AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
JANUARY 20, 1998,
AMONG
CARDIAC CONTROL SYSTEMS, INC.,
CCS SUBSIDIARY, INC.
AND
ELECTRO-CATHETER CORPORATION
GLOSSARY
The following terms used in this agreement are defined in the following
sections:
SECTION OR
TERM OTHER LOCATION
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Acquisition Transaction...................................................6.4(a)
Acquisition Sub........................................................Preamble
Actions....................................................................3.14
Affiliate Agreements........................................................5.2
Agreement.......................................................First paragraph
Plan of Merger..................................................First paragraph
Benefit Arrangements.....................................................3.17(d)
Break-up Fee.............................................................10.1(b)
Business Day................................................................1.7
CCSFE.......................................................................4.2
Certificate.................................................................3.1
Closing.....................................................................1.7
Closing Date................................................................1.7
Code........................................................................1.6
Common Shares Trust...................................................2.2(d)(ii)
Company................................................................Preamble
Company Affiliate Agreement.................................................5.2
Company Common Stock............................................First paragraph
Company Disclosure Schedule...................................................3
Company Financial Statements................................................3.6
Company Options...........................................................2.3(a)
Company Returns.............................................................3.9
Company Sec Documents.......................................................3.5
Company Sub.................................................................3.1
Company Warrants............................................................3.3
Constituent Corporations....................................................1.1
Effective Time..............................................................1.2
Employee.................................................................3.17(a)
Employee Plans...........................................................3.17(a)
Encumbrances...............................................................3.10
ERISA....................................................................3.17(a)
ERISA Affiliate..........................................................3.17(a)
Excess Shares..........................................................2.2(d)(i)
Exchange Act................................................................3.4
Exchange Agent............................................................2.2(a)
Exchange Fund.............................................................2.2(a)
Executory Period..........................................................6.1(a)
FAS No. 5...................................................................3.7
FDA........................................................................3.15
GAAP........................................................................3.6
Governmental Authority.....................................................3.14
GTH.........................................................................8.6
Intellectual Property Rights...............................................3.11
Liability...................................................................3.7
Material Adverse Effect.....................................................3.1
ii
Merger......................................................................1.1
Merger Shares.............................................................2.1(c)
Multiemployer Plan.......................................................3.17(c)
New Jersey Statute..............................................First Paragraph
Old Certificates..........................................................2.2(a)
Other Filings...............................................................6.5
Parent.................................................................Preamble
Parent Common Stock.............................................First Paragraph
Parent Disclosure Schedule....................................................4
Parent Financial Statements.................................................4.6
Parent Options..............................................................4.3
Parent SEC Documents........................................................4.5
Parent Warrants.............................................................4.3
Party.....................................................................6.1(a)
Pension Plans............................................................3.17(a)
Related Agreements..........................................................5.1
Rule 145....................................................................5.2
Rule 145 Affiliate..........................................................5.2
S-4.........................................................................6.5
SEC.........................................................................3.4
SSS&G.......................................................................8.5
Stockholder Action..........................................................6.9
Stockholder Statement.......................................................6.9
Stockholders..............................................................2.2(a)
Stockholders' Materials.....................................................6.9
Stockholders' Meeting.......................................................6.9
Subsidiary................................................................2.1(b)
Superior Proposal.........................................................6.4(a)
Surviving Corporation.......................................................1.1
Tax.........................................................................3.9
Taxes.......................................................................3.9
Unvested Company Option...................................................2.3(b)
Vested Company Option.....................................................2.3(c)
Voting Agreement............................................................5.1
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TABLE OF CONTENTS
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PAGE
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ARTICLE I. - GENERAL
1.1. THE MERGER........................................................... 1
1.2. THE EFFECTIVE TIME OF THE MERGER..................................... 1
1.3. EFFECT OF MERGER..................................................... 1
1.4. CERTIFICATE AND BY-LAWS OF SURVIVING CORPORATION..................... 1
1.5. TAKING OF NECESSARY ACTION........................................... 2
1.6. TAX-FREE REORGANIZATION.............................................. 2
1.7. CLOSING.............................................................. 2
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES..................................... 2
2.1. EFFECT ON CAPITAL STOCK.............................................. 2
2.2. EXCHANGE OF CERTIFICATES............................................. 3
2.3. COMPANY WARRANTS..................................................... 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 6
3.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER................. 6
3.2. EQUITY INVESTMENTS................................................... 7
3.3. CAPITAL STOCK; SECURITIES............................................ 7
3.4. AUTHORITY; NO CONSENTS............................................... 7
3.5. SEC DOCUMENTS........................................................ 8
3.6. FINANCIAL STATEMENTS................................................. 8
3.7. ABSENCE OF UNDISCLOSED LIABILITIES................................... 9
3.8. ABSENCE OF CHANGES................................................... 9
3.9. TAX MATTERS.......................................................... 10
3.10. TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.......... 11
3.11. INTELLECTUAL PROPERTY............................................... 11
3.12. AGREEMENTS, ETC..................................................... 11
3.13. NO DEFAULTS, ETC.................................................... 12
3.14. LITIGATION, ETC..................................................... 12
3.15. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS............................. 13
3.16. LABOR RELATIONS; EMPLOYEES.......................................... 13
3.17. EMPLOYEE BENEFIT PLANS AND CONTRACTS................................ 13
3.18. CERTAIN AGREEMENTS.................................................. 14
3.19. INSURANCE........................................................... 15
3.20. BROKERS............................................................. 15
3.21. RELATED TRANSACTIONS................................................ 15
3.22. BOARD APPROVAL...................................................... 15
3.23. VOTE REQUIRED....................................................... 15
3.24. INFORMATION SUPPLIED................................................ 15
3.25. COMPANY NOT AN INTERESTED STOCKHOLDER............................... 16
3.26. DISCLOSURE.......................................................... 16
3.27. KNOWLEDGE DEFINITION................................................ 16
3.28. COMPANY REFERENCE INCLUDES COMPANY SUBS............................. 16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB.. 16
4.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER................. 16
4.2. EQUITY INVESTMENTS................................................... 17
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4.3. CAPITAL STOCK; SECURITIES............................................ 17
4.4. AUTHORITY; NO CONSENTS............................................... 17
4.5. SEC DOCUMENTS........................................................ 18
4.6. FINANCIAL STATEMENTS................................................. 18
4.7. ABSENCE OF UNDISCLOSED LIABILITIES................................... 19
4.8. ABSENCE OF CHANGES................................................... 19
4.9. TAX MATTERS.......................................................... 20
4.10. TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.......... 20
4.11. INTELLECTUAL PROPERTY............................................... 21
4.12. AGREEMENTS, ETC..................................................... 21
4.13. NO DEFAULTS, ETC.................................................... 22
4.14. LITIGATION, ETC..................................................... 22
4.15. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS............................. 22
4.16. LABOR RELATIONS; EMPLOYEES.......................................... 22
4.17. EMPLOYEE BENEFIT PLANS AND CONTRACTS................................ 23
4.18. CERTAIN AGREEMENTS.................................................. 24
4.19. INSURANCE........................................................... 24
4.20. BROKERS............................................................. 24
4.21. RELATED TRANSACTIONS................................................ 24
4.22. BOARD APPROVAL...................................................... 24
4.23. INFORMATION SUPPLIED................................................ 25
4.24. ACQUISITION SUB..................................................... 25
4.25. DISCLOSURE.......................................................... 25
4.26. KNOWLEDGE DEFINITION................................................ 25
4.27. PARENT REFERENCE INCLUDES CCSFE..................................... 25
ARTICLE V. RELATED AGREEMENTS.............................................. 25
5.1. VOTING AGREEMENT..................................................... 25
5.2. AFFILIATE AGREEMENTS................................................. 25
ARTICLE VI. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS...................................................... 26
6.1. ACCESS TO RECORDS AND PROPERTIES OF EACH PARTY; CONFIDENTIALITY...... 26
6.2. OPERATION OF BUSINESS OF THE COMPANY................................. 26
6.3. OPERATION OF BUSINESS OF THE PARENT.................................. 27
6.4. NEGOTIATION WITH OTHERS.............................................. 27
6.5. PREPARATION OF S-4; OTHER FILINGS.................................... 28
6.6. ADVICE OF CHANGES.................................................... 28
6.7. LETTER OF THE COMPANY'S ACCOUNTANTS.................................. 28
6.8. LETTER OF PARENT'S ACCOUNTANTS....................................... 28
6.9. STOCKHOLDERS' APPROVAL............................................... 29
6.10. LEGAL CONDITIONS TO MERGER.......................................... 29
6.11. CONSENTS............................................................ 29
6.12. EFFORTS TO CONSUMMATE............................................... 29
6.13. NOTICE OF PROSPECTIVE BREACH........................................ 30
6.14. PUBLIC ANNOUNCEMENTS................................................ 30
6.15. AFFILIATES.......................................................... 30
6.16. PREFERRED STOCK; SECURED PROMISSORY NOTE............................ 30
ARTICLE VII. CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS.............. 30
7.1. STOCKHOLDER APPROVAL; AGREEMENT OF MERGER............................ 30
7.2. APPROVALS............................................................ 31
7.3. LEGAL ACTION......................................................... 31
7.4. S-4.................................................................. 31
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7.5. LEGISLATION.......................................................... 31
7.6. BID PRICE RATIO...................................................... 31
7.7. FINANCING............................................................ 31
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB...... 31
8.1. REPRESENTATIONS AND WARRANTIES....................................... 31
8.2. PERFORMANCE OF OBLIGATIONS OF THE COMPANY............................ 31
8.3. AUTHORIZATION OF MERGER.............................................. 32
8.4. CERTIFICATE.......................................................... 32
8.5. OPINION OF THE COMPANY'S COUNSEL..................................... 32
8.6. ACCEPTANCE BY COUNSEL TO PARENT AND ACQUISITION SUB.................. 32
8.7. CONSENTS AND APPROVALS............................................... 32
8.8. GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC............................. 32
8.9. RELATED AGREEMENTS................................................... 32
ARTICLE IX. CONDITIONS TO OBLIGATIONS OF THE COMPANY....................... 32
9.1. REPRESENTATIONS AND WARRANTIES....................................... 32
9.2. PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB............. 33
9.3. AUTHORIZATION OF MERGER.............................................. 33
9.4. CERTIFICATE.......................................................... 33
9.5. OPINION OF COUNSEL TO PARENT AND ACQUISITION SUB..................... 33
9.6. TAX OPINION.......................................................... 33
9.7. ACCEPTANCE BY COUNSEL TO THE COMPANY................................. 33
9.8. CONSENTS AND APPROVALS............................................... 33
9.9. GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC............................. 33
9.10. APPOINTMENT OF DIRECTORS............................................ 33
9.11. FAIRNESS OPINION.................................................... 34
9.12. DIRECTOR INDEMNITY.................................................. 34
9.13. COMPANY INDEBTEDNESS................................................ 34
ARTICLE X. PAYMENT OF CERTAIN FEES AND EXPENSES............................ 34
10.1. PAYMENT OF CERTAIN FEES AND EXPENSES................................ 34
ARTICLE XI TERMINATION, AMENDMENT, MODIFICATION AND WAIVER................. 34
11.1. TERMINATION......................................................... 34
11.2. EFFECT OF TERMINATION............................................... 36
ARTICLE XII. MISCELLANEOUS................................................. 36
12.1 ENTIRE AGREEMENT..................................................... 36
12.2. DESCRIPTIVE HEADINGS................................................ 36
12.3. NOTICES............................................................. 36
12.4. COUNTERPARTS........................................................ 37
12.5. GOVERNING LAW....................................................... 37
12.6. BENEFITS OF AGREEMENT............................................... 37
12.7. PRONOUNS............................................................ 37
12.8. AMENDMENT, MODIFICATION AND WAIVER.................................. 37
12.9. SEVERABILITY........................................................ 37
vi
AGREEMENT AND PLAN OF REORGANIZATION dated as of January 20, 1998, among
CARDIAC CONTROL SYSTEMS, INC., a Delaware corporation ("Parent"), CCS
SUBSIDIARY, INC., a New Jersey corporation and wholly-owned subsidiary of Parent
("Acquisition Sub"), and ELECTRO-CATHETER CORPORATION, a New Jersey corporation
(the "Company").
The Boards of Directors of Parent, Acquisition Sub and the Company have
each duly approved and adopted this Agreement and Plan of Reorganization (this
"Agreement"), the plan of merger (the "Plan of Merger") and the proposed merger
of Acquisition Sub with and into the Company in accordance with this Agreement,
the Plan of Merger and the New Jersey Business Corporation Act (the "New Jersey
Statute"), whereby, among other things, the issued and outstanding shares of
common stock, $.10 par value, of the Company (the "Company Common Stock"), will
be exchanged and converted into shares of common stock, $.10 par value, of
Parent (the "Parent Common Stock") in the manner set forth in Article II hereof
and in the Plan of Merger, upon the terms and subject to the conditions set
forth in this Agreement and the Plan of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the Plan of Merger and the representations, warranties,
covenants, agreements, conditions and promises contained herein and therein, the
parties hereby agree as follows:
ARTICLE I.
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GENERAL
1.1. THE MERGER. In accordance with the provisions of this Agreement, the
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Plan of Merger and the New Jersey Statute, Acquisition Sub shall be merged with
and into the Company (the "Merger"), which at and after the Effective Time shall
be, and is sometimes herein referred to as, the "Surviving Corporation".
Acquisition Sub and the Company are sometimes referred to as the "Constituent
Corporations".
1.2. THE EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
--------------------------------
Agreement, the Plan of Merger in substantially the form of Exhibit 1.2 attached
-----------
hereto shall be executed, delivered and filed with the Secretary of State of the
State of New Jersey by each of the Constituent Corporations on the Closing Date
in the manner provided under Section 14A:10-4.1 of the New Jersey Statute. The
Merger shall become effective (the "Effective Time") upon the filing of the
Certificate of Merger (to which the Plan of Merger is an exhibit) with the
Secretary of State of the State of New Jersey.
1.3. EFFECT OF MERGER. At the Effective Time the separate existence of
----------------
Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
the Surviving Corporation, and the Surviving Corporation shall possess all of
the rights, privileges, powers and franchises as well of a public as of a
private nature, and be subject to all the restrictions, disabilities and duties
of each of the Constituent Corporations and shall have such other effects as
provided by the New Jersey Statute.
1.4. CERTIFICATE AND BY-LAWS OF SURVIVING CORPORATION. From and after
the Effective Time: (a) the Certificate of the Company shall be amended so that
the Fourth Article thereof shall read in its entirety as set forth in
Exhibit 1.4 attached hereto, and the Certificate of the Company, as so amended,
-----------
shall be the Certificate of the Surviving Corporation, unless and until altered,
amended or repealed as provided in the New Jersey Statute; (b) the current
amended and restated by-laws of the Company shall be the by-laws of the
Surviving Corporation, unless and until altered, amended or repealed as provided
in the New Jersey Statute, the Certificate or such by-laws; (c) the directors of
Acquisition Sub shall be Xxxx X. Xxxxx, W. Xxxx Xxxxxx and Xxxxx Xxxxxxxxxx each
of whom shall be the directors of the Surviving Corporation, unless and until
removed, or until their respective terms of office shall have expired,
1
in accordance with the New Jersey Statute, the Certificate or the by-laws of the
Surviving Corporation, as applicable; and (d) the officers of the Company shall
be the officers of the Surviving Corporation, unless and until removed, or until
their terms of office shall have expired, in accordance with the New Jersey
Statute, the Certificate or the by-laws of the Surviving Corporation, as
applicable.
1.5. TAKING OF NECESSARY ACTION. Prior to the Effective Time, the parties
--------------------------
hereto shall do or cause to be done all such acts and things as may be necessary
or appropriate in order to effectuate the Merger as expeditiously as reasonably
practicable, in accordance with this Agreement, the Plan of Merger, and the New
Jersey Statute. In case at any time after the Effective Time, any further action
is necessary or desirable to carry out the purpose of this Agreement and to vest
in the Surviving Corporation full title to all assets, privileges, etc. of
either Constituent Corporations, the officers and directors of such corporations
shall take all such lawful and necessary action.
1.6. TAX-FREE REORGANIZATION. For Federal income tax purposes, the parties
-----------------------
intend that the Merger be treated as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"), by reason of Section 368(a)(2)(E) of the Code.
1.7. CLOSING. Unless this Agreement shall have been terminated and the
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transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article XI, and subject to this Agreement, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. (Florida time) on a date (the "Closing
Date") to be mutually agreed upon by the parties, which date shall be not later
than the third (3rd) Business Day after all the conditions set forth in Articles
VII, VIII and IX shall have been satisfied (or waived to the extent the same may
be waived), unless another date is agreed to in writing by the parties. The
Closing shall take place at the offices of Xxxxxxxxx Traurig Xxxxxxx Xxxxxx
Xxxxx & Xxxxxxx, P.A., 000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxx
00000, unless another place is agreed to in writing by the parties. As used
herein, the term "Business Day" shall mean any day other than a Saturday, Sunday
or day on which banks are permitted to close in New Jersey or Florida.
ARTICLE II.
-----------
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. EFFECT ON CAPITAL STOCK. At the Effective Time, subject and pursuant
-----------------------
to the terms and conditions of this Agreement and the Plan of Merger, by virtue
of the Merger and without any action on the part of the Constituent Corporations
or the holders of the capital stock of the Constituent Corporations:
(a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and outstanding
share of common stock, par value $.01 per share, of Acquisition Sub shall
immediately prior to the Effective Time be deemed cancelled and converted into
and shall represent the right to receive one share of common stock, par value
$.10 per share, of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF COMPANY COMMON STOCK. Each
share of Company Common Stock that is immediately prior to the Effective Time:
(i) owned by the Company as treasury stock; (ii) owned by any Subsidiary of the
Company; or (iii) owned by Parent or any subsidiary of Parent, shall be
cancelled and no Parent Common Stock or other consideration shall be delivered
in exchange therefor. As used in this Agreement, a "Subsidiary" of any
corporation means another corporation an amount of whose voting securities
2
sufficient to elect at least a majority of its Board of Directors is owned
directly or indirectly by such corporation.
(c) EXCHANGE RATIO FOR COMPANY COMMON STOCK. Subject to Section 2.2,
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares cancelled pursuant to Section 2.1(b))
shall be deemed cancelled and converted into and shall represent the right to
receive two-thirds (2/3) of a share of Parent Common Stock in accordance with
Section 2.2. For convenience of reference, the shares of Parent Common Stock to
be issued upon the exchange and conversion of Company Common Stock in accordance
with this Section 2.1(c) are sometimes hereinafter collectively referred to as
the "Merger Shares".
(d) ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the Effective Time,
Parent or the Company recapitalizes through a subdivision of its outstanding
shares into a greater number of shares, or a combination of its outstanding
shares into a lesser number of shares, or reorganizes, reclassifies or otherwise
changes its outstanding shares into the same or a different number of shares or
other classes, or declares a dividend on its outstanding shares payable in
shares of its capital stock or securities convertible into shares of its capital
stock, then the applicable exchange ratio for Company Common Stock will be
adjusted appropriately so as to maintain the relative proportionate interests of
the holders of shares of Company Common Stock and the holders of shares of
Parent Common Stock.
2.2. EXCHANGE OF CERTIFICATES.
------------------------
(a) PROCEDURE FOR EXCHANGE. Prior to the Closing Date, Parent shall
select an exchange agent (the "Exchange Agent") reasonably satisfactory to
Company to act in such capacity in connection with the Merger. As of the
Effective Time, Parent shall deposit with the Exchange Agent, for the benefit of
the holders of shares of Company Common Stock (the "Stockholders"), for exchange
in accordance with this Article II and the Plan of Merger, certificates
representing the shares of Parent Common Stock contemplated to be issued as
Merger Shares (which shares of Parent Common Stock, together with any dividends
or distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"). As soon as practicable after the Effective Time but in no
event later than twenty (20) Business Days after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately before the Effective Time represented issued and
outstanding shares of Company Common Stock (collectively, the "Old
Certificates"): (i) a letter of transmittal advising such holders of the terms
of the exchange effected by the Merger (and specifying how delivery shall be
effected, and risk of loss and title to the Old Certificates shall pass, only
upon delivery of the Old Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify); and (ii)
instructions for use in effecting the surrender of Old Certificates in exchange
for certificates representing Merger Shares. Upon surrender of an Old
Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as may be reasonably
required by the Exchange Agent, the holder of such Old Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II and the Plan of Merger and
the Old Certificate so surrendered shall forthwith be cancelled. In the event
of a transfer of ownership of shares of Company Common Stock which are not
registered on the transfer records of the Company, it shall be a condition of
the exchange thereof that the Old Certificate representing such Company Common
Stock is presented to the Exchange Agent properly endorsed and otherwise in
proper form for transfer and accompanied by all documents required to evidence
and effect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section 2.2(a)
and the Plan of Merger, each Old Certificate shall be deemed, on and after the
Effective Time, to represent only the right to receive upon such
3
surrender the certificate representing shares of Parent Common Stock and cash in
lieu of fractional shares (as hereinafter provided) of Parent Common Stock as
contemplated by this Article II and the Plan of Merger.
(b) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Old Certificate with respect to the
shares of Parent Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.2(d) or
the Plan of Merger until the holder of record of such Old Certificate shall
surrender such Old Certificate. Subject to the effect of applicable laws,
following surrender of any such Old Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest: (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(d)
and the Plan of Merger and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock; 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 whole shares of Parent Common Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms of this Article II and the
Plan of Merger (including any cash paid pursuant to Section 2.2(b) or 2.2(d))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock and there shall be no further
registration or transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any Old
Certificate is presented to the Surviving Corporation for any reason, such Old
Certificate shall be cancelled and exchanged as provided in this Article II and
the Plan of Merger.
(d) NO ISSUANCE OF FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Old Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a stockholder of
Parent such as rights to dividends, stock splits or interest in lieu of issuing
certificates for fractional shares.
(i) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (x) the number of full shares of
Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 2.2(a) over (y) the maximum number of full shares of Parent Common Stock
distributable to holders of Company Common Stock pursuant to Section 2.2(a)
(such excess being herein called the "Excess Shares"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for the holders of
Company Common Stock, shall aggregate and sell the Excess Shares at then
prevailing prices in the over-the-counter market, all in the manner provided in
subsection (ii) of this Section 2.2(d).
(ii) The sale of the Excess Shares by the Exchange Agent shall be
executed in the over-the-counter market through one or more member firms of the
National Association of Securities Dealers, Inc. and shall be executed in round
lots to the extent practicable. Until the net proceeds of such sale or sales
have been distributed to the holders of Company Common Stock as contemplated in
subsection (iii) of this Section 2.2(d), the Exchange Agent shall hold such
proceeds in trust for the holders of Company Common Stock (the "Common Shares
Trust"). Parent shall pay all commissions, transfer taxes and other out-of-
pocket
4
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of the Excess Shares. The Exchange
Agent shall determine the portion of the Common Shares Trust to which each
holder of Company Common Stock shall be entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares Trust by a
fraction, the numerator of which is the amount of the fractional share interest
to which such holder of Company Common Stock is entitled and the denominator of
which is the aggregate amount of fractional share interests to which all holders
of Company Common Stock are entitled.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to the holders of Company Common Stock in lieu of any
fractional share interests, the Exchange Agent shall make available such amounts
without interest to such holders of Company Common Stock.
(e) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Old
Certificates shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Old Certificate to be lost,
stolen or destroyed, the Exchange Agent shall issue an exchange for such loss,
stolen or destroyed Old Certificate the consideration payable and exchange
therefor pursuant to this Article II. The Exchange Agent or the Surviving
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Old Certificate to
give the Exchange Agent a bond in such reasonable sum as it may direct as
indemnity against any claim that may be made against the Surviving Corporation
with respect to the Old Certificate alleged to have been lost, stolen or
destroyed.
(f) TERMINATION OF EXCHANGE FUND AND COMMON SHARES TRUST. Any portion
of the Exchange Fund and Common Shares Trust which remains undistributed to the
stockholders of the Company for six (6) months after the Effective Time shall be
delivered to Parent, upon demand, and any former Stockholders of the Company who
have not theretofore complied with this Article II and the Plan of Merger shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock (and Parent shall
remain obligated to so pay and/or distribute).
(g) NO LIABILITY. Neither the Exchange Agent, Parent, Acquisition Sub
nor the Company shall be liable to any holder of shares of Company Common Stock
or Parent Common Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Common Stock to be issued in
exchange for Company Common Stock pursuant to this Section 2.2, if, on or after
the expiration of twelve (12) months following the Effective Date, such shares
are delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
2.3. COMPANY WARRANTS AND OPTIONS. At the Effective Time, each of the
----------------------------
Company's then outstanding Company Warrants and Company Options (whether or not
exercisable at the Effective Time), by virtue of the Merger and without any
further action on the part of any holder thereof, shall be assumed by Parent and
automatically converted, on the same terms, into a warrant or option to purchase
a number of shares of Parent Common Stock (to be registered shares to the extent
the option or warrant holder is, by the terms of the Company option plan or
warrant in effect, entitled upon exercise of the option or warrant, to receive
registered stock) determined by multiplying the number of shares of Company
Common Stock covered by such Company Warrants and Company Options immediately
prior to the Effective Time by two-thirds (2/3) (rounded up to the nearest whole
number of shares), at an exercise price per share of Parent Common Stock equal
to the exercise price in effect under such Company Warrants or Company Options
immediately prior to the Effective Time divided by two-thirds (2/3) (rounded up
to the nearest cent). The converted warrants and options shall be exercisable on
the same terms
5
and conditions as the existing Company Warrants and Company Options without
however giving effect to any mandatory or permissive exercise arising by virtue
of the Merger of the Company with the Subsidiary provided for herein.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Company Options" shall mean and include any Unvested Company
Option and any Vested Company Option.
(b) "Unvested Company Option" shall mean each of the options to
purchase Company Common Stock that is outstanding at the Effective Time, which
is not exercisable immediately prior to the Effective Time pursuant to its terms
in effect as of the date hereof.
(c) "Vested Company Option" shall mean each of the options to purchase
Company Common Stock that is outstanding at the Effective Time, which is
exercisable immediately prior to the Effective Time pursuant to its terms in
effect as of the date hereof.
ARTICLE III.
------------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquisition Sub that,
except as disclosed in the Company SEC Documents or the disclosure schedule
dated the date hereof, certified by the President or Acting President of the
Company and delivered by the Company to Parent and Acquisition Sub
simultaneously herewith (which disclosure schedule shall contain specific
references to the representations and warranties to which the disclosures
contained therein relate) (the "Company Disclosure Schedule"):
3.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of the
----------------------------------------------------
Company and the wholly-owned subsidiary of the Company set forth in the Company
Disclosure Schedule (the "Company Sub"): (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey;
(b) has all requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as now being conducted
and as currently proposed to be conducted; and (c) is duly qualified and in good
standing to do business in all jurisdictions in which the failure to be so
qualified and in good standing could reasonably be expected to have a material
adverse effect on the business, properties, Liabilities, assets, operations,
results of operations, condition (financial or otherwise), prospects or affairs
(a "Material Adverse Effect") of the Company. The Company has all requisite
corporate power and authority to enter into this Agreement and the Plan of
Merger and each of the Related Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Company has delivered to Parent true and
complete copies of the Charter and by-laws of the Company and the Company Sub,
respectively, in each case as amended to the date hereof. As used in this
Agreement, "Certificate" shall mean, with respect to any corporation, those
instruments that at the time constitute its corporate charter as filed or
recorded under the general corporation law of the jurisdiction of its
incorporation, including the articles or certificate of incorporation or
organization, and any amendments thereto, as the same may have been restated,
and any amendments thereto (including any articles or certificates of merger or
consolidation or certificates of designation or similar instruments which effect
any such amendment) which became effective after the most recent such
restatement.
6
3.2. EQUITY INVESTMENTS. The Company does not currently own any capital
------------------
stock or other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity other than the
Company Sub. Other than the Company Sub, the Company does not currently have any
Subsidiaries. The Company owns 100% of the issued and outstanding capital stock
of the Company Sub, free and clear of all Encumbrances. Except for the Company
Options and the Company Warrants, there are no options, warrants, rights, calls,
commitments or agreements of any character to which the Company or the Company
Sub is a party or by which the Company or the Company Sub is bound calling for
the issuance of shares of capital stock of the Company or the Company Sub or any
securities convertible into or exercisable or exchangeable for, or representing
the right to purchase or otherwise receive, any such capital stock, or other
arrangement to acquire, at any time or under any circumstance, capital stock of
the Company or any such other securities of the Company or the Company Sub.
3.3. CAPITAL STOCK; SECURITIES. The authorized capital stock of the
-------------------------
Company consists of 20,000,000 shares of Company Common Stock, of which
6,383,611 shares are outstanding as of November 18, 1997 and 1,000,000 shares of
preferred stock with no par value, of which no shares are outstanding. As of
November 30, 1997, the Company has outstanding warrants for 583,344 shares of
Company Common Stock (with no shares of Company Common Stock reserved for such
purpose) (collectively, the "Company Warrants") and (y) 675,000 shares of
Company Common Stock reserved for issuance upon the exercise of 351,200
outstanding Company Options, of which 274,700 are Vested Company Options and
76,500 are Unvested Company Options. Other than the 583,344 outstanding Company
Warrants and the 351,200 outstanding Company Options, the Company does not have
outstanding any options to purchase, or any pre-emptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. All outstanding
shares of Company Common Stock are validly issued and outstanding, fully paid
and non-assessable and not subject to preemptive rights. There are no voting
trusts, voting agreements (except in favor of the Merger), proxies (except as a
part of voting agreements in favor of the Merger), first refusal rights, first
offer rights, co-sale rights, transfer restrictions (other than restrictions
imposed by federal or state securities laws) or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect to the
voting, transfer or disposition of Company Common Stock to which the Company is
a party or by which it is bound, or, to the best knowledge of the Company, among
or between any persons other than the Company.
3.4. AUTHORITY; NO CONSENTS. The execution, delivery and performance by
----------------------
the Company of this Agreement, the Plan of Merger and the Related Agreements to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of the Company; and this Agreement and the Related Agreements
to which it is a party have been, and the Plan of Merger when executed and
delivered by the Company will be, duly and validly executed and delivered by the
Company, and this Agreement and the Related Agreements to which it is a party
are, and the Plan of Merger when executed and delivered by the parties thereto
will be, the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and general equitable principles. Neither the execution, delivery and
performance of this Agreement, the Plan of Merger or Related Agreements to which
it is a party nor the consummation by the Company of the transactions
contemplated hereby or thereby nor compliance by the Company with any provision
hereof or thereof will: (a) conflict with; (b) result in any violations of; (c)
cause a default under (with or without due notice, lapse of time or both); (d)
give rise to any right of termination, amendment, cancellation or acceleration
of any obligation contained in or the loss of any material benefit under; or (e)
result in the creation of any Encumbrance on or against any assets, right or
property of the Company under any term,
7
condition or provision of: (x) any instrument or agreement to which the Company
is a party, or, to the best knowledge of the Company, by which the Company or
any of its properties, assets or rights may be bound (except as shall have been
waived or with respect to which consent shall have been obtained prior to the
Closing); (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Governmental Authority
applicable to the Company or any of its properties, assets or rights; or (z) the
Company's Certificate or by-laws, as amended through the date hereof. Except as
contemplated by this Agreement or the Plan of Merger, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority is required in connection with the execution, delivery
and performance by the Company of this Agreement, the Plan of Merger or the
Related Agreements to which the Company is a party or the consummation of the
transactions contemplated hereby or thereby, except for: (i) the filing with the
Securities and Exchange Commission (the "SEC") of (A) the S-4 and (B) such
reports and information under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated by the
SEC thereunder, as may be required in connection with this Agreement, the Plan
of Merger and the transactions contemplated hereby and thereby; (ii) such
filings as may be required by the Over the Counter Bulletin Board Service with
respect to Parent Common Stock to be issued in connection with the Merger and
the Company Warrants to be assumed by Parent in the Merger; (iii) the filing of
such documents with, and the obtaining of such orders from, various state
securities and blue-sky authorities as are required in connection with the
transactions contemplated hereby; (iv) the distribution of the Stockholders'
Materials with respect to the adoption by the Stockholders of this Agreement and
the Plan of Merger; (v) the filing of the Plan of Merger with the Secretary of
State of the State of New Jersey and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business;
and (vi) such other consents, waivers, authorizations, filings, approvals and
registrations which if not obtained or made would not have a Material Adverse
Effect on the Company or materially impair the ability of the Company and the
Stockholders to consummate the transactions contemplated by this Agreement or
the Plan of Merger, including, without limitation, the Merger.
3.5. SEC DOCUMENTS. The Company has furnished Parent with a correct and
-------------
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC on or after August 31, 1996
(the "Company SEC Documents"), which are all the documents (other than
preliminary material) that the Company was required to file (or otherwise did
file) with the SEC on or after August 31, 1996. As of their respective dates,
none of the Company SEC Documents (including all exhibits and schedules thereto
and documents incorporated by reference therein) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company SEC
Documents complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
3.6. FINANCIAL STATEMENTS. The financial statements of the Company
--------------------
included in the Company SEC Documents (the "Company Financial Statements"): (a)
complied as to form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principals ("GAAP"), consistently applied (except as may have been indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q promulgated by the SEC); (b) were in accordance with the books and
records of the Company; and (c) fairly present (subject, in the case of the
unaudited statements, to normal, nonrecurring audit adjustments) the
consolidated financial position of the Company and its consolidated subsidiaries
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
8
3.7. ABSENCE OF UNDISCLOSED LIABILITIES. At August 31, 1997: (a) the
----------------------------------
Company had no liability or obligation of any nature (whether known or unknown,
matured or unmatured, fixed or contingent ("Liability")), which was not provided
for or disclosed on the Company SEC Documents for the fiscal year ended August
31, 1997; and (b) all liability reserves established by the Company and set
forth on the Company Financial Statements were adequate, in the good faith
judgment of the Company, for all such Liabilities at the date thereof. There
were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975 ("FAS No. 5")) which were not adequately provided
for on the Company Financial Statements as required by FAS No. 5.
3.8. ABSENCE OF CHANGES. Since August 31, 1997, the Company has been
------------------
operated in the ordinary course, consistent with past practice, and there has
not been:
(a) to the best knowledge of the Company, any damage, destruction or
loss, whether or not covered by insurance, having or which could reasonably be
expected to have a Material Adverse Effect;
(b) to the best knowledge of the Company, any Liability created,
assumed, guaranteed or incurred, or any material transaction, contract or
commitment entered into, by the Company, other than the license, sale or
transfer of the Company's products to customers in the ordinary course of
business;
(c) any declaration, setting aside or payment of any dividend or other
distribution of any assets of any kind whatsoever with respect to any shares of
the capital stock of the Company, or any direct or indirect redemption, purchase
or other acquisition of any such shares of the capital stock of the Company;
(d) any payment, discharge or satisfaction of any material Encumbrance
or Liability or any cancellation by the Company of any material debts or claims
or any amendment, termination or waiver of any right of material value to the
Company;
(e) any stock split, reverse stock split, combination,
reclassification or recapitalization of any Company Common Stock, or any
issuance of any other security in respect of or in exchange for, any shares of
Company Common Stock;
(f) any issuance by the Company of any shares of its capital stock or
any debt security or securities, rights, options or warrants convertible into or
exercisable or exchangeable for any shares of its capital stock or debt security
(other than shares of Company Common Stock issued upon exercise of Company
Options in accordance with the present terms thereof);
(g) any termination of, or, to the best knowledge of the Company,
indication of an intention to terminate or not renew, any material contract,
license, commitment or other agreement between the Company and any other person,
or the assignment by the Company of any interest in any contract to which the
Company is a party;
(h) any material write-down or write-up of the value of any asset of
the Company, or any material write-off of any accounts receivable or notes
receivable of the Company or any portion thereof;
(i) any increase in or modification or acceleration of compensation or
benefits payable or to become payable to any officer, employee, consultant or
agent of the
9
Company other than in the ordinary course, or the entering into of any
employment contract with any officer or employee;
(j) the making of any loan, advance or capital contribution to or
investment in any person or the engagement in any transaction with any employee,
officer, director or stockholder of the Company, other than advances to
employees in the ordinary course of business for travel and similar business
expenses;
(k) any change in the accounting methods or practices followed by the
Company, or any change in depreciation or amortization policies or rates
theretofore adopted by the Company;
(l) any termination of employment of any officer or key employee of
the Company or, to the best knowledge of the Company, any expression of
intention by any officer or key employee of the Company to terminate such office
or employment with the Company;
(m) any amendments or changes in the Company's Certificate or by-laws;
(n) to the best knowledge of the Company, the commencement of any
litigation or other action by or against the Company; or
(o) any agreement, understanding, authorization or proposal, whether
in writing or otherwise, for the Company to take any of the actions specified in
items (a) through (n) above.
3.9. TAX MATTERS. The Company and each other corporation included in any
-----------
consolidated or combined tax return in which the Company has been included: (a)
have filed and will file, in a timely and proper manner, consistent with
applicable laws, all Federal, state and local Tax returns and Tax reports
required to be filed by them through the Closing Date (the "Company Returns")
with the appropriate governmental agencies in all jurisdictions in which Company
Returns are required to be filed and have paid or will pay all amounts shown
thereon to be due; and (b) have paid and shall timely pay all Taxes required to
have been paid on or before the Closing Date. All Taxes attributable to all
taxable periods ending on or before the Closing Date, to the extent not required
to have been previously paid have been adequately provided for on the Company
Financial Statements and the Company will not accrue a Tax liability from the
date of the Company Financial Statements up to and including the Closing Date,
other than a Tax liability accrued in the ordinary course of business. The
Company has not been notified by the Internal Revenue Service or any state,
local or foreign taxing authority that any issues have been raised (and are
currently pending) in connection with any Company Return, and no waivers of
statutes of limitations have been given or requested with respect to the
Company. Except as contested in good faith and disclosed in the Company
Disclosure Schedule, any deficiencies asserted or assessments (including
interest and penalties) made as a result of any examination by the Internal
Revenue Service or by any other taxing authorities of any Company Return have
been fully paid or are adequately provided for on the Company Financial
Statements and no proposed additional Taxes have been asserted. The Company has
not made an election to be treated as a "consenting corporation" under Section
341(f) of the Code nor is it a "personal holding company" within the meaning of
Section 542 of the Code. The Company has not agreed to, nor is required to make
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise. The Company will not incur a Tax liability
resulting from the Company ceasing to be a member of a consolidated or combined
group that had previously filed consolidated, combined or unitary Tax returns.
As used in this Agreement, "Tax" means any of the Taxes and "Taxes" means, with
respect to any entity: (x) all income taxes (including any tax on or based upon
net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem,
10
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax and other additional amounts imposed by any taxing
authority (domestic or foreign) on such entity; and (y) any liability for the
payment of any amount of the type described in the immediately preceding clause
(x) as a result of: (i) being a "transferee" (within the meaning of Section 6901
of the Code or any other applicable law) of another entity; (ii) being a member
of an affiliated or combined group; or (iii) any contractual obligations or
otherwise.
3.10. TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS. The
----------------------------------------------------------
Company has good and marketable title to all assets, properties and interests in
properties, real, personal or mixed, reflected on the Company SEC Documents or
acquired after August 31, 1997, except for: (a) those Encumbrances set forth in
the Company Disclosure Schedule; (b) liens for current taxes not yet due and
payable; (c) statutory mechanics and materialmen's liens; and (d) utility
easements. As used in this Agreement, the term "Encumbrances" shall mean and
include security interests, mortgages, liens, pledges, guarantees, charges,
easements, reservations, restrictions, clouds, equities, rights of way, options,
rights of first refusal and all other encumbrances, whether or not relating to
the extension of credit or the borrowing of money.
3.11. INTELLECTUAL PROPERTY. The Company Disclosure Schedule sets forth
---------------------
a list of all patents, copyrights, trademarks, tradenames and service marks and
any licensed intellectual property rights (other than commercial or "shrink-
wrap" licenses covering software generally available to the public on a retail
basis) (collectively, "Intellectual Property Rights") of the Company. To the
best knowledge of the Company, the ownership or use of such Intellectual
Property Rights by the Company does not infringe on the intellectual property
rights of others and the Company has not received notice alleging any such
infringement, and, to the best knowledge of the Company, no third party is
infringing on the Intellectual Property Rights of the Company. The Company is
not obligated to pay any third party any royalty or fee for the use of the
Intellectual Property Rights used in its business.
3.12. AGREEMENTS, ETC. The Company Disclosure Schedule sets forth a true
---------------
and complete list of all written or oral contracts, agreements and other
instruments to which the Company is a party and not made in the ordinary course
of business, or made in the ordinary course of business and referred to in
clauses (a) through (i) of this Section 3.12:
(a) any joint venture, partnership or other agreement or arrangement
for the sharing of profits;
(b) any collective bargaining contract or other contract with or
commitment to any labor union;
(c) the future purchase, sale or license of products, material,
supplies, equipment or services requiring payments to or from the Company in an
amount in excess of $25,000 per annum, which agreement, arrangement or
understanding is not terminable on thirty (30) days' notice without cost or
other liability at or at any time after the Effective Time, or in which the
Company has granted or received manufacturing rights, most favored nations
pricing provisions or exclusive marketing or other rights relating to any
product, group of products, services, technology, assets or territory;
(d) the employment of any officer, employee, consultant or agent or
any other type of contract, commitment or understanding with any officer,
employee, consultant or agent which (except as otherwise generally provided by
applicable law) is not immediately terminable without cost or other liability at
or at any time after the Effective Time;
11
(e) an indenture, mortgage, promissory note, loan agreement, guarantee
or other agreement or commitment for the borrowing of money, for a line of
credit or, if involving payments in excess of $25,000 per annum, for a leasing
transaction of a type required to be capitalized in accordance with Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board;
(f) a contract or commitment for capital expenditures individually in
excess of $25,000;
(g) any agreement or contract with a "disqualified individual" (as
defined in Section 280G(c) of the Code), which could result in a disallowance of
the deduction for any "excess parachute payment" (as defined in Section
280G(b)(i) of the Code) under Section 280G of the Code;
(h) an agreement or arrangement for the sale of any assets, properties
or rights having a value in excess of $25,000; or
(i) an agreement which restricts the Company from engaging in any
aspect of its business or competing in any line of business in any geographic
area.
The Company has furnished to Parent true and complete copies of all such
agreements listed in the Company Disclosure Schedule and each such agreement:
(i) is the legal, valid and binding obligation of the Company and, to the best
knowledge of the Company, the legal, valid and binding obligation of each other
party thereto, in each case enforceable in accordance with its terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and general equitable principles; (ii) to the best
knowledge of the Company is in full force and effect; and (iii) to the best
knowledge of the Company, the other party or parties thereto is or are not in
material default thereunder.
3.13. NO DEFAULTS, ETC. The Company has in all material respects
----------------
performed all the obligations required to be performed by it to date and is not
in material default or, to the best knowledge of the Company, alleged to be in
material default under: (a) its Certificate or by-laws; or (b) any material
agreement, lease, contract, commitment, instrument or obligation to which the
Company is a party or by which any of its properties, assets or rights are or
may be bound or affected, and, to the best knowledge of the Company, there
exists no event, condition or occurrence which, with or without due notice or
lapse of time, or both, would constitute such a default by it of any of the
foregoing. To the best knowledge of the Company, no current customer has
notified, or expressed an intention to notify, the Company that such customer
will materially reduce the dollar amount of business it will do with the Company
or cease doing business with the Company under circumstances where such
notification or intention has been reported to an officer of the Company.
3.14. LITIGATION, ETC. There are no: (a) actions, suits, claims,
---------------
investigations or legal or administrative or arbitration proceedings
(collectively, "Actions") pending, or to the best knowledge of the Company,
threatened against the Company, whether at law or in equity, or before or by any
Federal, state, municipal, foreign or other governmental court, department,
commission, board, bureau, agency or instrumentality ("Governmental Authority");
(b) judgments, decrees, injunctions or orders of any Governmental Authority or
arbitrator against the Company; or (c) to the best knowledge of the Company,
material disputes with customers or vendors, in each case, except for any such
matter which would not have a material adverse effect on the Company.
12
3.15. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. To the best knowledge of
---------------------------------------
the Company, the Company has complied within the last five (5) years and is
presently in compliance in all material respects with all material Federal,
state, local or foreign laws, ordinances, regulations and orders applicable to
it or its business, including, without limitation, the Food and Drug
Administration of the United States Department of Health and Human Services
("FDA"), all Federal and state securities or "blue sky" laws and all laws and
regulations relating to occupational safety and health and the environment. To
the best knowledge of the Company, the Company has all material Federal, state,
local and foreign governmental authorizations, security clearances, consents,
approvals, licenses and permits necessary in the conduct of its business as
presently conducted and as currently proposed to be conducted, such
authorizations, consents, approvals, licenses and permits are in full force and
effect, no material violations are or have been recorded in respect of any
thereof and no proceeding is pending or, to the best knowledge of the Company,
threatened to revoke or limit any thereof. To the best knowledge of the Company,
all of the Company's full-time and temporary personnel who provide services in a
manner or of the type that require specific certifications or clearances have
provided such services at all times while having such certifications or
clearances in full force and effect. Neither the Company nor, to the best
knowledge of the Company, any of its full-time or part-time personnel has been
cited or alleged by the FDA or other regulatory authority within the last five
(5) years as failing to comply with regulatory requirements or guidelines in the
performance of services.
3.16. LABOR RELATIONS; EMPLOYEES. The Company Disclosure Schedule sets
--------------------------
forth the number of full-time and part-time employees of the Company and the
primary locations at which such employees provide their services as of November
30, 1997. To the best knowledge of the Company: (a) the Company is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to date or amounts required to be reimbursed to such employees; (b)
Acquisition Sub nor the Surviving Corporation will by reason of anything done
prior to the Closing be liable to any of such employees for severance pay or any
other payments; (c) the Company is in compliance in all material respects with
all material Federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices, terms and conditions of employment
and wages and hours; and (d) there is no unfair labor practice, sexual
harassment or other employment-related complaint pending or, to the best
knowledge of the Company, threatened against the Company or any employee of the
Company. To the best knowledge of the Company, no employee of the Company is in
material violation of any term of any employment contract, confidentiality
agreement or any other contract or agreement relating to the relationship of
such employee with the Company or any other party because of the nature of the
business conducted or proposed to be conducted by the Company or the execution
and delivery of such agreement or contract by such employee.
3.17. EMPLOYEE BENEFIT PLANS AND CONTRACTS.
------------------------------------
(a) The Company Disclosure Schedule identifies each "employee benefit
plan," as defined in Section 1002(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and all other material written or formal
plans or agreements involving direct or indirect compensation (including any
employment agreements entered into between the Company and any Employee of the
Company, but excluding workers' compensation, unemployment compensation, other
government-mandated programs and the Company's salary and wage arrangements)
currently or previously maintained, contributed to or entered into by the
Company or any ERISA Affiliate thereof for the benefit of any Employee or former
Employee under which the Company or any ERISA Affiliate thereof has any present
or future obligation or liability (the "Employee Plans"). The Company has
provided to Parent true and complete copies of all Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto and written
interpretations thereof. For purposes of the preceding sentence, "ERISA
Affiliate" shall mean any entity which is a member of (A) a "controlled group of
corporations," as defined in
13
Section 414(b) of the Code, (B) a group of entities under "common control," as
defined in Section 414(c) of the Code or (C) an "affiliated service group," as
defined in Section 414(m) of the Code or treasury regulations promulgated under
Section 414(o) of the Code, any of which includes the Company. Any Employee
Plans which individually or collectively would constitute an "employee pension
benefit plan," as defined in Section 3(2) of ERISA, but which are not
Multiemployer Plans (collectively, the "Pension Plans"), are identified as such
in the Company Disclosure Schedule. For purposes of this Section 3.17 and
Section 4.17, "Employee" means any common law employee, consultant or director
as to Section 3.17 of the Company, and as to Section 4.17, Parent.
(b) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to the date hereof, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The Company has
provided Parent with copies of the most recent Internal Revenue Service
determination letters with respect to any such Employee Plans. Each Employee
Plan has been maintained substantially in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including, without limitation, ERISA and the Code, which are applicable to such
Employee Plans.
(c) No Employee Plan constitutes or since the enactment of ERISA has
constituted a "multiemployer plan," as defined in Section 3(37) of ERISA (a
"Multiemployer Plan"). The Company has not within the past five (5) years
incurred any material liability under Title IV of ERISA arising in connection
with the termination of any Pension Plan or the complete or partial withdrawal
from any Multiemployer Plan. If a "complete withdrawal" by the Company were to
occur as of the Closing with respect to all Multiemployer Plans, the Company
would not incur any withdrawal liability under Title IV of ERISA.
(d) The Company Disclosure Schedule lists each employment, severance
or other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which: (i) is not an Employee Plan; (ii) is
entered into, maintained or contributed to, as the case may be, by the Company;
(iii) covers any Employee or former Employee; and (iv) under which the Company
has any present or future obligation or liability (excluding workers'
compensation, unemployment compensation or other government-mandated programs
and the Company's salary and wage arrangements). Such contracts, plans and
arrangements as are described above are hereinafter referred to collectively as
the "Benefit Arrangements". Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all material laws, statutes, rules, regulations, orders and judgments
which are applicable to such Benefit Arrangements.
(e) The Company has provided, or will have provided, to individuals
entitled thereto who are current or former Employees of the Company all required
notices within the applicable time period and coverage pursuant to Section 4980B
of the Code with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Code) occurring prior to and including the Closing Date, and
no tax payable on account of Section 4980B of the Code has been incurred with
respect to any current or former Employees of the Company.
3.18. CERTAIN AGREEMENTS. Neither the execution and delivery of this
------------------
Agreement nor the consummation of the transactions contemplated hereby will: (a)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of the Company from the Company, under any Employee Plan, Benefit
Arrangement or otherwise; (b) materially increase any benefits
14
otherwise payable under any Employee Plan or the Benefit Arrangement; or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
3.19. INSURANCE. The Company maintains policies of liability, theft,
---------
fidelity, fire, product liability, workmen's compensation, indemnification of
directors and officers and other similar forms of insurance. The Company
Disclosure Schedule sets forth a history of all claims within the last five (5)
years in excess of $50,000 made by the Company thereunder and the status
thereof. All such policies of insurance are in full force and effect and all
premiums with respect thereto are currently paid and, to the best knowledge of
the Company, no basis exists for termination of any thereof on the part of the
insurer. The amounts of coverage under such policies conform to the requirements
set forth in the Company's customer contracts. The Company has not, during the
last three fiscal years, been denied or had revoked or rescinded any policy of
insurance.
3.20. BROKERS. The Company has not, nor have any of its officers,
-------
directors, stockholders or employees, employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement, the Plan of Merger or any
of the Related Agreements.
3.21. RELATED TRANSACTIONS. Except for compensation to regular employees
--------------------
of the Company, no current or former director, officer or stockholder that is an
affiliate of the Company or any associate (as defined in the rules promulgated
under the Exchange Act) thereof, is now, or has been during the last five (5)
fiscal years: (a) a party to any transaction with the Company (including, but
not limited to, any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
borrowing money from, or otherwise requiring payments to, any such director,
officer or affiliated stockholder of the Company or associate thereof); or (b)
the direct or indirect owner of an interest in any corporation, firm,
association or business organization which is a present or potential competitor,
supplier or customer of the Company (other than non-affiliated holdings in
publicly-held companies), nor does any such person receive income from any
source other than the Company which relates to the business of, or should
properly accrue to, the Company.
3.22. BOARD APPROVAL. The Board of Directors of the Company has
--------------
unanimously: (a) approved this Agreement, the Plan of Merger and each of the
Related Agreements to which the Company is a party and the transactions
contemplated hereby and thereby; (b) determined that the Merger is in the best
interests of the Stockholders of the Company and, subject to receipt of a
fairness opinion, is on terms that are fair to such Stockholders; and (c)
recommended that the Stockholders of the Company approve the Merger in
accordance with the Plan of Merger and the New Jersey Statute. No other
approvals are required other than that of the Board of Directors and
Stockholders of the Company.
3.23. VOTE REQUIRED. The affirmative vote of two-thirds (2/3) of the
-------------
outstanding shares voting of the Company Common Stock approving the Merger, this
Agreement, the Plan of Merger, and the transactions contemplated hereby and
thereby are the only votes of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement, the Plan of Merger
and each of the Related Agreements to which the Company is a party and the
transactions contemplated hereby and thereby.
3.24. INFORMATION SUPPLIED. None of the information supplied or to be
--------------------
supplied by the Company or any Stockholder for inclusion in: (a) the S-4 will,
at the time that the S-4 is filed with the SEC and at the time that the S-4
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; and (b) the
Stockholders' Materials will, at the dates mailed to the Stockholders and at the
effective date of the Stockholder
15
Action, 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 light of the circumstances under which they are made, not
misleading. The Stockholders' Materials will comply as to form in all material
respects with the provisions of all applicable laws, rules and regulations of
all Governmental Authorities.
3.25. COMPANY NOT AN INTERESTED STOCKHOLDER. As of the date of this
-------------------------------------
Agreement, neither the Company nor, to the best of the Company's knowledge, any
of its Affiliates is an "Interested Stockholder" of Parent as such term is
defined in Section 203 of the Delaware General Corporation Law.
3.26. DISCLOSURE. No part of Article III of this Agreement (including
----------
the Company Disclosure Schedule) nor any document, written information,
statement, financial statement, certificate or exhibit furnished or to be
furnished to Parent or Acquisition Sub by or on behalf of the Company or any
Stockholder pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements or facts contained herein and therein not misleading in light of the
circumstances under which they were made.
3.27. KNOWLEDGE DEFINITION. As used in this Agreement, "to the best
--------------------
knowledge of the Company" and like phrases shall mean and include: (a) actual
knowledge; and (b) that knowledge which a prudent businessperson (including the
officers, directors and other key employees of the Company) would have obtained
in the management of his or her business affairs after making due inquiry and
exercising reasonable diligence with respect thereto. In connection therewith,
the knowledge (both actual and constructive) of any officer, director or other
key employee of the Company shall be imputed to be the knowledge of the Company.
3.28. COMPANY REFERENCE INCLUDES COMPANY SUBS. Each reference to the
---------------------------------------
Company in this Article III shall be deemed to be a reference to the Company and
the Company Sub, unless the context requires otherwise. Accordingly, the Company
Disclosure Schedule shall include disclosures with respect to the Company Sub,
as well as the Company, in response to the representations and warranties set
forth in this Article III, as applicable.
ARTICLE IV.
-----------
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Parent and Acquisition Sub, jointly and severally, represent and warrant to
the Company that, except as disclosed in the Parent SEC Documents or the
disclosure schedule dated the date hereof, certified by the President of Parent
and delivered by Parent to the Company simultaneously herewith (which disclosure
schedule shall contain specific references to the representations and warranties
to which the disclosures contained therein relate) (the "Parent Disclosure
Schedule"):
4.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of Parent
----------------------------------------------------
and Acquisition Sub: (a) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and New Jersey,
respectively; (b) has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as now being
conducted and as currently proposed to be conducted, to enter into this
Agreement, the Plan of Merger (in the case of Acquisition Sub) and each of the
Related Agreements to which either is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby; and (c) is duly qualified and in good standing in all jurisdictions
in which the failure to be so qualified and in good standing could reasonably be
expected to have a Material Adverse Effect on the Parent or Acquisition Sub.
16
Parent has delivered to the Company true and complete copies of the Certificate
and by-laws of each of Parent and Acquisition Sub.
4.2. EQUITY INVESTMENTS. Other than Cardiac Control Systems Far East,
------------------
Ltd. ("CCSFE") and Acquisition Sub, the Company does not currently have any
Subsidiaries, nor does it currently own any capital stock or other proprietary
interest, directly or indirectly, in any corporation, association, trust,
partnership, joint venture or other entity. Parent owns 100% of the issued and
outstanding capital stock of CCSFE, free and clear of all Encumbrances. Except
for the Parent Options and the Parent Warrants, there are no options, warrants,
rights, calls, commitments or agreements of any character to which Parent or
Acquisition Sub is a party or by which Parent or Acquisition Sub is bound
calling for the issuance of shares of capital stock of Parent or Acquisition Sub
or any securities convertible into or exercisable or exchangeable for, or
representing the right to purchase or otherwise receive, any such capital stock,
or other arrangement to acquire, at any time or under any circumstance, capital
stock of Parent or any such other securities of Parent or Acquisition Sub.
4.3. CAPITAL STOCK; SECURITIES. The authorized capital stock of Parent
-------------------------
consists of 30,000,000 shares of Parent Common Stock, of which 2,648,739 shares
are outstanding as of November 30, 1997. As of November 30, 1997, Parent has
reserved (x) 690,965 shares of Parent Common Stock for issuance upon exercise of
outstanding warrants (collectively, the "Parent Warrants") and (y) 413,165
shares of Parent Common Stock for issuance upon the exercise of outstanding
options (the "Parent Options"), of which 373,356 are vested Parent Options and
39,809 are unvested Parent Options. Other than the 690,965 outstanding Parent
Warrants and the 413,165 outstanding Parent Options, Parent does not have
outstanding any options to purchase, or any pre-emptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. There are no
voting trusts, voting agreements, proxies, first refusal rights, first offer
rights, co-sale rights, transfer restrictions (other than restrictions imposed
by federal or state securities laws) or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect to the
voting, transfer or disposition of Parent Common Stock to which Parent is a
party or by which it is bound, or, to the best knowledge of Parent, among or
between any persons other than Parent. All outstanding shares of Parent Common
Stock are validly issued, fully paid and non-assessable and not subject to
preemptive rights. Parent has duly authorized and reserved for issuance the
Merger Shares, and, when issued in accordance with the terms of Article II and
the Plan of Merger, the Merger Shares will be validly issued, fully paid and
nonassessable and free of preemptive rights. Parent owns all the outstanding
shares of capital stock of Acquisition Sub, and all of such shares are validly
issued, fully paid and nonassessable and not subject to preemptive rights.
4.4. AUTHORITY; NO CONSENTS. The execution, delivery and performance
----------------------
by Parent of this Agreement and each of the Related Agreements to which it is a
party, the execution, delivery and performance of this Agreement and the Plan of
Merger by Acquisition Sub and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Acquisition Sub. This Agreement and each of the
Related Agreements to which Parent is a party are valid and binding obligations
of Parent, enforceable against Parent in accordance with their respective terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally and general equitable principles; and this Agreement
is, and the Plan of Merger when executed and delivered by Acquisition Sub, as
contemplated hereby, will be, the valid and binding obligations of Acquisition
Sub, enforceable against Acquisition Sub in accordance with their respective
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally and
17
general equitable principles. Neither the execution, delivery and performance by
Parent of this Agreement and the Related Agreements to which it is a party, the
execution, delivery and performance of this Agreement and the Plan of Merger by
Acquisition Sub, nor the consummation of the transactions contemplated hereby or
thereby, will: (a) conflict with; (b) result in any violations of; (c) cause a
default under (with or without due notice, lapse of time or both); (d) give rise
to any right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under; or (e) result
in the creation of any Encumbrance on or against any assets, rights or property
of Parent or Acquisition Sub, as the case may be, under any term, condition or
provision of: (x) any instrument or agreement to which Parent or Acquisition Sub
is a party, or, to the best knowledge of Parent, by which Parent or Acquisition
Sub or any of their respective properties, assets or rights may be bound (except
as shall have been waived or with respect to which consent shall have been
obtained prior to the Closing); (y) any law, statute, rule, regulation, order,
writ, injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to Parent or Acquisition Sub or any of their
respective properties, assets or rights; or (z) Parent's or Acquisition Sub's
Certificate or by-laws, as amended through the date hereof. Except as
contemplated by this Agreement or the Plan of Merger, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority is required in connection with the execution, delivery
and performance by Parent or Acquisition Sub of this Agreement, the Plan of
Merger or the Related Agreements to which they are party or the consummation of
the transactions contemplated hereby or thereby, except for: (i) the filing with
the SEC of (A) the S-4 and (B) such reports and information under the Exchange
Act, and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement and the Plan of Merger and the
transactions contemplated hereby and thereby; (ii) such filings as may be
required by the Over the Counter Bulletin Board Service with respect to Parent
Common Stock to be issued in connection with the Merger and the Company Warrants
to be assumed by Parent in the Merger; (iii) the filing of such documents with,
and the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby; (iv) the filing of the Plan of Merger with the Secretary of State of the
State of New Jersey; and (v) such other consents, waivers, authorizations,
filings, approvals and registrations which if not obtained or made would not
have a Material Adverse Effect on Parent or materially impair the ability of
Parent or Acquisition Sub to consummate the transactions contemplated by this
Agreement and the Plan of Merger, including, without limitation, the Merger.
4.5. SEC DOCUMENTS. Parent has furnished the Company with a correct and
-------------
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent with the SEC on or after March 31, 1996 (the
"Parent SEC Documents"), which are all the documents (other than preliminary
material) that Parent was required to file (or otherwise did file) with the SEC
on or after March 31, 1996. As of their respective dates, none of the Parent SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Parent SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
4.6. FINANCIAL STATEMENTS. The financial statements of Parent included
--------------------
in the Parent SEC Documents (the "Parent Financial Statements"): (a) complied as
to form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP, consistently applied (except as
may have been indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-QSB promulgated by the SEC); (b) were in
accordance with the books and records of Parent; and (c) fairly present
(subject, in the case of the unaudited
18
statements, to normal, nonrecurring audit adjustments) the consolidated
financial position of Parent and its consolidated subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended.
4.7. ABSENCE OF UNDISCLOSED LIABILITIES. At September 30, 1997:
----------------------------------
(a) Parent had no Liability which was not provided for or disclosed
on the Parent SEC Documents for the quarter period ended for September 30, 1997;
and (b) liability reserves established by Parent and set forth thereon were
adequate, in the good faith judgment of Parent, for all such Liabilities at the
date thereof. There were no material loss contingencies (as such term is used in
FAS No. 5) which were not adequately provided on the Parent Financial Statements
as required by FAS No. 5.
4.8. ABSENCE OF CHANGES. Since September 30, 1997, Parent has been
------------------
operated in the ordinary course, consistent with past practice, and there has
not been:
(a) to the best knowledge of Parent, any damage, destruction or loss,
whether or not covered by insurance, having or which could reasonably be
expected to have a Material Adverse Effect;
(b) to the best knowledge of Parent, any Liability created, assumed,
guaranteed or incurred, or any material transaction, contract or commitment
entered into, by Parent, other than the license, sale or transfer of Parent's
products to customers in the ordinary course of business;
(c) any declaration, setting aside or payment of any dividend or other
distribution of any assets of any kind whatsoever with respect to any shares of
the capital stock of Parent, or any direct or indirect redemption, purchase or
other acquisition of any such shares of the capital stock of Parent;
(d) any payment, discharge or satisfaction of any material Encumbrance
or Liability or any cancellation by Parent of any material debts or claims or
any amendment, termination or waiver of any right of material value to Parent;
(e) any stock split, reverse stock split, combination,
reclassification or recapitalization of any Parent Common Stock, or any issuance
of any other security in respect of or in exchange for, any shares of Parent
Common Stock;
(f) any issuance by Parent of any shares of its capital stock or any
debt security or securities, rights, options or warrants convertible into or
exercisable or exchangeable for any shares of its capital stock or debt
security;
(g) any termination of, or, to the best knowledge of Parent,
indication of an intention to terminate or not renew, any material contract,
license, commitment or other agreement between Parent and any other person, or
the assignment by Parent of any interest in any contract to which Parent is a
party;
(h) any material write-down or write-up of the value of any asset of
Parent, or any material write-off of any accounts receivable or notes receivable
of Parent or any portion thereof;
(i) any increase in or modification or acceleration of compensation or
benefits payable or to become payable to any officer, employee, consultant or
agent of Parent other than in the ordinary course, or the entering into of any
employment contract with any officer or employee;
19
(j) the making of any loan, advance or capital contribution to or
investment in any person or the engagement in any transaction with any employee,
officer, director or stockholder of Parent, other than advances to employees in
the ordinary course of business for travel and similar business expenses;
(k) any change in the accounting methods or practices followed by
Parent, or any change in depreciation or amortization policies or rates
theretofore adopted by Parent;
(l) any termination of employment of any officer or key employee of
Parent or, to the best knowledge of Parent, any expression of intention by any
officer or key employee of Parent to terminate such office or employment with
Parent;
(m) any amendments or changes in Parent's Certificate or by-laws;
(n) to the best knowledge of Parent, the commencement of any
litigation or other action by or against Parent; or
(o) any agreement, understanding, authorization or proposal, whether
in writing or otherwise, for Parent to take any of the actions specified in
items (a) through (i) above.
4.9. TAX MATTERS. Parent and each other corporation included in any
-----------
consolidated or combined tax return in which Parent has been included: (a) have
filed and will file, in a timely and proper manner, consistent with applicable
laws, all Federal, state and local Tax returns and Tax reports required to be
filed by them through the Closing Date (the "Parent Returns") with the
appropriate governmental agencies in all jurisdictions in which Parent Returns
are required to be filed and have paid or will pay all amounts shown thereon to
be due; and (b) have paid and shall timely pay all Taxes required to have been
paid on or before the Closing Date. All Taxes attributable to all taxable
periods ending on or before the Closing Date, to the extent not required to have
been previously paid have been adequately provided for on the Parent Financial
Statements and Parent will not accrue a Tax liability from the date of the
Parent Financial Statements up to and including the Closing Date, other than a
Tax liability accrued in the ordinary course of business. Parent has not been
notified by the Internal Revenue Service or any state, local or foreign taxing
authority that any issues have been raised (and are currently pending) in
connection with any Parent Return, and no waivers of statutes of limitations
have been given or requested with respect to Parent. Except as contested in good
faith and disclosed in the Parent Disclosure Schedule, any deficiencies asserted
or assessments (including interest and penalties) made as a result of any
examination by the Internal Revenue Service or by any other taxing authorities
of any Parent Return have been fully paid or are adequately provided for on the
Parent Financial Statements and no proposed additional Taxes have been asserted.
Parent has not made an election to be treated as a "consenting corporation"
under Section 341(f) of the Code nor is it a "personal holding company" within
the meaning of Section 542 of the Code. Parent has not agreed to, nor is
required to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. Parent will not incur a Tax liability
resulting from Parent ceasing to be a member of a consolidated or combined group
that had previously filed consolidated, combined or unitary Tax returns.
4.10. TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS. Parent
----------------------------------------------------------
has good and marketable title to all assets, properties and interests in
properties, real, personal or mixed, reflected on the Parent SEC Documents or
acquired after September 30, 1997, except for: (a) those Encumbrances set forth
in the Parent Disclosure Schedule; (b) liens for current taxes not yet due and
payable; (c) statutory mechanics and materialmen's liens; and (d) utility
easements.
20
4.11. INTELLECTUAL PROPERTY. The Parent Disclosure Schedule sets forth
---------------------
a list of all Intellectual Property Rights of Parent. To the best knowledge of
Parent, the ownership or use of such Intellectual Property Rights by Parent does
not infringe on the intellectual property rights of others and Parent has not
received notice alleging any such infringement, and, to the best knowledge of
Parent, no third party is infringing on the Intellectual Property Rights of
Parent. Parent is not obligated to pay any third party any royalty or fee for
the use of the Intellectual Property Rights used in its business.
4.12. AGREEMENTS, ETC. The Parent Disclosure Schedule sets forth a true
---------------
and complete list of all written or oral contracts, agreements and other
instruments to which Parent is a party and not made in the ordinary course of
business, or made in the ordinary course of business and referred to in clauses
(a) through (i) of this Section 4.12:
(a) any joint venture, partnership or other agreement or arrangement
for the sharing of profits;
(b) any collective bargaining contract or other contract with or
commitment to any labor union;
(c) the future purchase, sale or license of products, material,
supplies, equipment or services requiring payments to or from Parent in an
amount in excess of $25,000 per annum, which agreement, arrangement or
understanding is not terminable on thirty (30) days' notice without cost or
other liability at or at any time after the Effective Time, or in which Parent
has granted or received manufacturing rights, most favored nations pricing
provisions or exclusive marketing or other rights relating to any product, group
of products, services, technology, assets or territory;
(d) the employment of any officer, employee, consultant or agent or
any other type of contract, commitment or understanding with any officer,
employee, consultant or agent which (except as otherwise generally provided by
applicable law) is not immediately terminable without cost or other liability at
or at any time after the Effective Time;
(e) an indenture, mortgage, promissory note, loan agreement, guarantee
or other agreement or commitment for the borrowing of money, for a line of
credit or, if involving payments in excess of $25,000 per annum, for a leasing
transaction of a type required to be capitalized in accordance with Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board;
(f) a contract or commitment for capital expenditures individually in
excess of $25,000;
(g) any agreement or contract with a "disqualified individual" (as
defined in Section 280G(c) of the Code), which could result in a disallowance of
the deduction for any "excess parachute payment" (as defined in Section
280G(b)(i) of the Code) under Section 280G of the Code;
(h) an agreement or arrangement for the sale of any assets, properties
or rights having a value in excess of $25,000; or
(i) an agreement which restricts Parent from engaging in any aspect of
its business or competing in any line of business in any geographic area.
Parent has furnished to the Company true and complete copies of all such
agreements listed in the Parent Disclosure Schedule and each such agreement: (i)
is the legal, valid and binding
21
obligation of Parent and, to the best knowledge of Parent, the legal, valid and
binding obligation of each other party thereto, in each case enforceable in
accordance with its terms except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally and general
equitable principles; (ii) to the best knowledge of Parent is in full force and
effect; and (iii) to the best knowledge of Parent, the other party or parties
thereto is or are not in material default thereunder.
4.13. NO DEFAULTS, ETC. Parent has in all material respects performed all
----------------
the obligations required to be performed by it to date and is not in material
default or, to the best knowledge of Parent, alleged to be in material default
under: (a) its Certificate or by-laws; or (b) any material agreement, lease,
contract, commitment, instrument or obligation to which Parent is a party or by
which any of its properties, assets or rights are or may be bound or affected,
and, to the best knowledge of Parent, there exists no event, condition or
occurrence which, with or without due notice or lapse of time, or both, would
constitute such a default by it of any of the foregoing. To the best knowledge
of Parent, no current customer has notified, or expressed an intention to notify
Parent that such customer will materially reduce the dollar amount of business
it will do with Parent or cease doing business with Parent.
4.14. LITIGATION, ETC. There are no: (a) Actions pending, or to the best
---------------
knowledge of Parent, threatened against Parent, whether at law or in equity, or
before or by any Governmental Authority; (b) judgments, decrees, injunctions or
orders of any Governmental Authority or arbitrator against the Parent; or (c) to
the best knowledge of the Parent, material disputes with customers or vendors,
in each case, except for any such matter which would not have a material adverse
effect of Parent.
4.15. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. To the best knowledge of
---------------------------------------
Parent, Parent has complied within the last five (5) years and is presently in
compliance in all material respects with all material Federal, state, local or
foreign laws, ordinances, regulations and orders applicable to it or its
business, including, without limitation, the FDA, all Federal and state
securities or "blue sky" laws and all laws and regulations relating to
occupational safety and health and the environment. To the best knowledge of
Parent, Parent has all material Federal, state, local and foreign governmental
authorizations, security clearances, consents, approvals, licenses and permits
necessary in the conduct of its business as presently conducted and as currently
proposed to be conducted, such authorizations, consents, approvals, licenses and
permits are in full force and effect, no material violations are or have been
recorded in respect of any thereof and no proceeding is pending or, to the best
knowledge of Parent, threatened to revoke or limit any thereof. To the best
knowledge of Parent, all of Parent's full-time and temporary personnel who
provide services in a manner or of the type that require specific certifications
or clearances have provided such services at all times while having such
certifications or clearances in full force and effect. Neither Parent nor, to
the best knowledge of Parent, any of its full-time or part-time personnel has
been cited or alleged by the FDA or other regulatory authority within the last
five (5) years as failing to comply with regulatory requirements or guidelines
in the performance of services.
4.16. LABOR RELATIONS; EMPLOYEES. The Parent Disclosure Schedule sets
--------------------------
forth the number of full-time and part-time employees of Parent and the primary
locations at which such employees provide their services as of November 30,
1997. To the best knowledge of Parent: (a) Parent is not delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to date or amounts
required to be reimbursed to such employees; (b) Acquisition Sub nor the
Surviving Corporation will by reason of anything done prior to the Closing be
liable to any of such employees for severance pay or any other payments; (c)
Parent is in compliance in all material respects with all material Federal,
state, local and foreign laws and regulations respecting labor, employment and
employment practices, terms and conditions of employment and wages and
22
hours; and (d) there is no unfair labor practice, sexual harassment or other
employment-related complaint pending or, to the best knowledge of Parent,
threatened against Parent or any employee of Parent. To the best knowledge of
Parent, no employee of Parent is in material violation of any term of any
employment contract, confidentiality agreement or any other contract or
agreement relating to the relationship of such employee with Parent or any other
party because of the nature of the business conducted or proposed to be
conducted by Parent or the execution and delivery of such agreement or contract
by such employee.
4.17. EMPLOYEE BENEFIT PLANS AND CONTRACTS
------------------------------------
(a) The Parent Disclosure Schedule identifies each "employee benefit
plan," as defined in Section 1002(3) of ERISA, and all other material written or
formal plans or agreements involving direct or indirect compensation (including
any employment agreements entered into between Parent and any Employee of
Parent, but excluding workers' compensation, unemployment compensation, other
government-mandated programs and Parent's salary and wage arrangements)
currently or previously maintained, contributed to or entered into by Parent or
any ERISA Affiliate thereof for the benefit of any Employee or former Employee
under which Parent or any ERISA Affiliate thereof has any present or future
obligation or liability (the "Employee Plans"). Parent has provided to the
Company true and complete copies of all Employee Plans (and, if applicable,
related trust agreements) and all amendments thereto and written interpretations
thereof. For purposes of the preceding sentence, "ERISA Affiliate" shall mean
any entity which is a member of (A) a "controlled group of corporations," as
defined in Section 414(b) of the Code, (B) a group of entities under "common
control," as defined in Section 414(c) of the Code or (C) an "affiliated service
group," as defined in Section 414(m) of the Code or treasury regulations
promulgated under Section 414(o) of the Code, any of which includes Parent. Any
Employee Plans which individually or collectively would constitute an "employee
pension benefit plan," as defined in Section 3(2) of ERISA, but which are not
Multiemployer Plans (collectively, the "Pension Plans"), are identified as such
in the Parent Disclosure Schedule.
(b) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to the date hereof, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. Parent has provided the
Company with copies of the most recent Internal Revenue Service determination
letters with respect to any such Employee Plans. Each Employee Plan has been
maintained substantially in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including,
without limitation, ERISA and the Code, which are applicable to such Employee
Plans.
(c) No Employee Plan constitutes or since the enactment of ERISA has
constituted a "multiemployer plan," as defined in Section 3(37) of ERISA (a
"Multiemployer Plan"). Parent has not within the past five (5) years incurred
any material liability under Title IV of ERISA arising in connection with the
termination of any Pension Plan or the complete or partial withdrawal from any
Multiemployer Plan. If a "complete withdrawal" by Parent were to occur as of
the Closing with respect to all Multiemployer Plans, Parent would not incur any
withdrawal liability under Title IV of ERISA.
(d) The Parent Disclosure Schedule lists each employment, severance or
other similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which: (i) is not an Employee Plan; (ii) is
entered into, maintained or contributed to, as the case may be, by Parent; (iii)
covers any Employee or former Employee; and (iv) under which Parent has any
present or future obligation or liability (excluding workers'
23
compensation, unemployment compensation or other government-mandated programs
and Parent's salary and wage arrangements). Such contracts, plans and
arrangements as are described above are hereinafter referred to collectively as
the "Benefit Arrangements". Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all material laws, statutes, rules, regulations, orders and judgments
which are applicable to such Benefit Arrangements.
(e) Parent has provided, or will have provided, to individuals
entitled thereto who are current or former Employees of Parent all required
notices within the applicable time period and coverage pursuant to Section 4980B
of the Code with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Code) occurring prior to and including the Closing Date, and
no tax payable on account of Section 4980B of the Code has been incurred with
respect to any current or former Employees of Parent.
4.18. CERTAIN AGREEMENTS. Neither the execution and delivery of this
------------------
Agreement nor the consummation of the transactions contemplated hereby will: (a)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of Parent from Parent, under any Employee Plan, Benefit Arrangement
or otherwise; (b) materially increase any benefits otherwise payable under any
Employee Plan or the Benefit Arrangement; or (c) result in the acceleration of
the time of payment or vesting of any such benefits.
4.19. INSURANCE. Parent maintains policies of liability, theft, fidelity,
---------
fire, product liability, workmen's compensation, indemnification of directors
and officers and other similar forms of insurance. The Parent Disclosure
Schedule sets forth a history of all claims within the last five (5) years in
excess of $50,000 made by Parent thereunder and the status thereof. All such
policies of insurance are in full force and effect and all premiums with respect
thereto are currently paid and, to the best knowledge of Parent, no basis exists
for termination of any thereof on the part of the insurer. The amounts of
coverage under such policies conform to the requirements set forth in the
Parent's customer contracts. Parent has not, during the last three fiscal years,
been denied or had revoked or rescinded any policy of insurance.
4.20. BROKERS. Neither Parent, Acquisition Sub, nor any of their
-------
respective officers, directors or employees have employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated by this Agreement, the Plan of
Merger or any of the Related Agreements.
4.21. RELATED TRANSACTIONS. Except for compensation to regular employees
--------------------
of Parent, no current or former director, officer or stockholder that is an
affiliate of Parent or any associate (as defined in the rules promulgated under
the Exchange Act) thereof, is now, or has been during the last five (5) fiscal
years: (a) a party to any transaction with Parent (including, but not limited
to, any contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or borrowing money
from, or otherwise requiring payments to, any such director, officer or
affiliated stockholder of Parent or associate thereof); or (b) the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a present or potential competitor, supplier or customer of
Parent (other than non-affiliated holdings in publicly-held companies), nor does
any such person receive income from any source other than Parent which relates
to the business of, or should properly accrue to Parent.
4.22. BOARD APPROVAL. The Board of Directors of Parent and Acquisition
--------------
Sub have: (a) approved this Agreement, the Plan of Merger and each of the
Related Agreements to which either is a party and the transactions contemplated
hereby and thereby; (b) determined that the Merger is in the best interests of
the stockholders of Parent and Acquisition Sub and is on
24
terms that are fair to such stockholders; and (c) recommended that the
stockholders of Acquisition Sub approve the Merger in accordance with the Plan
of Merger and the New Jersey statute. No other approvals are required other than
that of the Board of Directors of Parent and the Board of Directors and
stockholder of Acquisition Sub.
4.23. INFORMATION SUPPLIED. None of the information supplied or to be
--------------------
supplied by Parent or Acquisition Sub for inclusion or incorporation by
reference in the S-4 will, at the time the S-4 is filed with the SEC and at the
time the S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
4.24. ACQUISITION SUB. Acquisition Sub is a newly formed wholly-owned
---------------
subsidiary of Parent, currently is not and has not engaged in business and
currently has no assets or liabilities of a material nature.
4.25. DISCLOSURE. No part of Article IV of this Agreement nor any
----------
document, written information, statement, financial statement, certificate or
exhibit furnished or to be furnished to the Company by or on behalf of Parent or
Acquisition Sub pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements or facts contained herein and therein not misleading in light of
the circumstances under which they were made.
4.26. KNOWLEDGE DEFINITION. As used in this Agreement, "to the best
--------------------
knowledge of Parent" and like phrases shall mean and include: (a) actual
knowledge; and (b) that knowledge which a prudent businessperson (including the
officers, directors and other key employees of Parent) would have obtained in
the management of his or her business affairs after making due inquiry and
exercising reasonable diligence with respect thereto. In connection therewith,
the knowledge (both actual and constructive) of any officer, director or other
key employee of Parent shall be imputed to be the knowledge of Parent.
4.27. PARENT REFERENCE INCLUDES CCSFE. Each reference to Parent in this
-------------------------------
Article IV shall be deemed to be a reference to Parent and CCSFE, unless the
context requires otherwise. Accordingly, the Parent Disclosure Schedule shall
include disclosures with respect to CCSFE, as well as Parent, in response to the
representations and warranties set forth in this Article IV, as applicable.
ARTICLE V.
----------
RELATED AGREEMENTS
5.1. VOTING AGREEMENT. The T Partnership, LLP, a New Jersey limited
----------------
liability partnership ("The T Partnership") shall enter into a Voting Agreement
and Irrevocable Proxy with Parent and the Company in the form of Exhibit 5.1
-----------
attached hereto (the "Voting Agreement"), providing, among other things, that
such Stockholder shall vote in favor of or consent in writing to the Merger and
shall not transfer its shares of Company Common Stock prior to the Effective
Date (as defined therein).
5.2. AFFILIATE AGREEMENTS. The Company shall use its best efforts to
--------------------
cause each of the persons (within the meaning of Rule 145) who or which are, in
Parent's reasonable judgment on the date hereof, "affiliates" of the Company
within the meaning of Rule 145 of the rules and regulations promulgated by the
SEC under the Securities Act ("Rule 145") and identified as such on Schedule 5.2
------------
attached hereto (each such person, together with the persons identified pursuant
to Section 6.16 hereof after the date hereof, a "Rule 145 Affiliate"), to, on or
prior to the
25
date of filing of the S-4 with the SEC, enter into a Company Affiliate Agreement
with Parent, effective as of the Effective Time (collectively, the "Company
Affiliate Agreements; together with the Voting Agreement, the "Related
Agreements"), in the form of Exhibit 5.2 attached hereto; providing, among other
-----------
things, that such persons shall receive certain registration rights, and not
transfer their shares of Company Common Stock following the Effective Time,
except as provided therein. The Company shall provide Parent such information
and documents as Parent shall reasonably request for purposes of creating
Schedule 5.2. Parent and Acquisition Sub shall be entitled to place legends on
------------
the certificates evidencing any Parent Common Stock to be received by each Rule
145 Affiliate pursuant to the terms of this Agreement and the Plan of Merger,
and to issue appropriate stop transfer instructions to the transfer agent for
Parent Common Stock, consistent with the terms of the Company Affiliate
Agreements, whether or not the Company Affiliate Agreements are actually
delivered to Parent.
ARTICLE VI.
-----------
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS
6.1. ACCESS TO RECORDS AND PROPERTIES OF EACH PARTY; CONFIDENTIALITY.
---------------------------------------------------------------
(a) From and after the date hereof until the Effective Time or the
earlier termination of this Agreement pursuant to Section 11.1 hereof (the
"Executory Period"), each Party shall afford: (i) to the officers, independent
certified public accountants, counsel and other representatives of the other
Party, free and full access at all reasonable times to all properties, books and
records (including tax returns filed and those in preparation) of such Party, in
order that the other Party and such other persons may have full opportunity to
make such investigations as they shall reasonably desire to make of the business
and affairs of such Party; and (ii) to the independent certified public
accountants of the other Party, free and full access at all reasonable times to
the work papers of the independent certified public accountants for such Party.
Additionally, each Party will permit the other Party to make such reasonable
inspections of such Party and its respective operations during normal business
hours as the other Party may reasonably require and each Party will cause its
officers to furnish to the other Party and such other persons, such additional
financial and operating data and other information as to the business and
properties of such Party as the other Party or such other persons shall from
time to time reasonably request. No investigation pursuant to this Section 6.1,
or made prior to the date hereof, shall affect or otherwise diminish or obviate
in any respect any of the representations and warranties of any Party made in
this Agreement. As used in this Agreement, except as modified in Section 6.4,
the term "Party" shall mean and refer to the Company, on the one hand, and
Parent and Acquisition Sub, on the other hand.
(b) Reference is made to the Confidentiality Agreement dated September
11, 1997, between the Company and Parent, which is hereby confirmed by the
parties hereto and is and shall remain in full force and effect in accordance
with its terms, and each of Parent and Company shall observe and perform its
respective obligations thereunder. Acquisition Sub hereby affirms as if
original signatory to the Confidentiality Agreement referenced above.
6.2. OPERATION OF BUSINESS OF THE COMPANY. During the Executory Period,
------------------------------------
the Company will operate its business as now operated and only in the normal and
ordinary course and, consistent with such operation, will use its best efforts
to preserve intact its present business organization, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with licensors, franchisees, licensees, suppliers, contractors,
distributors, customers and other persons having business dealings with it.
Without limiting the generality of the foregoing, during the Executory Period,
the Company shall not, without the prior written consent of Parent, except as
legally required and as required under Section 7.7 or 7.8:
26
(a) take any action that would result in any of the representations and
warranties of the Company herein becoming untrue or in any of the conditions to
the Merger not being satisfied; or (b) take or cause to occur any of the actions
or transactions described in Section 3.8 hereof.
6.3. OPERATION OF BUSINESS OF THE PARENT. During the Executory Period,
-----------------------------------
Parent will operate its business as now operated and only in the normal and
ordinary course and, consistent with such operation, will use its best efforts
to preserve intact its present business organization, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with licensors, franchisees, licensees, suppliers, contractors,
distributors, customers and other persons having business dealings with it.
Without limiting the generality of the foregoing, during the Executory Period,
Parent shall not, without the prior written consent of the Company, except as
legally required and as required under Section 7.7 or 7.8: (a) take any action
that would result in any of the representations and warranties of Parent herein
becoming untrue or in any of the conditions to the Merger not being satisfied;
or (b) take or cause to occur any of the actions or transactions described in
Section 4.8 hereof.
6.4. NEGOTIATION WITH OTHERS.
-----------------------
(a) During the Executory Period, neither Party (which solely for
purposes of this Section 6.4 shall include The T Partnership or any of its
partners) shall, and neither Party shall permit any agent or other
representative of such Party to, directly or indirectly: (i) solicit, initiate
or engage in discussions or engage in negotiations with any person (whether such
negotiations are initiated by the Party or otherwise) or take any other action
to facilitate the efforts of any person, relating to the possible acquisition of
a Party (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) or any material portion of its capital stock or assets (any such
acquisition being referred to as an "Acquisition Transaction"); (ii) provide
information to any person, other than a Party, relating to a possible
Acquisition Transaction; (iii) enter into an agreement with any person, other
than a Party, relating to a possible Acquisition Transaction; (iv) consummate an
Acquisition Transaction with any person other than a Party or enter into an
agreement with any person, other than a Party, providing for a possible
Acquisition Transaction; or (v) make or authorize any statement, recommendation
or solicitation in support of any possible Acquisition Transaction, unless all
Parties are a party to such Acquisition Transaction; provided, however, that
-------- -------
nothing contained herein shall prohibit the Board of Directors of the Company or
Parent, respectively, from furnishing information to, or entering into
discussions or negotiations with (i) any unaffiliated third party that makes or
is proposing to make an unsolicited written, bona fide offer with respect to an
Acquisition Transaction, if the Board of Directors of the Company or Parent,
respectively, based upon the written advice of outside legal counsel,
respectively, determines in good faith that such action is necessary for the
Board of Directors of the Company or Parent, respectively, to comply with its
fiduciary duties under applicable law (such unsolicited written, bona fide offer
being referred to herein as a "Superior Proposal") and prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company or Parent provides, respectively, written notice to the
other Party, and (ii) such parties who have made proposals, formal or informal,
which may become a Superior Proposal as to which either Company or Parent has
advised the other, in writing, prior to the date of this Agreement. If either
the Company or Parent receives any unsolicited offer or proposal to enter
negotiations relating to an Acquisition Transaction, such Party shall notify the
other Party thereof, including information as to the identity of the party
making such offer or proposal and the specific terms of such offer or proposal,
as the case may be.
(b) During the Executory Period, notwithstanding anything contained
herein to the contrary, neither Party shall enter into or consummate an
Acquisition Transaction with a party other than the other Party unless it shall
have terminated this Agreement pursuant to Section 11.1(h).
27
6.5. PREPARATION OF S-4; OTHER FILINGS. As promptly as practicable after
---------------------------------
the date of this Agreement, Parent and the Company shall properly prepare and
file with the SEC a Registration Statement on Form S-4 with respect to the
Merger Shares, the shares of Parent Common Stock to be issued in exchange for
Vested Company Options and the shares of Parent Common Stock reserved for
issuance upon exercise of the assumed Unvested Company Options and Company
Warrants (as to which the option or warrant holder is, by the terms of the
Company option plan or warrant in effect, entitled upon exercise of the option
or warrant, to receive registered stock) (the "S-4"), in which the Stockholder
Statement will be included as a prospectus. Each of Parent and the Company shall
use its best efforts to respond to any comments of the SEC, to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing and to cause the Stockholder Statement to be mailed to the
Stockholders at the earliest practicable time, but in any event within five (5)
Business Days after the S-4 has been declared effective by the SEC. As promptly
as practicable after the date of this Agreement, Parent and the Company shall
properly prepare and file any other filings required under the Exchange Act, the
Securities Act or any other Federal or state laws and Parent shall properly
prepare and file any filings required under state securities or "blue sky" laws,
in each case, relating to the Merger and the transactions contemplated by this
Agreement and the Plan of Merger (collectively, the "Other Filings"). The
Company shall promptly furnish Parent with all information concerning the
Company and the Stockholders as may be reasonably required in connection with
any action contemplated by this Section 6.5. Each Party will notify the other
Party promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff or any other government officials for
amendments or supplements to the S-4 or any Other Filing or for additional
information and will supply the other Party with copies of all correspondence
between such Party or any of its representatives, on the one hand, and the SEC,
or its staff or any other government officials, on the other hand, with respect
to the S-4, the Merger or any Other Filing. Each Party shall promptly provide
the other Party (or its counsel) copies of all filings made by such Party with
any Governmental Authority in connection with this Agreement, the Plan of Merger
and the transactions contemplated hereby and thereby. The S-4 and the Other
Filings shall comply in all material respects with all applicable requirements
of law. Whenever any event occurs which should be set forth in an amendment or
supplement to the S-4 or any Other Filing, Parent or the Company, as the case
may be, shall promptly inform the other Party of such occurrence and cooperate
in filing with the SEC or its staff or any other government officials, and/or
mailing to Stockholders of the Company, such amendment or supplement.
6.6. ADVICE OF CHANGES. The Company and Parent shall confer on a regular
-----------------
and frequent basis with the other, report on operational matters and promptly
advise the other orally and in writing of any change, event or circumstance
having, or which, insofar as can reasonably be foreseen, could have, a Material
Adverse Effect on itself or which could impair (negatively or positively) its
financial projections or forecasts.
6.7. LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use its best
-----------------------------------
efforts to cause to be delivered to Parent a letter of KPMG Peat Marwick, LLP,
the Company's independent accountant, dated a date within two (2) Business Days
before the date on which the S-4 shall become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4 (and, if requested, a
bring-down comfort letter at the closing of the Merger).
6.8. LETTER OF PARENT'S ACCOUNTANTS. Parent shall use its best efforts to
------------------------------
cause to be delivered to the Company a letter of BDO Xxxxxxx, LLP, Parent's
independent public accountants, dated a date within two (2) Business Days before
the date on which the S-4 shall become effective and addressed to the Company,
in form and substance reasonably satisfactory to the Company and customary in
scope and substance for letters delivered by independent
28
public accountants in connection with registration statements similar to the S-4
(and, if requested, a bring-down comfort letter at the closing of the Merger).
6.9. STOCKHOLDERS' APPROVAL. The Company shall: (a) call a special
----------------------
meeting of the Stockholders (the "Stockholders' Meeting") within 20 days (or
such other period as may be required by applicable law) after the S-4 shall have
been declared effective by the SEC for the purpose of obtaining the approval of
the Merger, this Agreement and the Plan of Merger and the transactions
contemplated hereby and thereby (the "Stockholder Action"); and (b) recommend
(provided there has been no Superior Proposal) that the Stockholders vote in
favor of the Merger and approve this Agreement and the Plan of Merger and take
or cause to be taken all such other action as may be required by the New Jersey
Statute and any other applicable law in connection with the Merger, this
Agreement and the Plan of Merger, in each case as promptly as possible. The
Company shall prepare and distribute any written notice and other materials
relating to the Stockholder Action, including, without limitation, a proxy
statement (the "Stockholder Statement"), in accordance with the Certificate and
by-laws of the Company, the New Jersey Statute and any other Federal and state
laws relating to the Merger, such Stockholders' Meeting or any other transaction
relating to or contemplated by this Agreement (collectively, the "Stockholders'
Materials"); provided, however, that Parent and its counsel shall have the
-------- -------
opportunity to review all Stockholders' Materials prior to delivery to the
Stockholders, and all Stockholders' Materials shall be in form and substance
reasonably satisfactory to Parent and its counsel; provided, further, however,
-------- ------- -------
that if any event occurs which should be set forth in an amendment or supplement
to any Stockholders' Materials, the Company shall promptly inform Parent thereof
(or, if such event relates solely to Parent, Parent shall promptly inform the
Company thereof), and the Company shall promptly prepare an amendment or
supplement in form and substance satisfactory to Parent in accordance with the
Certificate and by-laws of the Company, the New Jersey Statute and any other
Federal or state laws.
6.10. LEGAL CONDITIONS TO MERGER. Each Party shall take all reasonable
--------------------------
actions necessary to comply promptly with all legal requirements which may be
imposed on such Party with respect to the Merger and will take all reasonable
action necessary to cooperate with and furnish information to the other Party in
connection with any such requirements imposed upon such other Party in
connection with the Merger. Each Party shall take all reasonable actions
necessary: (a) to obtain (and will take all reasonable actions necessary to
promptly cooperate with the other Party in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such Party
(or by the other Party) in connection with the Merger or the taking of any
action contemplated by this Agreement or the Plan of Merger; (b) to defend,
lift, rescind or mitigate the effect of any lawsuit, order, injunction or other
action adversely affecting the ability of such Party to consummate the
transactions contemplated hereby; and (c) to fulfill all conditions precedent
applicable to such Party pursuant to this Agreement.
6.11. CONSENTS. Each Party shall use its best efforts, and the other
--------
Party shall cooperate with such efforts, to obtain any consents and approvals
of, or effect the notification of or filing with, each person or authority,
whether private or governmental, whose consent or approval is required in order
to permit the consummation of the Merger and the transactions contemplated
hereby and to enable the Surviving Corporation to conduct and operate the
business of the Company substantially as presently conducted and as proposed to
be conducted.
6.12. EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
---------------------
provided, each of the Parties hereto shall, in good faith, use reasonable effort
to do or cause to be done all such acts and things as may be necessary, proper
or advisable, consistent with all applicable laws and regulations, to consummate
and make effective the transactions contemplated hereby and by the Plan of
Merger and to satisfy or cause to be satisfied all
29
conditions precedent that are applicable to each such Party that are set forth
in this Agreement as soon as reasonably practicable.
6.13. NOTICE OF PROSPECTIVE BREACH. Each Party hereto shall immediately
----------------------------
notify the other Party in writing upon the occurrence of any act, event,
circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure of
a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
6.14. PUBLIC ANNOUNCEMENTS. Each Party hereto agrees that, subject to
--------------------
public disclosure and other legal and regulatory obligations, none of them shall
issue any report, statement or release pertaining to this Agreement or any
transaction contemplated hereby, without the prior written consent of the other
Parties. Each Party further agrees that no Party shall unreasonably withhold
their written consent to the issuance of a public disclosure referred to in this
Section 6.14.
6.15. AFFILIATES. Within ten (10) Business Days prior to the effective
----------
date of the Stockholder Action, Parent and the Company shall amend Schedule 5.2
------------
hereto to add the names and addresses of any other person (within the meaning of
Rule 145) that Parent reasonably identifies as being a person who may be deemed
to be a Rule 145 Affiliate of the Company within the meaning of Rule 145;
provided, however, that no such person identified by Parent shall be added to
-------- -------
the list of Rule 145 Affiliates of the Company if Parent shall receive from the
Company, on or before the Effective Time, an opinion of counsel reasonably
satisfactory to Parent to the effect that such person is not a Rule 145
Affiliate. The Company shall use its best efforts to deliver or cause to be
delivered to Parent, prior to the Effective Time, from each of such additional
Rule 145 Affiliates a Company Affiliate Agreement.
6.16. PREFERRED STOCK; SECURED PROMISSORY NOTE. Parent and The T
----------------------------------------
Partnership agree that: (a) the designation of the Series A Preferred Stock of
the Surviving Corporation, which shall be convertible into shares of Parent
Common Stock, shall be as set forth in Exhibit 1.4 attached hereto, and such
----------
number of shares of Preferred Stock having a liquidation value equal to
$1,000,000 of the Company's indebtedness outstanding and due to The T
Partnership at the time of the Closing shall be issued in redemption of
$1,000,000 of such indebtedness; (b) Parent shall execute a conditional note for
the benefit of The T Partnership in the form set forth in Exhibit 6.16(b)
---------------
attached hereto; and (c) Parent shall execute a secured promissory note for the
remaining amount of the Company's indebtedness to The T Partnership
substantially in the form set forth in Exhibit 6.16(c) attached hereto.
---------------
ARTICLE VII.
------------
CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS
The obligations of each Party to perform this Agreement and the Plan of
Merger and to consummate the transactions contemplated hereby and thereby will
be subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by each other Party:
7.1. STOCKHOLDER APPROVAL; AGREEMENT OF MERGER. This Agreement, the Plan
-----------------------------------------
of Merger and the Merger shall have been approved and adopted by at least two-
thirds (2/3) of the outstanding shares voting of Company Common Stock, and the
Plan of Merger shall have been executed and delivered by Acquisition Sub and the
Company and filed with and accepted by the Secretary of State of the State of
New Jersey.
30
7.2. APPROVALS. All authorizations, consents, orders or approvals of, or
---------
declarations or filings with or expiration of waiting periods imposed by any
Governmental Authority necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made or shall have occurred.
7.3. LEGAL ACTION. No temporary restraining order, preliminary injunction
------------
or permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any Federal or state court or other Governmental
Authority and remain in effect.
7.4. S-4. The S-4 shall have become effective under the Securities Act
---
and shall not be the subject of any stop order or proceeding seeking a stop
order.
7.5. LEGISLATION. No Federal, state, local or foreign statute, rule or
-----------
regulation shall have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement or the Plan of
Merger or any of the conditions to the consummation of such transactions.
7.6. BID PRICE RATIO. The ratio of the closing bid price of a share of
---------------
Parent Common Stock to a share of Company Common Stock shall not be greater than
2.25 nor less than .75 based on the average of closing bid prices for any ten
(10) day period ending on and including the second NASDAQ trading day
immediately preceding the Closing Date and rounding the result of such average
to the nearest 1/100ths; provided, however, this condition shall be deemed
-----------------
satisfied if, notwithstanding the ratio, the Board of Directors of both Parent
and Company: (i) elect to proceed with the Plan of Merger; and (ii) agree upon a
revised exchange ratio under Section 2.1(c) which reasonably reflects the change
in values having caused the applicable increase or decrease in the ratio.
7.7. FINANCING. A minimum of $7,000,000 in financing on terms acceptable
---------
to both Parent and the Company shall have been obtained; provided, however, that
-------- -------
if Parent's current senior lenders, Sirrom Capital Corporation and Coast
Business Credit, both agree to remain creditors of Parent after the Effective
Time, then a minimum of $4,000,000 must be obtained in addition to a minimum of
$2,500,000 of existing financing.
ARTICLE VIII.
-------------
CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB.
The obligations of Parent to perform this Agreement and to consummate the
transactions contemplated hereby and of Acquisition Sub to perform this
Agreement and the Plan of Merger and to consummate the transactions contemplated
hereby and thereby will be subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by Parent
and Acquisition Sub:
8.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of the Company set forth in Article III hereof shall in each case be true and
correct in all material respects (except for any representation or warranty that
by its terms is qualified by materiality, in which case it shall be true and
correct in all respects) as of the date of this Agreement, and as of the
effective date of the Stockholder Action and as of the Closing Date as though
made at and as of such dates, respectively.
8.2. PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
-----------------------------------------
performed in all material respects the obligations required to be performed by
it under this Agreement and the Plan of Merger prior to or as of the Closing
Date.
31
8.3. AUTHORIZATION OF MERGER. All action necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement, the Plan of Merger and
the Related Agreements by the Company and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by the
board of directors and the Stockholders of the Company, and the Parent shall
have received copies of all such resolutions certified by the Secretary of the
Company. The Company and the Stockholders of the Company shall have full power
and right to effect the Merger on the terms provided herein.
8.4. CERTIFICATE. Parent and Acquisition Sub shall have received a
-----------
certificate dated the Closing Date, signed by the President or Acting President
of the Company as to the satisfaction of the conditions contained in Sections
8.1 through 8.3, except to the extent waived by Parent and Acquisition Sub.
8.5. OPINION OF THE COMPANY'S COUNSEL. Parent and Acquisition Sub shall
--------------------------------
have received an opinion dated the Closing Date of Saiber Xxxxxxxxxxx Satz &
Xxxxxxxxx ("SSS&G"), counsel to the Company, reasonably satisfactory in form and
substance to Parent and Acquisition Sub.
8.6. ACCEPTANCE BY COUNSEL TO PARENT AND ACQUISITION SUB. The form and
---------------------------------------------------
substance of all legal matters contemplated hereby and of all papers delivered
hereunder shall be reasonably acceptable to Xxxxxxxxx Traurig Xxxxxxx Xxxxxx
Xxxxx & Xxxxxxx, P.A. ("GTH"), counsel for Parent and Acquisition Sub.
8.7. CONSENTS AND APPROVALS. Parent and Acquisition Sub shall have
----------------------
received duly executed copies of all consents and approvals contemplated by this
Agreement or the Company Disclosure Schedule, in form and substance satisfactory
to Parent and Acquisition Sub.
8.8. GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by the Company of this Agreement, the Plan of Merger and
the Related Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby shall have been obtained or made.
8.9. RELATED AGREEMENTS. Each of the Related Agreements shall be in full
------------------
force and effect as of the Effective Time in accordance with the respective
terms thereof, and each person or entity who or which is required or
contemplated by the parties hereto to be a party to any Related Agreement who or
which did not theretofore enter into such Related Agreement shall execute and
deliver such Related Agreement.
ARTICLE IX.
-----------
CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to perform this Agreement and the Plan of
Merger, and to consummate the transactions contemplated hereby and thereby will
be subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Company:
9.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of Parent and Acquisition Sub set forth in Article IV hereof shall be true and
correct in all material respects (except for any representation or warranty that
by its terms is qualified by materiality, in
32
which case it shall be true and correct in all respects) as of the date of this
Agreement, and as of the Closing Date as though made at and as of such dates,
respectively.
9.2. PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB. Parent
--------------------------------------------------------
and Acquisition Sub shall have performed in all material respects their
respective obligations required to be performed by them under this Agreement and
the Plan of Merger prior to or as of the Closing Date.
9.3. AUTHORIZATION OF MERGER. All action necessary to authorize the
-----------------------
execution, delivery and performance of this Agreement and the Related Agreements
by Parent, the execution, delivery and performance of this Agreement and the
Plan of Merger by Acquisition Sub, and the consummation of the transactions
contemplated hereby and by the Plan of Merger shall have been duly and validly
taken by the board of directors of Parent and Acquisition Sub and by Parent as
the sole stockholder of Acquisition Sub, and the Company shall have received
copies of all such resolutions certified by the respective Secretary of Parent
and Acquisition Sub.
9.4. CERTIFICATE. Parent and Acquisition Sub shall have received a
-----------
certificate dated the Closing Date, signed by the President of each of Parent
and Acquisition Sub as to the satisfaction of the conditions contained in
Sections 9.1 through 9.3, except to the extent waived by the Company.
9.5. OPINION OF COUNSEL TO PARENT AND ACQUISITION SUB. The Company shall
------------------------------------------------
have received an opinion dated the Closing Date of GTH in form and substance
reasonably satisfactory to the Company.
9.6. TAX OPINION. The Company shall have received an opinion in form and
-----------
substance satisfactory to the Company or SSSG, counsel for the Company, to the
effect that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that Parent,
Acquisition Sub and the Company will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. In connection with such
opinion, counsel shall be entitled to rely upon certain representations of
Parent, Acquisition Sub and the Company and certain stockholders of the Company.
9.7. ACCEPTANCE BY COUNSEL TO THE COMPANY. The form and substance of all
------------------------------------
legal matters contemplated herein and of all papers delivered hereunder shall be
reasonably acceptable to SSSG.
9.8. CONSENTS AND APPROVALS. The Company shall have received duly
----------------------
executed copies of all consents and approvals contemplated by this Agreement or
the Parent Disclosure Schedule, in form and substance satisfactory to the
Company.
9.9. GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
----------------------------------------
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by Parent and Acquisition Sub of this Agreement and the
Related Agreements and by Acquisition Sub of the Plan of Merger and the
consummation by Parent and Acquisition Sub of the transactions contemplated
hereby and thereby shall have been obtained or made.
9.10. APPOINTMENT OF DIRECTORS. The Board of Directors of Parent shall
------------------------
have taken such action as shall be necessary to expand the size of Parent's
Board of Directors and to appoint two (2) individuals designated by the Company
and reasonably acceptable to Parent as directors of Parent to serve on Parent's
Board of Directors until the next annual meeting of
33
the stockholders of Parent. Parent shall continue to nominate such individuals
at the next three (3) successive annual meetings of the stockholders immediately
following the next annual meeting of the stockholders in the same manner and on
equal standing as other director nominees comprising management's slate.
9.11. FAIRNESS OPINION. The Company shall have received an opinion of
----------------
Compass Capital Partners, Ltd. or other financial advisor acceptable to it and
Parent with respect to the fairness, from a financial point of view, to the
stockholders of the Company of the Merger, and such opinion shall remain in full
force and effect as of the Closing Date.
9.12. DIRECTOR INDEMNITY. The Company shall have received a written
------------------
statement signed by the President of Parent that Parent will honor all
obligations of the Company under Article VIII of the Company's Amended and
Restated Bylaws pertaining to indemnification of a corporate agent as that term
is defined in such Article; provided, however, such commitment to honor
-------- -------
Company's indemnification obligations shall only be applicable to events or
actions on the part of such corporate agent occurring or taken prior to the
Closing Date.
9.13. COMPANY INDEBTEDNESS. Provisions shall have been made for payment
--------------------
at Closing of indebtedness of the Company which is due at Closing to The T
Partnership in the amount of $100,000, which amount may be increased upon
agreement of both Parent and the Company, and SSSG in an additional amount not
to exceed $160,000.
ARTICLE X.
----------
10.1. PAYMENT OF CERTAIN FEES AND EXPENSES.
------------------------------------
(a) Except as set forth below, Parent and the Company shall pay its
own expenses that are incidental to negotiations, preparation of agreements and
the Closing whether or not this Agreement and the transactions contemplated
hereby are actually consummated.
(b) If this Agreement is terminated by either Parent or the Company
pursuant to Section 11.1(h), the terminating party shall pay the non-terminating
party within sixty (60) days following such termination a fee of $225,000 plus
all out-of-pocket expenses (including, without limitation, all attorneys',
investment banking and commitment fees and expenses) incurred by the non-
terminating party in connection with the transactions contemplated by this
Agreement (the "Break-up Fee"). The Break-up Fee shall also be payable by the
Company if there exists a Superior Proposal and, at any meeting of the
stockholders of the Company, however called, or in any action by written consent
of the stockholders of the Company, The T Partnership does not vote in favor of
the approval and adoption of this Agreement, the Plan of Merger, the Merger and
the other transactions contemplated thereby (in which case the Break-up Fee will
be paid by the Company to Parent within sixty (60) days following such meeting
or action).
(c) If this Agreement is terminated by either Parent or the Company,
other than pursuant to Section 11.1(h) or 11.1(b)(ii), Parent and the Company
will split evenly the aggregate of all attorneys', investment banking and
commitment fees and expenses incurred by both parties in relation to the
transaction prior to the date of such termination.
ARTICLE XI
----------
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
11.1. TERMINATION. This Agreement may be terminated, and the Merger
-----------
abandoned, notwithstanding the approval by Parent, Acquisition Sub and the
Company of this Agreement, at any time prior to the Effective Time, by:
34
(a) the mutual consent of Parent, Acquisition Sub and the Company;
(b) Parent, Acquisition Sub or the Company, if: (i) the conditions set
forth in Article VII hereof shall not have been met by April 17, 1998, except if
such conditions have not been met solely as a result of the action or inaction
of the party seeking to terminate; or (ii) the other party or parties have
materially breached any material covenant or agreement set forth herein and such
breach is not cured (if curable) within 15 days following written notice
thereof;
(c) Parent and Acquisition Sub if the conditions set forth in Article
VIII hereof shall not have been met, and the Company if the conditions set forth
in Article IX hereof shall not have been met, in either case by April 17, 1998,
except if such conditions have not been met solely as a result of the action or
inaction of the party seeking to terminate;
(d) Parent and Acquisition Sub on the one hand, or the Company on the
other hand, if such party or parties shall have determined in its or their sole
discretion, exercised in good faith, that the Merger contemplated by this
Agreement and the Plan of Merger has become impracticable by reason of the
institution of any litigation, proceeding or investigation to restrain or
prohibit the consummation of the Merger, or which questions the validity or
legality of the transactions contemplated by this Agreement and the Plan of
Merger;
(e) Parent and Acquisition Sub on the one hand, or the Company on the
other hand, if such party or parties shall have determined in their or its sole
discretion, exercised in good faith, that the respective observations made
during their due diligence process disclosed information regarding the other
party unsatisfactory to the party performing the due diligence, and such
information is: (i) material; (ii) adverse; and (iii) not disclosed in this
Agreement or the other party's Disclosure Schedule.
(f) Parent and Acquisition Sub if any statute, rule, regulation or
other legislation shall have been enacted which, in the sole judgment of Parent
and Acquisition Sub, exercised reasonably and in good faith, materially
adversely impairs the conduct or operation of the Company as presently conducted
and as contemplated to be conducted;
(g) the Company if any statute, rule, regulation or other legislation
shall have been enacted which, in the sole judgment of the Company, exercised
reasonably and in good faith, materially adversely impairs the conduct or
operation of Parent's business as presently conducted;
(h) Parent and Acquisition Sub on the one hand, or the Company on the
other hand, if such parties or party shall have received a Superior Proposal,
and Parent's or the Company's Board of Directors, based upon the written advice
of outside legal counsel, determines in good faith that accepting such Superior
Proposal is necessary for the Board of Directors of Parent or the Company to
comply with its fiduciary duties to its stockholders under applicable law;
(i) Parent and Acquisition Sub on the one hand, or the Company on the
other hand, if the Board of Directors of the other party or parties shall have:
(i) withdrawn, modified or amended in any adverse respect its approval or
recommendation of this Agreement, the Merger or the transactions contemplated
hereby; or (ii) recommended to its stockholders an Acquisition Transaction with
any party other than Parent or the Company, respectively.
Any termination pursuant to this Section 11.1 (other than a termination pursuant
to Section 11.1(a) hereof) shall be effected by written notice from the party or
parties so terminating to the other parties hereto.
35
11.2. EFFECT OF TERMINATION. In the event of the termination of this
---------------------
Agreement as provided in Section 11.1, this Agreement shall be of no further
force or effect and no party hereto, nor its stockholders, directors, officers
or affiliates, shall have any liability in connection herewith; provided,
--------
however, that, Section 6.1(b), Article X, this Section 11.2 and Article XII
-------
shall survive the termination of this Agreement. Notwithstanding the foregoing,
this Section 11.2 shall not relieve any party from liability in connection with
an intentional or willful material breach of this Agreement prior to its
termination; provided, however, that the payment set forth in Section 10.1(d)
-------- -------
shall be the sole and exclusive remedy of either Parent or the Company in
connection with the consummation of an Acquisition Transaction with a party
other than the other Party or the termination of this Agreement by the Company
or Parent pursuant to Section 6.4(b) in connection therewith.
ARTICLE XII.
------------
MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement and the Plan of Merger (including
----------------
the Company Disclosure Schedule, the Parent Disclosure Schedule and the Exhibits
attached hereto) and the other writings referred to herein contain the entire
agreement among the parties hereto with respect to the transactions contemplated
hereby and supersede all prior agreements or understandings, written or oral,
among the parties with respect thereto (including, but not limited to, the
Letter of Intent dated October 23, 1997, as amended, between Parent and the
Company).
12.2. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
--------------------
and shall not control or affect the meaning or construction of any provision of
this Agreement.
12.3. NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested or by telecopier, with
confirmation as provided above addressed as follows:
if to Parent or Acquisition Sub, to:
Cardiac Control Systems, Inc.
0 Xxxxxxxx Xxxxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000; and
with a copy to:
Xxxxxxxxx Traurig Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, P.A.
000 Xxxxx Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
if to the Company, to:
Electro-Catheter Corporation
0000 Xxxxxx Xxxxx
00
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000; and
with a copy to:
Saiber Xxxxxxxxxxx Xxxx & Xxxxxxxxx
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received: (a) in the case of personal
delivery or telecopy, on the date of such delivery; (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent; and (c) in the case of mailing, on the third business day following
the date on which the piece of mail containing such communication was posted.
12.4. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
12.5. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the New Jersey Statute and with the laws of the State of New
Jersey applicable to contracts made and to be performed wholly therein.
12.6. BENEFITS OF AGREEMENT. All the terms and provisions of this
---------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, and shall not confer any
rights or benefits on any other persons or entities. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
provided, however, that anything contained herein to the contrary
-------- -------
notwithstanding, Acquisition Sub may assign and delegate any or all of its
rights and obligations hereunder to any other direct or indirect wholly-owned
subsidiary of Parent.
12.7. PRONOUNS. As used herein, all pronouns shall include the masculine,
--------
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
12.8. AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not be
----------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by Parent and the Company; provided, however, that any party to this Agreement
-------- -------
any other party under this Agreement. The waiver by any party hereto of a breach
may waive any obligation owed to it by any other party under this Agreement. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
12.9. SEVERABILITY. If any provision of this Agreement is held illegal,
------------
invalid or unenforceable, such illegality, invalidity, or unenforceability will
not affect any other provision hereof. This Agreement will, in such
circumstances, be deemed modified to the extent necessary to render enforceable
the provisions hereof.
37
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
and Plan of Reorganization to be executed on its behalf as of the day and year
first above written.
CARDIAC CONTROL SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx
President
CCS SUBSIDIARY, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx
President
ELECTRO-CATHETER CORPORATION
By: /s/ Xxxxx Xxxxxxxxxx
--------------------------------
Xxxxx Xxxxxxxxxx
Acting President
The T Partnership hereby executes this Agreement for the limited and sole
purpose of agreeing to abide by its obligations under Sections 5.1, 6.4 and 6.16
hereof.
THE T PARTNERSHIP, LLP
By: /s/ A. H. Nechemie
-----------------------------------
Name: A. H. Nechemie
---------------------------------
Its Partner
------------------------------------
38
