISA Section 302(d)(8)(C). Except
as set forth in Section 5.25 of the Megan Disclosure Letter, (a) each Megan
Benefit Plan and any related trust intended to be qualified under Sections
401(a) and 501(a) of the Code has received a favorable determination letter from
the IRS that it is so qualified and nothing has occurred since the date of such
letter that would reasonably be expected to materially adversely affect the
qualified status of such Megan Benefit Plan or related trust, (b) each Megan
Benefit Plan has been operated in all material respects in accordance with the
terms and requirements of applicable law and all required returns and filings
for each Megan Benefit Plan have been timely made, except for failures to file
which, individually or in the aggregate, would not reasonably be expected to
have a Megan Material Adverse Effect, (c) Megan has not incurred any direct or
indirect material liability under, arising out of or by operation of Title I or
Title IV of ERISA in connection with any Megan Benefit Plan or other retirement
plan or arrangement, and Megan has no knowledge of any fact or event that would
reasonably be expected to give rise to any such material liability, (d) all
material contributions due and payable on or before the date hereof in respect
of each Megan Benefit Plan have been made in full and in proper form, (e) Megan
has never sponsored or been obligated to contribute to any "multiemployer plan"
(as defined in Section 3(37) of ERISA), "multiple employer plan" (as defined in
Section 413 of the Code) or "defined benefit plan" (as defined in Section 3(35)
of ERISA), (f) except as otherwise required under ERISA, the Code and applicable
state laws, no Megan Benefit Plan currently or previously maintained by Megan
provides any post-retirement health or life insurance benefits, and Megan does
not maintain any obligations to provide post-retirement health or life insurance
benefits in the future, (g) all material reporting and disclosure obligations
imposed under ERISA and the Code have been satisfied with respect to each Megan
Benefit Plan, except where failure to so comply, individually or in the
aggregate, would not reasonably be expected to have a Megan Material Adverse
Effect, (h) no benefit or amount payable or which may become payable by Megan
pursuant to any Megan Benefit Plan, agreement or contract with any employee,
shall constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of any excise tax
under Section 4999 of the Code or which would not be deductible by reason of
Section 280G of the Code, (i) the transactions contemplated by this Agreement
shall not cause any amount to be payable to any employee of Megan as severance
or pursuant to any contract or employment agreement and (j) no litigation or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits ) is pending or, to
the knowledge of Megan, threatened with respect to any Megan Benefit Plan.
28
5.26 NO BROKERS. Except for Xxxxxx Consulting, Inc., which is entitled to a
fee not in excess of $215,000, Megan has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of such entity, AVANT or Acquisition Sub to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
5.27 ACQUISITION PROPOSALS. Megan has terminated any discussions or
negotiations relating to, or that would reasonably be expected to lead to, any
Acquisition Proposal (as hereinafter defined). -
5.28 CUSTOMERS AND SUPPLIERS. Section 5.28(A) of the Megan Disclosure
Letter sets forth a list of (a) each customer that accounted for more than 1% of
the consolidated revenues of Megan during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product to Megan. Except
as set forth on Section 5.28(B) of the Megan Disclosure Letter, since June 30,
2000, (i) no such customer has indicated that it will stop, or significantly
decrease the rate of, buying products from Megan, due to quality or performance
issues and (ii) no such supplier has indicated that it will stop supplying
products to Megan. No unfilled customer order or commitment obligating Megan to
process, manufacture or deliver products or perform services will result in a
loss to Megan upon completion of performance. No purchase order or commitment of
Megan is in excess of normal requirements, nor are prices provided therein in
excess of current market prices for the products or services to be provided
thereunder.
5.29 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No director, officer
or 10% owner of Megan (a) owns any property or right, tangible or intangible,
which is used in the business of Megan (except as specifically set forth on
Section 5.16 of the Megan Disclosure Letter), (b) has made any claim or
initiated any cause of action against Megan, or (c) owes any money to, or is
owed any money by, Megan, other than wages, consulting fees, travel and other
incidental expenses, royalties or similar payments in the ordinary course of
business. All such consulting fees arose under one or more of the consulting
agreements set forth in Section 5.18 of the Megan Disclosure Letter.
5.30 CERTAIN BUSINESS PRACTICES. Neither Megan, nor, to Megan's knowledge,
any Affiliates, directors, officers, agents or employees of Megan or other
people acting on behalf of any of them (in their capacities as such) has (i)
used any funds of Megan for contributions, gifts, entertainment or other
expenses relating to political activity in violation of any applicable law, (ii)
made any payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns, in each case in violation of
any applicable law, or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, (iii) consummated any transaction, made any payment,
entered into any agreement or arrangement or taken any other action in violation
of Section 1128B(b) of the Social Security Act, as amended, or (iv) accepted or
received any contributions, payments, gifts or expenditures in violation of any
applicable law.
29
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF AVANT AND ACQUISITION SUB
AVANT and Acquisition Sub represent and warrant to the Megan Stockholders
that the statements contained in this Article 6 are true and correct, except as
set forth in the disclosure letter delivered at or prior to the execution hereof
to Megan (the "AVANT Disclosure Letter"). The AVANT Disclosure Letter shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article 6.
6.1 EXISTENCE; GOOD STANDING; AUTHORITY.
(a) Each of AVANT and Acquisition Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Each of AVANT and Acquisition Sub is duly licensed or qualified to
do business as foreign corporations and is in good standing under the laws of
each jurisdiction in which the transaction of its business makes such
qualification necessary, except where the failure to be so licensed or qualified
would not reasonably be expected to have a material adverse effect on the
business, assets, prospects, results of operations or financial condition of
AVANT and Acquisition Sub (other than changes that are the effect of economic
factors affecting the economy as a whole or changes that are the effect of
factors generally affecting the specific markets in which AVANT and Acquisition
Sub compete), (an "AVANT Material Adverse Effect"); PROVIDED, HOWEVER, that an
AVANT Material Adverse Effect shall not include any adverse effect primarily
arising out of or resulting primarily from actions contemplated by the parties
in connection with or that is primarily attributable to the announcement or
performance of this Agreement and the transactions contemplated hereby. Each of
AVANT and Acquisition Sub has all requisite corporate power and authority to
carry on its business as now conducted.
(b) The AVANT certificate of incorporation and AVANT bylaws and the
organizational documents and joint venture agreements (and in each such case,
all amendments thereto) of AVANT and Acquisition Sub are listed in Section 6.1
of the AVANT Disclosure Letter, and the copies of such documents, all of which
have previously been delivered to Megan and its counsel, are true, correct and
complete.
6.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of AVANT and
Acquisition Sub has the requisite power and authority to enter into the
transactions contemplated hereby and to execute and deliver this Agreement and
the Ancillary Agreements to which they are parties. The Boards of Directors of
AVANT and Acquisition Sub have unanimously approved this Agreement and the
Ancillary Agreements and all transactions contemplated hereby and thereby. The
execution by AVANT and Acquisition Sub of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of AVANT and Acquisition Sub, respectively. This Agreement constitutes, and the
Ancillary Agreements to which they have or will become parties (when executed
and delivered pursuant hereto) will constitute, the valid and legally binding
obligations of AVANT and Acquisition Sub enforceable against each such entity in
accordance with their respective terms.
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6.3 CAPITALIZATION. The authorized capital stock of AVANT consists of (a)
75,000,000 shares of AVANT Common Stock, of which 54,986,000 shares were issued
and outstanding as of September 30, 2000, and (b) 3,000,000 shares of Preferred
Stock, $.01 par value per share, of which no shares are issued or outstanding.
All of the issued and outstanding shares of AVANT Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
fights. All of the AVANT Common Stock to be issued as Merger Consideration will
be, when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights.
6.4 SUBSIDIARIES. AVANT has no subsidiaries and does not control, directly
or indirectly, or have any loans to any, corporation, partnership, joint
venture, association business or other entity, other than Polmerix, Inc. and
AVANT Acquisition Corp.
6.5 AUTHORIZATION OF TRANSACTION. Each of AVANT and Acquisition Sub has all
requisite power and authority to execute and deliver this Agreement and each
Ancillary Agreement to which it is a party and to perform its obligations
hereunder and thereunder. The execution and delivery by AVANT and the
Acquisition Sub of this Agreement and each Ancillary Agreement to which it is a
party and the consummation by AVANT and Acquisition Sub of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of AVANT and Acquisition Sub,
respectively. This Agreement and each Ancillary Agreement to which it is a party
has been duly and validly executed and delivered by AVANT and Acquisition Sub,
as applicable, and constitutes a valid and binding obligation of AVANT and
Acquisition Sub, as applicable, enforceable against them in accordance with its
terms.
6.6 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act, the Nasdaq National Market, and the filing of the Certificate of
Merger as required by the DGCL, neither the execution and delivery by AVANT or
Acquisition Sub of this Agreement or each Ancillary Agreement to which it is a
party, nor the consummation by AVANT or Acquisition Sub of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the Certificate of Incorporation or Bylaws of AVANT or the Certificate of
Incorporation of Acquisition Sub, (b) require on the part of AVANT or
Acquisition Sub any filing with, or permit, authorization, consent or approval
of, any governmental or regulatory authority (other than pursuant to Section 7.9
hereof), (c) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which AVANT or Acquisition Sub is a party or by which either is bound or to
which any of their assets are subject, or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to AVANT or
Acquisition Sub or any of their properties or assets, except for any of the
foregoing matters set forth in clauses (a) through (d) which, individually or in
the aggregate, would not reasonably be expected to have an AVANT Material
Adverse Effect and would not prevent or materially delay the consummation of the
transactions contemplated hereby or by the Ancillary Agreements.
6.7 REPORTS AND FINANCIAL STATEMENTS. AVANT has timely filed all reports
required to be filed under the Securities Act and the Exchange Act with the
Securities and Exchange
31
Commission (the "SEC") since October 31, 1999. AVANT has previously furnished or
made available to Megan complete and accurate copies, as amended or
supplemented, of all reports filed by AVANT under Section 13 or subsections (a)
or (c) of Section 14 of the Exchange Act with the SEC since January 1, 2000
(such reports are collectively referred to herein as the "SEC Reports"). The SEC
Reports constitute all of the documents required to be filed by AVANT under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the
SEC from January 1, 2000 through the date of this Agreement. The SEC Reports
complied as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder when filed. As of their
respective dates, the SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. AVANT currently meets the requirements for
the use of Form S-3 for the registration of the resale of the shares of AVANT
Common Stock to be issued to the Megan Stockholders in the Merger and will use
commercially reasonable efforts to maintain S-3 eligibility with the SEC. AVANT
does not know of any current facts or circumstances that would prohibit or delay
the preparation and filing of a registration statement on Form S-3 with respect
to the resale of the AVANT Common Stock to be issued to the Megan Stockholders
in the Merger, other than the possible unavailability of historical audited
financial statements of Megan, the failure of such financial statements to meet
the requirements of Item 7 of Form 8-K or the lack of a consent of Megan's
auditors to any filing AVANT is required to make under the Securities Act or the
Exchange Act.
6.8 ABSENCE OF MATERIAL ADVERSE CHANGE. Since September 30, 2000, there has
occurred no event or development which has had, or would reasonably be expected
to have, an AVANT Material Adverse Effect, other than those events or
developments described in press releases issued by AVANT, which press releases
are listed in Section 6.8 of the AVANT Disclosure Letter.
6.9 INVESTMENT COMPANY. AVANT is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the rules and
regulations of the SEC thereunder.
6.10 LITIGATION. Except as disclosed in the SEC Reports, as of the date of
this Agreement, there is no legal proceeding which is pending or, to AVANT's
knowledge, threatened in writing against AVANT or any subsidiary of AVANT
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.
6.11 INTERIM OPERATIONS OF THE ACQUISITION SUB. Acquisition Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and has engaged in no business activities other than as contemplated
by this Agreement.
6.12 BROKERS' FEES. Neither AVANT nor Acquisition Sub has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
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ARTICLE 7. COVENANTS
7.1 ACQUISITION PROPOSALS.
Except in connection with the transactions contemplated hereby, unless and
until this Agreement shall have been terminated in accordance with its terms for
any reason, Megan shall not (a) take any action to solicit, initiate submission
of or encourage proposals or offers from any person relating to any acquisition
or purchase of all or a portion of the outstanding shares of Megan Stock or any
assets of Megan, any merger or business combination with anyone other than
AVANT, any public or private offering of shares of the capital stock of Megan,
or any other acquisition, transaction or financing involving Megan (an
"Acquisition Proposal"), (b) participate in any discussions or negotiations
regarding an Acquisition Proposal with any person other than AVANT and its
affiliates and representatives, (c) furnish any information with respect to or
afford access to the properties, books or records of Megan to any person who may
consider making or has made an offer with respect to an Acquisition Proposal
other than AVANT and its affiliates and representatives, or (d) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any person other than AVANT and its affiliates and
representatives to do or seek any of the foregoing. Megan shall promptly notify
AVANT upon receipt of any offer or indication that any person is considering
making an offer with respect to an Acquisition Proposal or any request for
information relative to Megan, and will keep AVANT fully informed of the status
and details of any such offer, indication or request.
7.2 CONDUCT OF BUSINESSES BY MEGAN. From the date of this Agreement until
the Effective Time, unless AVANT has otherwise consented to in writing thereto
or unless otherwise specifically permitted by this Agreement, and except as
contemplated by this Agreement and the Ancillary Agreements, Megan:
(a) shall use its reasonable best efforts to preserve intact its
business organization and goodwill and keep available the services of its
respective officers and material employees;
(b) shall comply in all material respects with all material laws,
regulations and orders applicable with respect to its business;
(c) shall promptly notify AVANT of any event that is reasonably
expected to have a Megan Material Adverse Effect, or the breach in any material
respect of any of its representations or warranties contained herein;
(d) shall employ its reasonable best efforts to secure, before the
Closing, the consent to the consummation of the transactions contemplated by
this Agreement by each party to any contract, commitment or any of its
obligations, absent which consent such transactions would constitute a default,
would accelerate, modify or vest its obligations or would permit cancellation of
any such contract;
33
(e) shall use its reasonable best efforts to cause the satisfaction of
the conditions precedent contained in Article 9 hereof;
(f) shall conduct its operations according to its usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(g) shall not incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person or, except in each case in
the ordinary course of business consistent with past practice, make any loans or
advances;
(h) shall not amend its certificate of incorporation or the bylaws;
(i) shall not (A) issue any shares of its capital stock, effect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction, except pursuant to its existing options or outstanding
warrants, (B) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares of its capital
stock, (C) increase any compensation, other than in the ordinary course of
business consistent with past practice, or enter into or amend any employment
agreement with any of its officers or directors, or (D) adopt any new employee
benefit plan (including any stock option, stock benefit or stock purchase plan)
or amend any Megan Benefit Plans in any material respect, except for changes
which are not more favorable to participants in such plans or are otherwise
required to comply with applicable law;
(j) shall not (A) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital stock,
or (B) directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock, or make any commitment for any such action;
(k) shall not sell, pledge, dispose of or encumber any of its assets
(except for (i) sales of assets in the ordinary course of business and in a
manner consistent with past practice, (ii) dispositions of obsolete or worthless
assets, and (iii) sales of other assets not in excess of $10,000 in the
aggregate);
(l) shall not make any loans, advances or capital contributions to, or
investments in, any other person;
(m) shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than (i) the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance with
their terms, of liabilities reflected or reserved against in, or contemplated by
Section 5.10 of the Megan Disclosure Letter or entered into in accordance with
this Agreement or (ii) the settlement of claims and litigation in the ordinary
course of business in an amount not in excess of $10,000;
(n) shall not authorize any capital expenditures or purchase of fixed
assets which are not listed in the Megan Disclosure Letter, as applicable, or
(ii), in the aggregate, do not exceed $10,000;
34
(o) shall not enter into any material Commitment with any of its
officers, directors, consultants or affiliates;
(p) shall use its reasonable best efforts to not do any act or omit to
do any act, or permit any act or omission to act, which will cause a material
breach of any of its material contracts, commitments or obligations;
(q) shall not take any action to accelerate the exercise date of any
outstanding option granted pursuant to its option plans, other than as a result
of the Merger; and
(r) shall not make any filing or election relating to Taxes.
Any request for consent under this Section 7.2 shall be directed to Xxxxx X.
Xxxxxx at the address set forth for AVANT in Section 11.2 hereof, with copies to
Xxxxxx X. Cable, Esq. at the address set forth for Xxxxxxx, Procter & Xxxx LLP
set forth in Section 11.2 hereof, and any consent so requested shall not be
unreasonably withheld or delayed by the other.
7.3 REORGANIZATION. From and after the date hereof, none of AVANT,
Acquisition Sub or Megan or their respective affiliates shall knowingly take any
action, or knowingly fail to take any action, whether before or after the
Effective Time, that would cause the Merger not to qualify as a "reorganization"
within the meaning of Section 368 of the Code.
7.4 LISTING APPLICATION. AVANT shall promptly prepare and submit to the
Nasdaq National Market all reports, applications and other documents that may be
necessary or desirable, if any, to enable all of the shares of AVANT Common
Stock to be issued to the Megan Stockholders in the Merger to be listed for
trading on the Nasdaq National Market.
7.5 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, Megan, AVANT and Acquisition Sub shall use their reasonable best
efforts to cooperate with one another in (a) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states, and foreign jurisdictions and any third parties in
connection with the execution and delivery of this Agreement and the Ancillary
Agreements and consummation of the Merger; (b) timely making all such filings
and timely seeking all such consents, approvals, permits or authorizations; (c)
obtaining in writing any consents required from third parties to effectuate the
Merger in form and substance reasonably satisfactory to each of Megan, AVANT and
Acquisition Sub; and (d) taking, or causing to be taken, all other action and
doing, or causing to be done, all other things necessary, proper or appropriate
to consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement or the Ancillary Agreements, the proper officers and directors of
AVANT, Acquisition Sub and Megan shall take all such necessary action.
7.6 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Upon reasonable notice, Megan afford to the officers, employees,
accountants, counsel and other representatives of AVANT, reasonable access,
during normal
35
business hours during the period from the date hereof to the Effective Time, to
all its properties, books, contracts, commitments and records and permit such
persons to make such inspections as they may reasonably require, and during such
period Megan shall furnish promptly to AVANT all information concerning its
businesses, properties, personnel and accountants as AVANT may reasonably
request ("Proprietary Information").
(b) AVANT agrees that, unless and until the Closing has been
consummated, AVANT and its officers, directors, employees, agents and
representatives will hold in strict confidence, and will not use any
confidential or proprietary data or information obtained from Megan with respect
to the business or financial condition of Megan ("Megan Proprietary
Information") except for the purpose of evaluating, negotiating and completing
the transaction contemplated hereby. The foregoing obligations of
confidentiality and non-use shall not apply to information that is (i) publicly
available or generally known in AVANT's or Megan's industry, (ii) disclosed to
AVANT by third parties which have a right to do so, (iii) proven by AVANT by
clear and convincing evidence (including, without limitation, contemporaneous
written record) to have been independently developed without use of, reliance
upon or access to Megan Proprietary or (iv) with respect to obligations of
confidentiality only, required to be disclosed pursuant to any order or decree
resulting from a judicial or regulatory proceeding, provided that AVANT must
give Megan as much notice as is reasonably practicable to allow Megan to
overturn such order or decree or otherwise obtain the protection it deems
necessary to maintain the confidentiality of the Megan Proprietary Information.
The foregoing obligations of confidentiality and non-use shall expire five (5)
years after the Effective Time. If the transaction contemplated by this
Agreement is not consummated, AVANT will return to Megan (or certify that it has
destroyed) all copies of such data and information, including but not limited to
financial information, customer lists, business and corporate records,
worksheets, test reports, tax returns, lists, memoranda, and other documents
prepared by or made available to AVANT in connection with the transaction.
(c) Megan agrees (and by their approval of this Agreement the Megan
Stockholders agree) that, from the date hereof and through and after the
Closing, Megan, the Megan Stockholders and their respective officers, directors,
employees, agents and representatives (each, a "Megan Party") will hold in
strict confidence, and will not use, (i) any confidential or proprietary data or
information obtained from AVANT with respect to its business or financial
condition ("AVANT Proprietary Information") except for the purpose of
evaluating, negotiating and completing the transaction contemplated hereby and
(ii) any Megan Proprietary Information. The foregoing obligations of
confidentiality and non-use shall not apply to a Megan Party with respect to
information that is (i) publicly available or generally known in AVANT's or
Megan's industry, (ii) disclosed to such Megan Party by third parties which have
a right to do so, (iii) proven by such Megan Party by clear and convincing
evidence (including, without limitation, contemporaneous written record) to have
been independently developed without use of, reliance upon or access to Megan
Proprietary Information or AVANT Proprietary Information or (iv) with respect to
obligations of confidentiality only, required to be disclosed pursuant to any
order or decree resulting from a judicial or regulatory proceeding, provided
that such Megan Party must give AVANT as much notice as is reasonably
practicable to allow AVANT to overturn such order or decree or otherwise obtain
the protection it deems necessary to maintain the confidentiality of the Megan
Proprietary Information or AVANT Proprietary Information, as applicable. The
foregoing obligations of
36
confidentiality and non-use shall expire five (5) years after the Effective
Time. If the transaction contemplated by this Agreement is not consummated,
Megan and the Megan Stockholders will return to AVANT (or certify that it has
destroyed) all copies of such data and information, including but not limited to
financial information, customer lists, business and corporate records,
worksheets, test reports, tax returns, lists, memoranda, and other documents
prepared by or made available to Megan in connection with the transaction.
7.7 EXPENSES. Subject to the provisions of Section 10.3, all costs and
expenses incurred in connection with this Agreement, the Merger and the
Ancillary Agreements and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses, except if otherwise provided
herein. Subject to the provisions of Section 10.3, all costs and expenses for
professional services rendered in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements including, but not limited to,
investment banking and legal services, will be paid by each party incurring such
costs and expenses.
7.8 RESTRICTED SECURITIES.
(a) The AVANT Common Stock issued in the Merger (collectively, the
"Restricted Securities") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 7.8, which conditions are intended to
insure compliance with the provisions of the Securities Act.
(b) Each certificate representing Restricted Securities issued to a
holder of such certificate and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.8 (c) and (d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM."
(c) Prior to any Transfer of Restricted Securities, the holder thereof
shall give written notice to AVANT of such holder's intention to effect such
Transfer and to comply in all other respects with the provisions of this Section
7.8. Each such notice shall describe the manner and circumstances of the
proposed Transfer and shall be accompanied by the written opinion, addressed to
AVANT, of counsel for the holder of such Restricted Securities, stating that in
the opinion of such counsel (which opinion shall be reasonably satisfactory to
AVANT) such proposed transfer does not involve a transaction requiring
registration or qualification of such Restricted Securities under the Securities
Act or the securities or "blue sky" laws of any relevant state of the United
States. The holder thereof shall thereupon, with the written consent of AVANT,
be entitled to Transfer such Restricted Securities in accordance with the terms
of the
37
notice delivered by it to AVANT. Each certificate or other instrument evidencing
the securities issued upon the Transfer of any such Restricted Securities (and
each certificate or other instrument evidencing any untransferred balance of
such Restricted Securities) shall bear the legend set forth in Section 7.8(b)
unless (x) in the opinion of counsel of AVANT registration of any future
Transfer is not required by the applicable provisions of the Securities Act or
(y) AVANT shall have waived the requirement of such legends. No holder shall
Transfer any Restricted Securities until such opinion of counsel has been given
(unless waived by AVANT).
(d) Notwithstanding the foregoing provisions of this Section 7.8, the
restrictions imposed by this Section 7.8 upon the transferability of Restricted
Securities shall not apply during any period when (i) any such shares are sold
or otherwise disposed of pursuant to an effective registration statement under
the Securities Act or as otherwise contemplated by Section 7.8(c) and, pursuant
to Section 7.8(c), the securities so transferred are not required to bear the
legend set forth in Section 7.8(c) or (ii) the holder of such Restricted
Securities has met the requirements for Transfer of such Restricted Securities
pursuant to subparagraph (k) of Rule 144 of the Securities Act. Whenever the
restrictions imposed by this Section 7.8 shall terminate, as herein provided,
the holder of Restricted Securities as to which such restrictions have
terminated shall be entitled to receive from AVANT, without expense, a new
certificate not bearing the restrictive legend set forth in Section 7.8(b) and
not containing any other reference to the restrictions imposed by this Section
7.8.
(e) AVANT, at its discretion, may cause stop transfer orders to be
placed with its transfer agent with respect to certificates for Restricted
Securities owned by a holder but not as to certificates for such shares of AVANT
Common Stock as to which the legend set forth in paragraph (b) of this Section
7.8 is no longer required because one or more of the conditions set forth in
Section 7.8(d) shall have been satisfied.
7.9 REGISTRATION RIGHTS.
(a) After the Closing Date, AVANT shall, on or before the date which
is 30 days after the Closing Date, prepare and file with the Commission under
the Securities Act a Registration Statement on Form S-3 (or any successor form)
under the Securities Act (the "Resale Shelf") to register for resale the shares
of AVANT Common Stock issued to the Megan Stockholders in the Merger (that is,
the Initial Shares and the Escrow Shares) on behalf of the holders thereof (the
"Selling Shareholders") on a delayed or continuous basis under Rule 415 of the
Securities Act, and shall use all commercially reasonable efforts to cause such
Registration Statement to be declared effective at the earliest practicable
date, but not later than the later of (i) 120 days after the Closing, or (ii)
the tenth (10th) business day after the filing of AVANT's annual report on Form
10-K for the fiscal year ended December 31, 2000 (the "Target Effective Date").
Upon receipt of any notice (a "Suspension Notice") from AVANT of the happening
of any event which makes any statement made in the Resale Shelf or related
prospectus untrue or which requires the making of any changes in such Resale
Shelf or prospectus so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, each holder of AVANT Common Stock
registered under such Resale Shelf shall forthwith discontinue disposition of
the AVANT Common Stock pursuant to such Resale Shelf until such holder's receipt
of the copies of the supplemented or
38
amended prospectus or until it is advised in writing (the "Advice") by AVANT
that the use of the prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
prospectus; PROVIDED, HOWEVER, that AVANT shall not give a Suspension Notice
until after the Resale Shelf has been declared effective. In the event that
AVANT shall give any Suspension Notice, AVANT shall use its reasonable best
efforts and take such actions as are reasonably necessary to render the Advice
and end the suspension period as promptly as practicable. Notwithstanding
anything to the contrary provided in this Section 7.9, AVANT shall not have any
obligation to maintain the Resale Shelf or keep it effective to permit the
resale of any AVANT Common Stock on a delayed or continuous basis pursuant to
Rule 415 of the Securities Act from and after such time as the AVANT Common
Stock may be sold by the holders thereof pursuant to Rule 144 of the Securities
Act. AVANT shall have the option of including the shares of AVANT Common Stock
issued to Pfizer, Inc., pursuant to that certain Stock Purchase Agreement, dated
as of the date of this Agreement, in the Resale Shelf. AVANT shall be
responsible for all fees and expenses incurred in connection with complying with
this Section 7.9(a), other than (i) fees and expenses of counsel for the Megan
Stockholders and (ii) all underwriting discounts, selling commissions and
transfer taxes applicable to the sale of AVANT Common Stock under the Resale
Shelf.
(b) AVANT agrees to indemnify and hold harmless each Selling
Shareholder, from and against any losses, claims, damages or liabilities to
which such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the Resale
Shelf, (ii) the 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 (iii) any failure by AVANT to fulfill any undertaking included in
the Resale Shelf (each, a "Violation"), and AVANT will reimburse such Selling
Shareholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any action, proceeding or claim
relating to such Violation; PROVIDED, HOWEVER, that the indemnity contained in
this Section 7.10(b) shall not apply to any amounts paid by, or on behalf of, a
Selling Shareholder in settlement of any such loss, claim, damage or liability
if such settlement is effected without the consent of AVANT (which consent shall
not be unreasonably withheld), nor shall AVANT be liable to a Selling
Shareholder in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, any Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such Resale Shelf by such Selling Shareholder. AVANT will
reimburse such Selling Shareholder, as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. The indemnification obligations of AVANT
set forth in this Section 7.9(b) shall not be subject to the limitations on
indemnification set forth in Sections 8.5 and 8.6.
(c) Each Selling Shareholder agrees to indemnify and hold harmless
AVANT (and each person, if any, who controls AVANT within the meaning of the
Securities Act, each officer of AVANT who signs the Resale Shelf and each
director of AVANT) and any underwriter, any other stockholder selling shares of
AVANT Common Stock in such Resale Shelf and any controlling person of any such
underwriter or other stockholder, from and against any losses, claims, damages
or liabilities (joint or several) to which any of the foregoing persons
39
may become subject (under the Securities Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any Violation, in each case to the
extent that such Violation occurs in reliance upon and conformity with written
information furnished by such Selling Shareholder expressly for use in
connection with such Resale Shelf, and each Selling Shareholder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this Section 7.9(c) in connection with
investigating or defending any such loss, claim, damage or liability; PROVIDED,
HOWEVER, that the indemnity contained in this Section 7.9(c) shall not apply to
any amounts paid in settlement of any such loss, claim, damage or liability if
such settlement is effected without the consent of the Selling Shareholders
(which consent shall not be unreasonably withheld); and provided further that,
in no event shall any indemnity under this Subsection 7.9(c) exceed the net
proceeds from the offering received by such Selling Shareholder, except in the
case of willful fraud by such Selling Shareholder. The indemnification
obligations of the Selling Shareholders set forth in this Section 7.9(c) shall
not be subject to the limitations on indemnification set forth in Sections 8.5
and 8.6.
(d) If the indemnification provided for in Section 7.9(b) or (c) from
the indemnifying person is held by a court of competent jurisdiction to be
unavailable to an indemnified person hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then the indemnifying
person, in lieu of indemnifying such indemnified person, shall contribute to the
amount paid or payable by such indemnified person as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying person and indemnified persons in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying person and indemnified persons shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by, such indemnifying person or
indemnified persons, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
(e) The obligations of AVANT and the Selling Shareholders under this
Section 7.9 shall survive the completion of any offering of AVANT Common Stock
in a Resale Shelf under this Section 7.9.
(f) In the event that the Resale Shelf has not (i) been filed with the
SEC within 30 days after the Closing Date or (ii) become effective by the Target
Effective Date (each such event referred to in clauses (i) and (ii), a
"Registration Default"), for each thirty (30) day period (a "Penalty Period")
during which the Registration Default remained uncured, AVANT shall issue or
pay, as applicable, to the Selling Shareholders within three (3) business days
of the end of each such Penalty Period:
(i) with respect to the first (1st) Penalty Period, at AVANT's
sole election either: (A) a number of additional shares of
AVANT Common Stock equal to $37,557 divided by the Market
Value (as defined hereafter) of a share of AVANT Common
Stock or (B) a cash payment equal to $37,557;
40
(ii) with respect to the second (2nd) Penalty Period, at AVANT's
sole election either: (A) a number of additional shares of
AVANT Common Stock equal to $75,114 divided by the Market
Value of a share of AVANT Common Stock or (B) a cash
payment equal to $75,114;
(iii) with respect to the third (3rd) Penalty Period, at AVANT's
sole election either: (A) a number of additional shares of
AVANT Common Stock equal to $112,671 divided by the Market
Value of a share of AVANT Common Stock or (B) a cash
payment equal to $112,671; and
(iv) with respect to each Penalty Period thereafter, at AVANT's
sole election either: (A) a number of additional shares of
AVANT Common Stock equal to $150,228 divided by the Market
Value of a share of AVANT Common Stock or (B) a cash
payment equal to $150,228.
Notwithstanding anything to the contrary set forth herein, in no event shall the
total cumulative amount of all payments under this Section 7.9 (whether
consisting of shares of AVANT Common Stock ("Penalty Shares") or cash) exceed
$976,480, with Penalty Shares valued as of the date of issuance as provided
herein. For any Penalty Period lasting less than thirty (30) days the penalty
amount shall be appropriately pro-rated. Notwithstanding the foregoing, a
Registration Default shall not be deemed to have occurred if the delay in filing
the Resale Shelf and/or having the Resale Shelf declared effective is
attributable to the unavailability of historical audited financial statements of
Megan, the failure of such financial statements to meet the requirements of Item
7 of Form 8-K or the lack of a consent of Megan's auditors to any filing AVANT
is required to make under the Securities Act or the Exchange Act. For purposes
of this Agreement, the "Market Value" of a share of AVANT Common Stock shall be
the average of the high and low sales prices of the AVANT Common Stock on the
Nasdaq National Market on the last trading day in the relevant Penalty Period.
7.10 STOCKHOLDER CONSENTS. In conjunction with the execution of this
Agreement, Megan shall obtain the consent and approval of the Committed
Stockholders of the Merger and this Agreement pursuant to the Approval of Merger
Agreements. Megan hereby represents that the execution of the Approval of Merger
Agreements by the Committed Stockholders will, in accordance with Section 13 of
the Megan Bylaws, as permitted by Section 228 of the DGCL, constitute approval
of the Merger by the Megan Stockholders.
7.11 FORM X. XXXXX agrees to file one or more Forms D with respect to the
AVANT Common Stock issued to the Selling Shareholders on a timely basis as
required under Regulation D under the Securities Act ("Regulation D") to claim
the exemption provided by Rule 506 of Regulation D and to provide a copy thereof
to the Stockholders' Representatives promptly after such filing.
7.12 STATE SECURITIES LAWS. AVANT shall take such action as shall be
necessary to qualify, or to obtain, an exemption from the registration
requirements of state securities or "blue sky" laws with respect to the issuance
of AVANT Common Stock to the Selling Shareholders in the Merger. AVANT shall
furnish the Stockholders' Representatives with copies of all filings,
applications, orders, grants or confirmation of exemptions relating to such
securities laws.
41
ARTICLE 8. INDEMNIFICATION.
8.1 INDEMNIFICATION BY THE STOCKHOLDERS. Subject to the limitations in
Sections 8.5 and 8.6 hereof, the Megan Stockholders shall indemnify AVANT, the
Surviving Corporation and each of their officers, directors, employees, agents,
and each person, if any, who controls or may control AVANT within the meaning of
the Securities Act (each an "AVANT Indemnified Party" and collectively, the
"AVANT Indemnified Parties") in respect of, and hold them harmless against, any
and all debts, obligations and other liabilities (whether absolute, accrued,
contingent, fixed or otherwise, or whether known or unknown, or due or to become
due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors and other experts,
and other expenses of litigation) ("Damages") incurred or suffered by any of the
foregoing parties:
(a) resulting from, relating to or constituting any misrepresentation,
breach of warranty or failure to perform any covenant or agreement of Megan
contained in this Agreement or the Megan Officer's Certificate (as hereinafter
defined);
(b) based upon, arising out of, in connection with or by reason of any
of the intellectual property matters set forth on SCHEDULE C hereto related to
either the Assignment and Conditional Grantback License between A/W Company and
Megan dated November 1, 1992 assigning A/W Company's rights in the License
Agreement between Washington University and A/W Company dated November 1, 1992,
or the License and Right of First Refusal, effective November 1, 1992, between
A/W Company and Washington University, or the Assignment and Conditional
Grantback License dated May 28, 1993 between A/W Company and Megan
(collectively, as amended, the "Washington University IP Agreements"),
regardless of whether or not the relevant occurrence constitutes a breach of any
representation or warranty of Megan herein, including without limitation Section
5.16; or
(c) based upon, arising out of, in connection with or by reason of the
matters set forth on SCHEDULE D hereto related to the Regulated Antigen Delivery
System ("RADS") invention, regardless of whether or not the relevant occurrence
constitutes a breach of any representation or warranty of Megan herein,
including without limitation Section 5.16.
8.2 MEGAN STOCKHOLDER CLAIMS. Subject to the limitations in Sections 8.5
and 8.6 hereof, the Megan Stockholders shall indemnify, defend, protect and hold
harmless the AVANT Indemnified Parties from and against all Damages which are
incurred or suffered by any one or more of them based upon, arising out of, in
connection with or by reason of (i) the breach by Megan or by any present or
former director or any affiliate of such director or person who had the right to
nominate such director for election to the board of directors of Megan of any of
their respective fiduciary duties (including duties of disclosure) to the Megan
Stockholders whether or not arising in connection with the transactions
contemplated by this Agreement; (ii) any document prepared or distributed to the
Megan Stockholders by or on behalf of Megan in connection with the transactions
contemplated hereby, PROVIDED, HOWEVER, that the foregoing
42
shall not apply to information supplied by AVANT in writing to any such person
specifically for inclusion or incorporation by reference in any such document or
to any document prepared or filed by AVANT; and/or (iii) any rights of a Megan
Stockholder (other than the right to receive Merger Consideration pursuant to
this Agreement or appraisal rights under the applicable provisions of the DGCL),
under the Certificate of Incorporation or Bylaws of Megan or under the DGCL,
including any preemptive rights or rights to notice or to vote.
8.3 INDEMNIFICATION BY AVANT. Subject to the limitations in Sections 8.5
and 8.6 hereof, AVANT shall indemnify the Megan Stockholders, and Megan's
officers, directors, employees and agents, in respect of, and hold them harmless
against, any and all Damages incurred or suffered by any of the foregoing
resulting from, relating to or constituting any misrepresentation, breach of
warranty or failure to perform any covenant or agreement of AVANT or Acquisition
Sub contained in this Agreement or the AVANT Officer's Certificate (as
hereinafter defined).
8.4 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to indemnification
under this Article 8 (an "Indemnified Party") shall give written notification (a
"Notification of Suit") to the party from whom indemnification is sought (an
"Indemnifying Party") of the commencement of any suit or proceeding relating to
a third party claim for which indemnification pursuant to this Article 8 may be
sought. Such Notification of Suit shall be given within 30 business days after
receipt by the Indemnified Party of notice of such suit or proceeding, and shall
describe in reasonable detail (to the extent known by the Indemnified Party) the
facts constituting the basis for such suit or proceeding and the amount of the
claimed damages; PROVIDED, HOWEVER, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall relieve the Indemnifying Party
of any liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 30 days after
delivery of such Notification of Suit, the Indemnifying Party may, upon written
notice thereof to the Indemnified Party, assume control of the defense of such
suit or proceeding if, but only if, either (i) the Indemnified Party has
notified the Indemnifying Party that it will not defend the suit or proceeding,
or (ii) the Indemnified Party has failed to timely defend the suit or
proceeding; PROVIDED, HOWEVER, that the Indemnifying Party may not assume
control of the defense of a suit or proceeding involving criminal liability or
in which equitable relief is sought against the Indemnified Party. If the
Indemnifying Parties assume control of the defense pursuant to (i) or (ii)
above, the Indemnifying Parties shall acknowledge in writing their obligation to
indemnify the Indemnified Parties hereunder against any Damages that such
Indemnified Parties incur or have incurred in connection with such third party
claim. If the Indemnifying Party does not so assume control of such defense, the
Indemnified Party shall control such defense. The party not controlling such
defense (the "Non-controlling Party") may participate therein at its own
expense. The party controlling such defense (the "Controlling Party") shall keep
the Non-controlling Party advised of the status of such suit or proceeding and
the defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and
43
shall otherwise cooperate with and assist the Controlling Party in the defense
of such suit or proceeding. The Indemnifying Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed. The Indemnified Party
shall not agree to any settlement of, or the entry of any judgment arising from,
any such suit or proceeding without the prior written consent of the
Indemnifying Party, which shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article 8, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article 8 for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment (in the manner
provided in paragraph (c) below) in the amount of such Damages. The Indemnifying
Party shall deliver a copy of the Claim Notice to the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a written response (the "Response")
in which the Indemnifying Party shall: (i) agree that the Indemnified Party is
entitled to receive all of the Claimed Amount; (ii) agree that the Indemnified
Party is entitled to receive part, but not all, of the Claimed Amount (the
"Agreed Amount"); or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount. If the Indemnifying Party agrees that the
Indemnified Party is entitled to receive all of the Claimed Amount, the
Indemnifying Party shall deliver to the Indemnified Party with the Response
either a payment for the Claimed Amount, by check or by wire transfer, or, if
the Indemnifying Parties are the Megan Stockholders, deliver to the Escrow
Agent, within three days following the delivery of the Response, a written
notice instructing the Escrow Agent to distribute to AVANT such number of Escrow
Shares as have an aggregate Value (as defined below) equal to the Claimed
Amount. If the Indemnifying Party agrees that the Indemnified Party is entitled
to receive part, but not all, of the Claimed Amount, the Indemnifying Party
shall deliver to the Indemnified Party with the Response either a payment for
the Agreed Amount, by check or by wire transfer, or, if the Indemnifying Parties
are the Megan Stockholders, deliver to the Escrow Agent, within three days
following the delivery of the Response, a written notice instructing the Escrow
Agent to distribute to AVANT such number of Escrow Shares as have an aggregate
Value equal to the Agreed Amount. If the Indemnifying Party in the Response
disputes its liability for all or part of the Claimed Amount, the Indemnifying
Party and the Indemnified Party shall follow the procedures set forth in Section
8.4(d) for the resolution of such dispute (a "Dispute"). For purposes of this
Article 8, the "Value" of any Escrow Shares delivered in satisfaction of an
indemnity claim shall equal the number of such Escrow Shares, multiplied by the
average of the last reported sale prices per share of the AVANT Common Stock on
the Nasdaq National Market over the thirty (30) consecutive trading days ending
on the last trading day before the date of determination (the "Determination
Price").
(d) During the 60-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved within
such 60-day period, the
44
Indemnifying Party and the Indemnified Party shall discuss in good faith the
submission of the Dispute to a mutually acceptable alternative dispute
resolution procedure (which may be nonbinding or binding upon the parties, as
they agree in advance) (the "ADR Procedure"). In the event the Indemnifying
Party and the Indemnified Party agree upon an ADR Procedure, such parties shall,
in consultation with the chosen dispute resolution service (the "ADR Service"),
promptly agree upon a format and timetable for the ADR Procedure, agree upon the
rules applicable to the ADR Procedure, and promptly undertake the ADR Procedure.
The provisions of this Section 8.4(d) shall not obligate the Indemnifying Party
and the Indemnified Party to pursue an ADR Procedure or prevent either such
party from pursuing the Dispute in a court of competent jurisdiction; provided
that, if the Indemnifying Party and the Indemnified Party agree to pursue an ADR
Procedure, neither the Indemnifying Party nor the Indemnified Party may commence
litigation or seek other remedies with respect to the Dispute prior to the
completion of such ADR Procedure. Any ADR Procedure undertaken by the
Indemnifying Party and the Indemnified Party shall be considered a compromise
negotiation for purposes of federal and state rules of evidence, and all
statements, offers, opinions and disclosures (whether written or oral) made in
the course of the ADR Procedure by or on behalf of the Indemnifying Party, the
Indemnified Party or the ADR Service shall be treated as confidential and, where
appropriate, as privileged work product. Such statements, offers, opinions and
disclosures shall not be discoverable or admissible for any purposes in any
litigation or other proceeding relating to the Dispute (provided that this
sentence shall not be construed to exclude from discovery or admission any
matter that is otherwise discoverable or admissible). The fees and expenses of
any ADR Service used by the Indemnifying Party and the Indemnified Party shall
be shared equally by the Indemnifying Party and the Indemnified Party. If the
Indemnified Party is seeking to enforce the claim that is the subject of the
Dispute pursuant to the Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, pursuant to an ADR
Procedure, as a result of a judicial decision or otherwise), a written notice
executed by both parties instructing the Escrow Agent as to what (if any)
portion of the Escrow Shares shall be distributed to AVANT and/or the Megan
Stockholders (which notice shall be consistent with the terms of the resolution
of the Dispute).
(e) Notwithstanding the other provisions of this Section 8.4, if a
third party asserts (other than by means of a lawsuit) that an Indemnified Party
is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article 8, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article 8, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article 8,
for any such Damages for which it is entitled to indemnification pursuant to
this Article 8 (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article 8).
(f) For purposes of this Agreement, in the case where the Indemnifying
Parties are the Megan Stockholders, references to the "Indemnifying Party"
(except provisions
45
relating to an obligation to make or a right to receive any payments provided
for in Section 8.4 or Section 8.6) shall be deemed to refer to the Stockholders'
Representatives. The Stockholders' Representatives shall have full power and
authority on behalf of each Megan Stockholder to take any and all actions on
behalf of, execute any and all instruments on behalf of, and execute or waive
any and all rights of, the Megan Stockholders under this Article 8. The
Stockholders' Representatives shall have no liability to any Megan Stockholder
for any action taken or omitted on behalf of the Megan Stockholders pursuant to
this Article 8. Notices or communications to or from the Stockholders'
Representatives shall constitute notice to or from each of the Megan
Stockholders.
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement and any other certificate or document
delivered pursuant to this Agreement (other than the Principal Stockholders
Agreement and the letters of transmittal) shall (a) survive the Closing and any
investigation at any time made by or on behalf of an Indemnified Party and (b)
shall expire on the earlier of (i) March 31, 2002 and (ii) the date which is
five (5) business days after the date on which AVANT's Annual Report on Form
10-K for the fiscal year ended December 31, 2001 is filed with the SEC (such
earlier date, the "Indemnification Expiration Date"). Each Party's
indemnification obligations pursuant to this Article 8 with respect to
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letters and any other certificate or document delivered pursuant to
this Agreement (other than the Principal Stockholders Agreement or the letters
of transmittal) shall terminate on the Indemnification Expiration Date;
PROVIDED, HOWEVER, that if an Indemnified Party delivers to an Indemnifying
Party, before the Indemnification Expiration Date, either a Claim Notice, or a
notice that, as a result of a legal proceeding instituted by or written claim
made by a third party, the Indemnified Party reasonably expects to incur Damages
for which such party may be entitled to indemnification hereunder (an "Expected
Claim Notice"), then such indemnification obligation (and any related
representations, warranties, covenants or obligations) shall survive until, but
only for purposes of, the resolution of the matter covered by such Expected
Claim Notice. If the legal proceeding or written claim with respect to which an
Expected Claim Notice has been given is definitively withdrawn or resolved in
favor of the Indemnified Party, the Indemnified Party shall promptly so notify
the Indemnifying Party; and if the Indemnified Party has delivered a copy of the
Expected Claim Notice to the Escrow Agent and Escrow Shares have been retained
in escrow after the Termination Date (as defined in the Escrow Agreement) with
respect to such Expected Claim Notice, the Indemnifying Party and the
Indemnified Party shall promptly deliver to the Escrow Agent a written notice
executed by both parties instructing the Escrow Agent to distribute such
retained Escrow Shares to the Megan Stockholders in accordance with the terms of
the Escrow Agreement.
8.6 LIMITATIONS.
(a) The Escrow Agreement is intended to fund and secure the
indemnification obligations of the Megan Stockholders under this Agreement, and,
to the extent set forth in Section 8.6(d), the indemnification obligations of
the Principal Stockholders under the Principal Stockholders Agreement. The
rights of AVANT under this Article 8 shall be limited to the Escrow Shares and
the Escrow Agreement shall be the exclusive means for AVANT to enforce such
rights. Notwithstanding the foregoing, the rights of AVANT under the Principal
46
Stockholders Agreement shall not be limited to the Escrow Shares and the Escrow
Agreement shall not be the exclusive means for AVANT to enforce such rights.
(b) No Megan Stockholder shall have any right of contribution against
Megan or the Surviving Corporation with respect to any breach by Megan of any of
its representations, warranties, covenants or agreements.
(c) The Megan Stockholders shall not have any liability for
indemnification with respect to any matter described in Section 8.1, (i) unless
and until the aggregate amount of all such claims against the Megan Stockholders
exceeds $50,000, at which time the Megan Stockholders shall be required to
indemnify the AVANT Indemnified Parties for all Damages (up to the limitation of
subparagraph (ii) hereof) relating to such claims (the "Indemnity Threshold"),
and (ii) for any Damages in excess of $2,500,000 (the "Indemnity Cap");
PROVIDED, HOWEVER, that indemnification claims relating to matters described in
Sections 8.1(b) and 8.1(c) shall not be subject to the Indemnity Threshold.
Indemnification claims relating to matters described in Section 8.2 shall not be
subject to either the Indemnity Threshold or the Indemnity Cap, but shall be
subject to Section 8.6(d) below.
(d) The use of the Escrow Shares to satisfy claims and pay expenses
under this Agreement and the Principal Stockholders Agreement is subject to the
following provisions:
(i) Until the Indemnification Expiration Date, the maximum
number of Escrow Shares that may be used or set aside for
satisfaction of indemnification claims relating to matters
described in Section 8.2 and indemnification claims made
under the Principal Stockholders Agreement shall be 50% of
the Escrow Shares;
(ii) If on the Indemnification Expiration Date, there are any
Escrow Shares remaining in escrow which have not been used
or set aside for satisfaction of indemnification claims
made under this Agreement or the Principal Stockholders
Agreement, then such shares may be used or set aside for
satisfaction of indemnification claims relating to matters
described in Section 8.2 and claims made under the
Principal Stockholders Agreement regardless of the total
number of Escrow Shares used or set aside to satisfy such
claims prior to such time;
(iii) If after giving effect to (d)(ii) above, there are any
Escrow Shares remaining in escrow, and the Principal
Stockholders have made direct payments to AVANT under the
Principal Stockholders Agreement, then the Principal
Stockholders shall have the right to such remaining Escrow
Shares to the extent necessary to reimburse themselves;
(iv) If after giving effect to (d)(ii) and (d)(iii) above, there
are any Escrow Shares remaining in escrow and the Principal
Stockholders have incurred expenses in defending claims
made by third parties against AVANT Indemnified Parties
under the Pri ncipal Stockholders Agreement, then the
Principal Stockholders shall have the right to such
remaining Escrow Shares to the extent necessary to
reimburse themselves; and
(v) If after giving effect to (d)(ii), d(iii) and (d)(iv)
above, there are any Escrow Shares remaining in escrow and
the Principal Stockholders have directly paid some
47
of the expenses of the Stockholders' Representatives after
the Expense Account was depleted, then the Principal
Stockholders shall have the right to such remaining Escrow
Shares to the extent necessary to reimburse themselves for
such expenses.
(f) AVANT shall not have any liability for indemnification with
respect to any matter described in Section 8.3, (i) unless and until the
aggregate amount of all such claims against AVANT exceeds $50,000, at which time
AVANT shall be required to indemnify the Megan Stockholders for all Damages (up
to the limitation of subparagraph (ii) hereof) relating to such claim, and (ii)
for any Damages in excess of $2,500,000. The rights of the Megan Stockholders
under this Article 8 shall be their sole and exclusive remedy.
ARTICLE 9. CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived, in whole or in part by the parties hereto, to the extent permitted by
applicable law:
(a) STOCKHOLDER APPROVALS. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of Megan,
which vote shall be deemed received if the Committed Stockholders execute a
consent pursuant to Section 7.10 hereto.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
and there shall not be any action taken, or any law enacted, entered, enforced
or deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
9.2 CONDITIONS TO OBLIGATIONS OF MEGAN TO EFFECT THE MERGER. The obligation
of Megan to effect the Merger and the other transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing of the following
conditions, unless waived by Megan:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of AVANT contained in this Agreement shall have been true and correct
when made and shall be true and correct as though made on and as of the Closing
except (i) for any representations and warranties made as of a specific date, in
which case such representations and warranties shall be true and correct in all
material respects as of such date or (ii) where the failure of such
representations and warranties to be true and correct would not reasonably be
expected to have an AVANT Material Adverse Effect.
(b) ABSENCE OF CHANGES. From the date of this Agreement through the
Closing Date, there shall not have occurred any changes concerning AVANT that,
when
48
combined with all other changes, have had or would reasonably be expected likely
to have an AVANT Material Adverse Effect.
(c) PERFORMANCE OF OBLIGATIONS. AVANT and Acquisition Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by AVANT or
Acquisition Sub, at or prior to the Closing.
(d) CERTIFICATE FROM OFFICERS. Each of AVANT and Acquisition Sub shall
have delivered to Megan a certificate (the "AVANT Officer's Certificate") of its
respective President or Chief Financial Officer dated the Closing Date to the
effect that the statements set forth in paragraphs (a), (b) and (c) of this
Section 9.2 above with respect to AVANT and Acquisition Sub, as the case may be,
are true and correct.
(e) CONSENTS, APPROVALS, ETC. All consents, authorizations, orders and
approvals of or filings or registrations with any governmental commissions,
boards, other regulatory bodies or third parties required to be made or obtained
by Megan and its affiliated entities including, but not limited to, third party
consents under assignment or change of control provisions, in connection with
the execution, delivery and performance of this Agreement and the Ancillary
Agreements and the Merger shall have been obtained or made except where the
failure to have obtained such consents, authorizations, orders or approvals or
to have made such filings or registrations would not, individually or in the
aggregate, reasonably be expected to have an AVANT Material Adverse Effect.
(f) LEGAL OPINION. Megan shall have received from counsel to AVANT an
opinion in the form attached hereto as EXHIBIT E, addressed to Megan and dated
as of the Closing.
9.3 CONDITIONS TO OBLIGATION OF AVANT AND ACQUISITION SUB TO EFFECT THE
MERGER. The obligations of AVANT and Acquisition Sub to effect the Merger and
the other transactions contemplated hereby shall be subject to the fulfillment
at or prior to the Closing of the following conditions, unless waived by AVANT
and Acquisition Sub:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Megan contained in this Agreement shall have been true and correct
when made and shall be true and correct as though made on and as of the Closing
except (i) for any representations and warranties made as of a specific date, in
which case such representations and warranties shall be true and correct in all
material respects as of such date or (ii) where the failure of such
representations and warranties to be true and correct would not reasonably be
expected to have a Megan Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS. Megan shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by Megan, at or prior to the Closing.
(c) ABSENCE OF CHANGES. From the date of this Agreement through the
date of Closing, there shall not have occurred any changes concerning Megan
that, when combined with all other changes, have had or would reasonably be
expected to have a Megan Material Adverse Effect.
49
(d) CERTIFICATE FROM OFFICERS. Megan shall have delivered to AVANT and
Acquisition Sub a certificate (the "Megan Officer's Certificate") of the
President and the Chief Financial Officer of Megan dated the Closing Date to the
effect that the statements set forth in paragraphs (a), (b) and (c) above of
this Section 9.3 are true and correct.
(e) CONSENTS, APPROVALS, ETC. All consents, authorizations, orders and
approvals of or filings or registrations with any governmental commissions,
boards, other regulatory bodies or third parties required to be made or obtained
by Megan and its affiliated entities, including, but not limited to, third party
consents under assignment or change of control provisions, in connection with
the execution, delivery and performance of this Agreement and the Ancillary
Agreements and the Merger shall have been obtained or made except where the
failure to have obtained such consents, authorizations, orders or approvals or
to have made such filings or registrations would not, individually or in the
aggregate, reasonably be expected to have a Megan Material Adverse Effect.
(f) LEGAL OPINION. AVANT shall have received from counsel to Megan an
opinion in the form set forth in EXHIBIT F attached hereto, addressed to AVANT
and dated as of the Closing.
(g) APPROVAL OF MERGER AGREEMENTS. Each Committed Stockholder shall
have executed and delivered to AVANT an Approval of Merger Agreement.
(h) PRINCIPAL STOCKHOLDERS AGREEMENT. The Principal Stockholders shall
have executed and delivered to AVANT the Principal Stockholders Agreement.
(i) INELIGIBLE STOCKHOLDERS; DISSENTING STOCKHOLDERS. The Ineligible
Stockholders shall not include any person who is not listed on SCHEDULE E
hereto, which sets forth for each such person the number and class of Megan
Stock held, for a total maximum Cash Consideration of $172,381.98. The total
Merger Consideration payable to Ineligible Stockholders and holders of Megan
stock who exercise their dissenting stockholder's right to demand appraisal
pursuant to the DGCL, if any, as a group shall not exceed $400,000 (calculated
on the basis of the Cash Consideration payable plus the value of AVANT Common
Stock at a price of $9.54 per share) in the aggregate.
ARTICLE 10. TERMINATION; AMENDMENT; WAIVER
10.1 TERMINATION. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of Megan or AVANT:
(a) by mutual written consent of AVANT and Megan;
50
(b) by either AVANT or Megan, if any United States federal or state
court of competent jurisdiction or other governmental entity shall have issued a
final order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable, provided that the
party seeking to terminate shall have used its reasonable best efforts to appeal
such order, decree, ruling or other action;
(c) by either AVANT or Megan, if the Merger shall not have been
consummated on or before January 4, 2001 (other than due to the failure of the
party seeking to terminate this Agreement to perform any of its material
obligations under this Agreement required to be performed at or prior to the
Effective Time);
(d) by Megan, if AVANT or Acquisition Sub has failed to perform in any
material respect any of its obligations required to be performed by them under
this Agreement and such failure continues for more than 30 days after notice
thereof unless failure to so perform has been caused by or results from a breach
of this Agreement by Megan;
(e) by AVANT, if Megan shall have failed to perform in any material
respect any of its obligations required to be performed by it under this
Agreement and such failure continues for more than 30 days after notice unless
failure to so perform has been caused by or results from a breach of this
Agreement by AVANT or Acquisition Sub;
10.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Megan or AVANT as provided in Section 10.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of AVANT, Acquisition Sub or Megan, other than the provisions of
Sections 7.6(b) and 7.6(c) and this Section 10.2. Nothing contained in this
Section 10.2 shall relieve any party for any willful breach of the
representations, warranties, covenants or agreements set forth in this Agreement
or any of the Ancillary Agreements that occurs prior to such termination.
ARTICLE 11. GENERAL PROVISIONS
11.1 NOTICES. Any notice required to be given hereunder shall be in writing
and shall be sent by facsimile transmission and confirmed by courier service
(with proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid) and addressed as follows:
IF TO AVANT OR ACQUISITION SUB:
AVANT Immunotherapeutics, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Dr. Una X. Xxxx
Fax: (000) 000-0000
51
With copies to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Cable, Esq.
Fax: (000) 000-0000
IF TO MEGAN:
Megan Health, Inc.
0000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Ph.D.
Fax: (000) 000-0000
With copies to:
Xxxxxxxxx Xxxxxxxx LLP
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
IF TO THE STOCKHOLDERS' REPRESENTATIVES:
---------------------------------------
Xxxxx X. Xxxxxxxxx, Ph.D.
00000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx Xxxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxx
CID Equity Partners
Xxx Xxxxxxxx Xxxxxx
Xxxxx 0000, Xxx 00000
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With copies to:
Xxxxxxxxx Xxxxxxxx LLP
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
52
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
11.2 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned prior to the
Closing by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.6, 7.6(b), 7.6(c), 7.8 and 7.9 (relating to the Resale Shelf) and
Articles 4 and 8, nothing in this Agreement, expressed or implied, is intended
to confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
11.3 ENTIRE AGREEMENT. This Agreement, the Ancillary Agreements, the
Exhibits, the Megan Disclosure Letter and the AVANT Disclosure Letter constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
11.4 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective boards of directors, at any time before or
after approval of matters presented in connection with the Merger by the
Committed Stockholders of Megan and the stockholders of Acquisition Sub, but
after any such stockholder approval, no amendment shall be made which by law
requires the further approval of stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
11.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Megan, AVANT and Acquisition Sub hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts of
the State of Delaware and of the United States of America located in the State
of Delaware (the "Delaware Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waive
any objection to the laying of venue of any such litigation in the Delaware
Courts and agree not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in any inconvenient forum.
11.6 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
53
11.7 HEADINGS. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
11.8 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
11.9 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
At any time prior to the Effective Time, the parties may (a) extend the time for
the performance of any of the obligations or other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement or (c)
waive compliance with any of the agreements or conditions contained in this
Agreement. All waivers under this Agreement shall be in writing.
11.10 INCORPORATION. The Megan Disclosure Letter and the AVANT Disclosure
Letter and all Exhibits and Schedules attached hereto and thereto and referred
to herein and therein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
11.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.12 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions and other equitable remedies to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any Massachusetts Court, this being in addition to any other remedy to which
they are entitled at law or in equity. Any requirements for the securing or
posting of any bond with respect to such remedy are hereby waived by each of the
parties hereto.
11.13 CERTAIN DEFINITIONS.
(a) As used in this Agreement, the word "person" means an individual,
a corporation, a partnership, an association, a joint-stock company, a trust, a
limited liability company, any unincorporated organization or any other entity.
54
(b) As used in this Agreement, the phrase "transactions contemplated
by this Agreement" shall include without limitation, each act and transaction to
be performed or completed under this Agreement or any of the Ancillary
Agreements by any party hereto or thereto.
55
{Signature Page to Agreement and Plan of Merger}
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
AVANT IMMUNOTHERAPEUTICS, INC.
By: /s/ Dr. Una X. Xxxx
------------------------------------------------
Name: Dr. Una X. Xxxx
Title: Chief Executive Officer
AVANT ACQUISITION CORP.
By: /s/ Dr. Una X. Xxxx
------------------------------------------------
Name: Dr. Una X. Xxxx
Title: President
MEGAN HEALTH, INC.
By: /s/ Xxxxx X. Xxxxxxxxx, Ph.D.
------------------------------------------------
Name: Xxxxx X. Xxxxxxxxx, Ph.D.
Title: Chief Executive Officer
For the sole purpose of acknowledging and accepting their duties as
Stockholders' Representatives under the terms of this Agreement, the undersigned
have executed this Agreement and caused the same to be duly delivered on their
behalf on the day and year first written above.
/s/ Xxxxx X. Xxxxxxxxx, Ph.D.
--------------------------------------------
Xxxxx X. Xxxxxxxxx, Ph.D.
/s/ Xxxx X. Xxxxx
-----------------------------------
Xxxx X. Xxxxx
56
