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ACQUISITION AGREEMENT
Acquisition Agreement dated as of July 7, 2000, by and between
BioShield Technologies, Inc., a Georgia corporation ("BioShield") and
Arrow-Magnolia International, Inc., a Texas corporation (the "Company").
INTRODUCTION
BioShield has offered to acquire up to 85% of the issued and
outstanding shares of common stock, par value $0.10 per share, of the Company
(the "Shares"), and the Board of Directors of the Company has unanimously
determined that such acquisition by BioShield would be fair to and in the best
interests of the Company and its shareholders. Therefore, it is proposed that
BioShield shall make an exchange offer (the "Offer") to exchange $4.41 in cash
and $0.59 in shares of common stock, no par value, of BioShield (the "BioShield
Common Stock") calculated in accordance with the provisions set forth herein,
for each outstanding Share, for up to a maximum of 2,761,281 of the 3,248,566
issued and outstanding Shares, in accordance with the terms provided in this
Agreement.
Simultaneously with the execution and delivery of this Agreement and as
a condition and inducement to the willingness of BioShield to enter into this
Agreement, BioShield and certain stockholders of the Company (collectively, the
"Stockholders") are entering into an agreement (the "Tender Agreement") pursuant
to which the Stockholders will agree to tender for exchange certain of their
Shares in the Offer and to take certain other actions in furtherance of the
transactions contemplated by this Agreement upon the terms and subject to the
conditions set forth in the Tender Agreement.
BioShield and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the other
transactions contemplated by this Agreement and also to prescribe various
conditions to the Offer and the other transactions contemplated by this
Agreement.
The parties therefore agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. THE OFFER. (a) Provided that (i) this Agreement shall not
have been terminated in accordance with Section 6.1 and (ii) none of the events
set forth in Annex I hereto shall have occurred or be existing, BioShield shall,
as promptly as practicable after the date hereof, commence the Offer. Each Share
accepted by BioShield in accordance with the Offer shall be exchanged for the
right to receive from BioShield (i) the sum of $4.41 in cash and (ii) the number
of fully paid and nonassessable shares of BioShield Common Stock calculated by
dividing the sum of $0.59 by the Average Closing Bid Price, as hereinafter
defined. The Average Closing Bid Price shall mean that price which shall be
computed as the arithmetic average of the Closing Bid Prices, as hereinafter
defined, for a share of BioShield Common Stock for the five (5) consecutive
trading days ending on the trading day immediately prior to the date BioShield
and the Company shall jointly make the first public announcement of the
transactions contemplated hereby; and Closing Bid Price shall mean, for any
trading day, the last closing bid price on the Nasdaq SmallCap Market (the
"Nasdaq-SM") as reported by Bloomberg Financial Markets ("Bloomberg"), or, if
the Nasdaq-SM is not the principal trading market for the BioShield Common
Stock, the last closing bid price for the BioShield Common Stock on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price of such security in the over-the-counter market on the pink
sheets or
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bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the last closing trade price
of such security as reported by Bloomberg.
(b) The initial expiration date of the Offer shall be the twentieth
business day following commencement of the Offer. The Offer shall be subject to
the condition that there shall be validly tendered in accordance with the terms
of the Offer, prior to the expiration date of the Offer and not withdrawn, a
number of Shares which, together with any Shares then owned by BioShield,
represents at least a majority of the total number of outstanding Shares,
assuming the exercise of all outstanding options, rights and convertible
securities (if any) and the issuance of all Shares that the Company is obligated
to issue (such total number of outstanding Shares being hereinafter referred to
as the "Fully Diluted Shares") (the "Minimum Condition") and to the other
conditions set forth in Annex I hereto. BioShield expressly reserves the right
to waive the conditions to the Offer and to make any change in the terms or
conditions of the Offer; provided that, without the consent of the Company, no
change may be made which changes the form or amount of consideration to be paid
(other than by adding consideration), modifies the Offer to apply to less than
85% of the outstanding Shares, imposes conditions to the Offer in addition to
those set forth in Annex I, or makes any other change to any condition to the
Offer set forth in Annex I which is materially adverse to the holders of Shares.
Subject to the terms of the Offer and this Agreement and the satisfaction (or
waiver to the extent permitted by this Agreement) of the conditions to the
Offer, BioShield shall accept for payment all Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the applicable
expiration date of the Offer and shall pay for all such Shares promptly after
acceptance; provided that BioShield may, in its discretion, extend the Offer if,
at the scheduled expiration date of the Offer or any extension thereof, any of
the conditions to the Offer shall not have been satisfied, until such time as
such conditions are satisfied or waived. In addition, BioShield may extend the
Offer after the acceptance of Shares thereunder for a further period of time by
means of a subsequent offering period in accordance with Rule 14d-11 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
not more than 20 business days to meet the objective (which is not a condition
to the Offer) that there be validly tendered, in accordance with the terms of
the Offer, prior to the expiration date of the Offer (as so extended) and not
withdrawn a number of Shares which represents at least 85% of the outstanding
Shares. Notwithstanding anything to the contrary set forth herein, no
certificates or scrip representing fractional shares of BioShield Common Stock
shall be issued in connection with the exchange of BioShield Common Stock for
Shares upon consummation of the Offer, and in lieu thereof each tendering
stockholder who would otherwise be entitled to a fractional share of BioShield
Common Stock in the Offer will be paid an amount in cash equal to the product
obtained by multiplying (A) the fractional share interest such holder (after
taking into account all Shares tendered by such holder) would otherwise be
entitled by (B) the Average Closing Bid Price.
(c) As soon as practicable after the date of this Agreement, BioShield
shall prepare and file with the U.S. Securities and Exchange Commission (the
"SEC") a registration statement on Form S-4 to register the offer and sale of
BioShield Common Stock pursuant to the Offer (the "Form S-4"). The Form S-4 will
include a preliminary prospectus containing the information required under Rule
14d-4(b) promulgated under the Exchange Act (the "Preliminary Prospectus"). As
soon as practicable on the date of commencement of the Offer, BioShield shall
(i) file with the SEC a Tender Offer Statement on Schedule TO with respect to
the Offer which will contain or incorporate by reference all or part of the
Preliminary Prospectus and the form of the related letter of transmittal
(together with any supplements or amendments thereto, collectively the "Offer
Documents") and (ii) cause the Offer Documents to be disseminated to holders of
Shares. BioShield and the Company each agree promptly to correct any information
provided by it for use in the Form S-4 or the Offer Documents if and to the
extent that it shall have become false or misleading in any material respect.
BioShield agrees to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given a reasonable opportunity to
review and comment on the Schedule TO, the Form S-4 and the Offer Documents
prior to its being filed with the SEC.
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SECTION 1.2. COMPANY ACTION. (a) The Company hereby consents to the
Offer and represents that its Board of Directors, at a meeting duly called and
held, has unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer, are advisable and are fair to and in
the best interest of the Company's stockholders, (ii) approved this Agreement
and the transactions contemplated hereby, including the Offer, and the Tender
Agreement and the transactions contemplated thereby, and (iii) resolved to
recommend acceptance of the Offer by the Company's stockholders (such
recommendation is herein referred to as the "Recommendation"). The Company has
been advised that all of its directors and executive officers presently intend
to tender their Shares pursuant to the Offer. The Company will promptly furnish
BioShield with a list of its stockholders, mailing labels and any available
listing or computer file containing the names and addresses of all record
holders of Shares and lists of securities positions of Shares held in stock
depositories, in each case as of the most recent practicable date, and will
provide to BioShield such additional information (including, without limitation,
updated lists of stockholders, mailing labels and lists of securities positions)
and such other assistance as BioShield may reasonably request in connection with
the Offer.
(b) On the day that the Offer is commenced, the Company will file with
the SEC and disseminate to holders of Shares a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") which shall reflect the
Recommendation; provided that the Board of Directors of the Company may
withdraw, modify or change the Recommendation if but only if (i) it believes in
good faith, based on such matters as it deems relevant, including the advice of
the Company's financial advisors (if any), that a Superior Proposal (defined in
Section 3.5(b) hereof) has been made and (ii) it has determined in good faith,
after consultation with outside legal counsel, that the withdrawal, modification
or change of such Recommendation is, in the good faith judgment of the Board of
Directors, required by the Board to comply with its fiduciary duties imposed by
applicable law. The Company and BioShield each agree promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect. The
Company agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. BioShield and its counsel shall be given a reasonable opportunity to
review and comment on the Schedule 14D-9 prior to its being filed with the SEC.
SECTION 1.3. DIRECTORS. (a) Effective upon the acceptance for payment
by BioShield of at least a majority of the outstanding Shares pursuant to the
Offer (the "Appointment Time"), BioShield shall be entitled to designate the
number of directors, rounded up to the next whole number, on the Company's Board
of Directors that equals the product of (i) the total number of directors on the
Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section) and (ii) the percentage that the number of
Shares owned by BioShield (including Shares accepted for payment) bears to the
total number of Shares outstanding, and the Company shall take all action
legally available to the Company to cause BioShield's designees to be elected or
appointed to the Company's Board of Directors, including, without limitation,
seeking to increase the number of directors, or seeking and accepting
resignations of incumbent directors, or both. The Company will use its best
efforts to cause individuals designated by BioShield to constitute the same
percentage as such individuals represent on the Company's Board of Directors of
(x) each committee of the Board, (y) each board of directors of each subsidiary
and (z) each committee of each such board.
(b) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-l
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-l in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-l to fulfill its obligations under this Section 1.3.
BioShield will supply to the Company in writing and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
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SECTION 1.4. OPTIONS. BioShield shall offer to each holder of an
outstanding option or right listed in the Company Disclosure Schedule (a
"Company Option") to purchase Shares granted under any stock option plan,
warrant, program or agreement to which the Company or any of its subsidiaries is
a party (collectively, the "Company Stock Plans") to acquire such Company
Option, and agrees to purchase all Company Options from any holders who tender
Company Options, upon the consummation of the Offer in exchange for an amount in
cash equal to the product of (A) the excess, if any, of (x) the Purchase Price
(as hereinafter defined) over (y) the per share exercise price of such Company
Option multiplied by (B) the number of Shares subject to such Company Option
(whether or not then vested or exercisable). Any such payment shall be further
reduced by any income tax or employment tax withholding required under the
Internal Revenue Code of 1986, as amended (the "Code"). The Purchase Price shall
be $4.75.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Each
exception set forth in the Company Disclosure Schedule (defined below in Section
2.1(b)) to the representations and warranties in this Section 2.1 and each other
response to this Agreement set forth in the Company Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring to, a
specific individual Section of this Agreement and relates only to such Section,
except to the extent that one section of the Company Disclosure Schedule
specifically refers to another section thereof. Except as set forth in the
Company Disclosure Schedule, the Company represents and warrants to BioShield as
follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company and
each of its subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate or other power and
authority, as the case may be, to carry on its business as now being conducted.
Each of the Company and each of its subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) could
not reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Company and its subsidiaries taken as a whole (a "Company Material Adverse
Effect"). The Company has delivered or made available to BioShield complete and
correct copies of its certificate of incorporation and by-laws and the
certificates of incorporation and by-laws of its subsidiaries, in each case as
amended to the date of this Agreement. For purposes of this Agreement, a
"subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person;
and a "Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
(b) SUBSIDIARIES. Section 2.1(b) of the disclosure schedule attached
hereto (the "Company Disclosure Schedule") lists each subsidiary of the Company
and its respective jurisdiction of incorporation. All the outstanding shares of
capital stock of each such subsidiary have been validly issued and are fully
paid and nonassessable and are owned by the Company, by another subsidiary of
the Company or by the Company and another such subsidiary, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens") and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock). Except for the capital stock
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of its subsidiaries, the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any person.
(c) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 10,000,000 Shares and 500,000 shares of preferred stock, par value
$.10 per share (the "Company Preferred Stock"). As of June 30, 2000, (i)
3,248,566 Shares were issued and outstanding, (ii) 13,500 were issued and held
in treasury, (iii) no shares of the Company Preferred Stock were issued and
outstanding, and (iv) 885,600 Shares were reserved for issuance pursuant to the
Company Stock Plans (of which 848,613 are subject to outstanding options. Except
as set forth above, at the time of execution of this Agreement, no shares of
capital stock or other voting securities of the Company were issued, reserved
for issuance or outstanding. All outstanding shares of capital stock of the
Company are, and all shares which may be issued pursuant to the Company Stock
Plans will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no outstanding
bonds, debentures, notes or other indebtedness or securities of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of the Company
may vote. Except as set forth above, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements or undertakings of any
kind to which the Company or any of its subsidiaries is a party or by which any
of them is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, or undertaking. There are no outstanding rights,
commitments, agreements, or undertakings of any kind obligating the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock or other voting securities of the Company or any of its
subsidiaries or any securities of the type described in the two immediately
preceding sentences. The Company has delivered or made available to BioShield
complete and correct copies of the Company Stock Plans and all forms of the
Company Options. Section 2.1(c) of the Company Disclosure Schedule sets forth a
complete and accurate list of all the Company Options outstanding as of the date
of this Agreement and the exercise price of each outstanding Company Option.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. Except as set forth in Section 2.1(d) of the Company Disclosure
Schedule, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the certificate of incorporation or by-laws of the
Company or the comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate could not
reasonably be expected to (x) have a Company Material Adverse Effect, (y) impair
the Company's ability to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with or
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exemption by (collectively, "Consents") any Federal, state or local government
or any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental Entity"),
is required by or with respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the filing with the SEC of the Schedule 14D-9 and such
reports under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Securities Act of 1933, as amended (the "Securities Act") as may
be required in connection with this Agreement and the Tender Agreement and the
transactions contemplated hereby and thereby, (ii) such filings as may be
required under state securities or "blue sky" laws, and (iii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be made or obtained individually or in the
aggregate could not reasonably be expected to (x) have a Company Material
Adverse Effect, (y) impair the Company's ability to perform its obligations
under this Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
(e) SEC DOCUMENTS; FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
The Company has filed all required reports, schedules, forms, statements and
other documents with the SEC since December 31, 1997 (the "Company SEC
Documents"). As of their respective dates, except as set forth in Section 2.1(e)
of the Company Disclosure Schedule, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents when filed 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. The financial statements of the Company included
in the Company SEC Documents as of their respective dates comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal and recurring year-end audit adjustments not material in amount). Except
as reflected in the financial statements of the Company included in the Company
SEC Documents, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which are required by generally accepted accounting principles to
be set forth on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto other than any liabilities and obligations
incurred since March 31, 2000 in the ordinary course of business or which,
individually or in the aggregate, are not expected to have a Company Material
Adverse Effect.
(f) INFORMATION SUPPLIED. Neither the Schedule 14D-9, nor any of the
information supplied or to be supplied by the Company or its subsidiaries or
representatives for inclusion or incorporation by reference in the Form S-4 or
the Offer Documents will, at the respective times any such documents or any
amendments or supplements thereto are filed with the SEC, are first published,
sent or given to shareholders or become 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 to make the statements therein
not misleading. The Schedule 14D-9 will comply as to form in all material
respects with the requirements of all applicable laws, including the Exchange
Act and the rules and regulations thereunder. No representation or warranty is
made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by BioShield specifically for inclusion or
incorporation by reference therein.
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(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Company SEC Documents or in Section 2.1(g) of the Company Disclosure Schedule
and except as expressly contemplated by this Agreement, since March 31, 2000,
the Company and its subsidiaries have conducted their business only in the
ordinary course consistent with past practice, and there has not been (i) as of
the date of this Agreement, any event, occurrence or development which has had
or could reasonably be expected to have a Company Material Adverse Effect, (ii)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock or any repurchase, redemption or other acquisition by the Company
or any of its subsidiaries of any outstanding shares of capital stock or other
securities of the Company or any of its subsidiaries, (iii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) (A) any granting by
the Company or any of its subsidiaries to any current or former director,
officer or employee of the Company or any of its subsidiaries of any increase in
compensation or benefits (including the acceleration in the exercisability of
options to purchase, or in the vesting of, Shares (or other property)), except
in the ordinary course of business consistent with past practice or as was
required under employment agreements in effect as of Xxxxx 00, 0000, (X) any
granting by the Company or any of its subsidiaries to any such director, officer
or employee of any increase in severance or termination pay (including the
acceleration in the exercisability of options to purchase, or in the vesting of,
Shares (or other property)), except as was required under employment, severance
or termination agreements or plans in effect as of March 31, 2000, or (C) any
entry by the Company or any of its subsidiaries into any employment, deferred
compensation, severance or termination agreement with any such current or former
director, officer or employee, (v) any damage, destruction or loss, whether or
not covered by insurance, that has had or could reasonably be expected to have a
Company Material Adverse Effect, (vi) any change in accounting methods,
principles or practices by the Company or any of its subsidiaries, (vii) any
amendment of any material term of any outstanding security of the Company or any
of its subsidiaries, (viii) any incurrence, assumption or guarantee by the
Company or any of its subsidiaries of any indebtedness for borrowed money other
than in the ordinary course of business consistent with past practice, but in no
event in the amount of more than $200,000 in the aggregate, (ix) any creation or
assumption by the Company or any of its subsidiaries of any Lien on any asset
other than in the ordinary course of business consistent with past practice, but
in no event in the amount of more than $200,000 for any one transaction or
$500,000 in the aggregate, (x) any making of any loan, advance or capital
contributions to or investment in any person other than (A) loans, advances or
capital contributions to or investments in wholly-owned subsidiaries or entities
that became wholly-owned subsidiaries made in the ordinary course of business
consistent with past practice and (B) investments made in accordance with the
Company's investment guidelines, a copy of which has been made available to
BioShield, and in the ordinary course of business consistent with past practice,
(xi) any transaction or commitment made, or any contract or agreement entered
into, by the Company or any of its subsidiaries relating to its assets or
business (including the acquisition or disposition of any assets or the merger
or consolidation with any person) or any relinquishment by the Company or any of
its subsidiaries of any contract or other right, in either case, material to the
Company and its subsidiaries taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past practice and
those contemplated by this Agreement, but in the case of transactions or
commitments outside of the ordinary course of business in no event representing
commitments on behalf of the Company or any of its subsidiaries of more than
$50,000 for any transaction and $100,000 for any series of transactions, (xii)
any labor dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company or any of its subsidiaries, which employees were not subject to a
collective bargaining agreement at March 31, 2000, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees or (xiii) any agreement, commitment, arrangement or undertaking by the
Company or any of its subsidiaries to perform any action described in clauses
(i) through (xii) above.
(h) LITIGATION. Except as disclosed in the Company SEC Documents or in
Section 2.1(h) of the Company Disclosure Schedule, there is no suit, action or
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries (and the Company is not aware
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of any basis for any such suit, action or proceeding) that, individually or in
the aggregate, could reasonably be expected to (i) have a Company Material
Adverse Effect, (ii) impair the ability of the Company to perform its
obligations under this Agreement or (iii) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or any of its subsidiaries having,
or which, insofar as reasonably can be foreseen, in the future would have, any
such effect. Section 2.1(h) of the Company Disclosure Schedule sets forth, with
respect to any pending suit, action or proceeding to which the Company or any
its subsidiaries is a party and which involves claims which if adversely
determined would exceed $100,000, the forum, the parties thereto, the subject
matter thereof and the amount of damages claimed.
(i) ABSENCE OF CHANGES IN STOCK AND BENEFIT PLANS. Except as disclosed
in Section 2.1(g) and (i) of the Company Disclosure Schedule or as expressly
permitted by this Agreement, since March 31, 2000, there has not been (i) any
acceleration, amendment or change of the period of exercisability or vesting of
any the Company Options or restricted stock, stock bonus or other awards under
the Stock Plans (including any discretionary acceleration of the exercise
periods or vesting by the Company's Board of Directors or any committee thereof
or any other persons administering a Stock Plan) or authorization of cash
payments in exchange for any the Company Options, restricted stock, stock bonus
or other awards granted under any of such Stock Plans or (ii) any adoption or
amendment by the Company or any of its subsidiaries of any collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, stock appreciation right, retirement, vacation, severance, disability,
death benefit, hospitalization, medical, workers' compensation, supplementary
unemployment benefits or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of the Company or any of its subsidiaries or any beneficiary
thereof entered into, maintained or contributed to, as the case may be, by the
Company or any of its subsidiaries (collectively, "Benefit Plans").
(j) PARTICIPATION AND COVERAGE IN BENEFIT PLAN. Except with respect to
changes required by law, there has been no adoption of, amendment to, written
interpretation or announcement (whether or not written) by the Company or any of
its subsidiaries relating to, or change in employee participation or coverage
under, any Benefit Plan which would increase materially the expense of
maintaining such Benefit Plan above the level of the expense incurred in respect
thereof for the fiscal year ended on December 31, 1999.
(k) ERISA COMPLIANCE. (i) Section 2.1(k) of the Company Disclosure
Schedule contains a list of all "Employee Pension Benefit Plans" (defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), "Employee Welfare Benefit Plans" (defined in Section 3(l) of ERISA)
and all other material Benefit Plans maintained, or contributed to, by the
Company or any of its subsidiaries or ERISA affiliates (defined below) for the
benefit of any current or former employees, officers or directors of the Company
or any of its subsidiaries or ERISA affiliates or under which the Company or any
of its subsidiaries or ERISA affiliates has any material liability. The Company
has delivered or made available to BioShield complete and correct copies of (A)
each material Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof) and all amendments thereto and written interpretations
thereof, (B) the most recent summary plan description for each material Benefit
Plan for which such summary plan description is required and (C) each trust
agreement and group annuity or insurance contract relating to any Benefit Plan.
For purposes of this Agreement, "Erisa Affiliate" of the Company means any
person which, together with the Company or any of its subsidiaries, would be
treated as a single employer under Section 414 of the Code. The only Benefit
Plans which individually or collectively would constitute an "Employee Pension
Benefit Plan" defined in Section 3(2) of ERISA (the "Pension Plans") are
identified as such in Section 2.1(k) of the Company Disclosure Schedule.
(ii) Each Benefit Plan has been maintained and administered in
compliance with its terms in all material respects and with the requirements
prescribed by any and all applicable statutes, orders, rules and
9
regulations, and is, to the extent required by applicable law or contract, fully
funded without having any deficit or unfunded actuarial liability. Any Benefit
Plan intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified and nothing has
occurred that could reasonably be expected to cause the loss of such qualified
status.
(iii) No Benefit Plan is covered by Title IV of ERISA and no
contributions to any Benefit Plan are required under Section 412 of the Code.
Neither the Company nor any of its subsidiaries has incurred or reasonably
expects to incur any liability under Title IV of ERISA or Section 4975 of the
Code or any material liability or penalty under Section 4980B of the Code or
Section 502(i) of ERISA.
(iv) To the knowledge of the Company, there are no pending or
anticipated material claims against or otherwise involving any of the Benefit
Plans and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Benefit Plan activities) has been brought
against or with respect to any Benefit Plan.
(v) All material contributions, reserves or premium payments,
required to be made as of the date hereof to or with respect to the Benefit
Plans have been made or provided for.
(vi) Except as required by law, neither the Company nor any of
its subsidiaries has any obligations for post-retirement or post-termination
health and life benefits under any Benefit Plan.
(l) TAXES. As used in this Agreement, "Tax" or "Taxes" shall include
all Federal, state, local and foreign income, property, sales, excise and other
taxes, tariffs or governmental charges or assessments of any nature whatsoever
as well as any interest, penalties and additions thereto. Except as set forth in
Section 2.1(l) of the Company Disclosure Schedule:
(i) The Company and each of its subsidiaries have timely filed
all tax returns, statements, reports and forms required to be filed with any tax
authority (collectively, the "Tax Returns") and in accordance with all
applicable laws. All such Tax Returns are correct and complete in all respects.
All taxes shown as due and payable on the Tax Returns have been paid and all
other taxes of the Company or any of its subsidiaries have been adequately
reserved for in the financial statements included in the Company SEC Documents.
There are no Liens on any of the assets of the Company or any of its
subsidiaries that arose in connection with any failure (or alleged failure) to
pay any tax.
(ii) The Company and each of its subsidiaries has withheld and
timely paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) No dispute or claim concerning any tax liability of the
Company or any of its subsidiaries has been proposed or claimed in writing or,
to the knowledge of the Company, threatened by any authority. The Company has
provided BioShield with correct and complete copies of its Federal income tax
returns for taxable years ending December 31, 1995 through December 31, 1999,
and examination reports, and statements of deficiencies with respect to Federal
income taxes, if any, assessed against or agreed to by the Company and any of
its subsidiaries with respect to Federal income taxes for taxable years ending
December 31, 1995 through December 31, 1999.
(iv) Neither the Company nor any of its subsidiaries has
waived any statute of limitations in respect of taxes or agreed to any extension
of time with respect to a tax assessment or deficiency.
(v) Neither the Company nor any of its subsidiaries has filed
a consent pursuant to Section
10
341(f) of the Code concerning collapsible corporations. Neither the Company nor
any of its subsidiaries is a party to any tax allocation or sharing agreement.
Neither the Company nor any of its subsidiaries has any liability for the taxes
of any person (other than the Company and any of its subsidiaries that is
currently a member of the Company's affiliated group filing a consolidated
federal income tax return) under Treas. Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(vi) As of the date of the most recent financial statements
included in the Company SEC Documents, the unpaid taxes of the Company and its
subsidiaries did not exceed the liability for taxes (rather than any reserve for
deferred taxes established to reflect timing differences between book and tax
income) set forth on the face of such financial statements.
(vii) Neither the Company nor any of its subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method nor does
the Company or any of its subsidiaries have any knowledge that the Internal
Revenue Service (or other taxing authority) has proposed or is considering
proposing, any such change in accounting method.
(viii) Neither the Company nor any of its subsidiaries is a
party to any agreement, contract, or arrangement that, individually or
collectively, could give rise to the payment of any amount (whether in cash or
property, including Shares) that would not be deductible pursuant to the terms
of Section 162(m), 280G or, to the knowledge of the Company, 162(a)(i) of the
Code.
(ix) Neither the Company nor any of its subsidiaries has
constituted either a "Distributing Corporation" or a "Controlled Corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two years prior to the date of this Agreement, or (B) in a distribution that
could otherwise constitute part of a "Plan" or "Series Of Related Transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Offer.
(m) [deliberately omitted]
(n) BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement or the Tender Agreement based upon
arrangements made by or on behalf of the Company or any of its subsidiaries. No
such engagement letter obligates the Company to continue to use the services or
pay fees or expenses in connection with any future transaction.
(o) PERMITS; COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS. (i) Each of
the Company and its subsidiaries has in effect all Federal, state, local and
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits and rights ("Permits") necessary for it
to own, lease or operate its properties and assets and to carry on its business
as now conducted, and there has occurred no default under any such Permit,
except for the absence of Permits and for defaults under Permits which,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect. The Company and its subsidiaries have been, and
are, in compliance with all applicable statutes, laws, ordinances, regulations,
rules, judgments, decrees or orders of any Governmental Entity, and neither the
Company nor any of its subsidiaries has received any notice from any
Governmental Entity or any other person that either the Company or any of its
subsidiaries is in violation of, or has violated, any applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or orders, except such
failures to comply or violations as, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect.
11
(ii) Except as set forth in Section 2.1(o) of the Company
Disclosure Schedule, the Company has complied in all material respects with all
applicable Environmental Laws (as defined below). There is no pending or, to the
knowledge of the Company, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Company. For purposes of this Agreement, "Environmental Law"
means any federal, state or local law, statute, rule or regulation or the common
law relating to the protection of human health or the environment, including
without limitation CERCLA (as defined below), the Resource Conservation and
Recovery Act of 1976, any statute, regulation or order pertaining to (A)
treatment, storage, disposal, generation and transportation of industrial, toxic
or hazardous materials or substances or solid or hazardous waste; (B) air, water
and noise pollution; (C) groundwater and soil contamination; (D) the release or
threatened release into the environment of industrial, toxic or hazardous
materials or substances, or solid or hazardous waste, including without
limitation, emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants, or chemicals; (E) the protection of wild life, marine
life and wetlands, including without limitation all endangered and threatened
species; (F) storage tanks, vessels, abandoned or discarded barrels, containers
and other closed receptacles; (G) health and safety of employees and other
persons; and (H) manufacture, processing, use, distribution, treatment, storage,
disposal, transportation or handling of pollutants, contaminants, toxic or
hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used in this Section, the terms "release" and "environment"
shall have the meaning set forth in the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"). Except as set forth
in Section 2.1(o) of the Company Disclosure Schedule, to the best knowledge of
the Company, neither the Company nor any third party has released any Materials
of Environmental Concern (as defined below) into the environment at any parcel
of real property or any facility formerly or currently owned, operated or
controlled by the Company. Except as set forth in Section 2.1(o) of the Company
Disclosure Schedule, the Company is not aware of any releases of Materials of
Environmental Concern at parcels or real property of facilities other than those
owned, operated or controlled by the Company that could reasonably be expected
to have an impact on the real property or facilities owned, operated or
controlled by the Company. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resource
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products, or any other material subject to regulation under any Environmental
Law. The Company is not aware of any material environmental liability of the
solid and hazardous waste transporters and treatment, storage and disposal
facilities that have been utilized by the Company. Set forth in Section 2.1(o)
of the Company Disclosure Schedule is a list of all environmental reports,
investigations and audits of which the Company is aware (whether conducted by or
on behalf of the Company or a third party, and whether done at the initiative of
the company or directed by a Governmental Entity or other third party) issued or
conducted during the five years preceding the date hereof relating to premises
currently or previously owned or operated by the Company. Complete and accurate
copies of each such report, or the results of each such investigation or audit,
have been provided to counsel for BioShield.
(p) CONTRACTS; DEBT INSTRUMENTS. (i) Except as otherwise disclosed in
Section 2.1(p) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is a party to or subject to:
(A) any union contract, or any employment, consulting,
severance, termination, or indemnification agreement, contract or
arrangement providing for future payments, written or oral, with any
current or former officer or director which (1) exceeds $100,000 per
annum or (2) requires aggregate annual payments or total payments over
the life of such agreement, contract or arrangement to such current or
former officer, consultant, director or employee in excess of $100,000
or $250,000, respectively, and is not terminable by it or its
subsidiary on 30 days' notice or less without penalty or obligation to
make payments related to such termination;
12
(B) any joint venture contract or similar arrangement or any
other agreement not in the ordinary course of business which has
involved or is expected to involve a sharing of revenues of $250,000
per annum or more with other persons;
(C) any lease for real or personal property in which the
amount of payments which the Company is required to make on an annual
basis exceeds $500,000;
(D) to the knowledge of the Company, any material agreement,
contract, policy, license, Permit, document, instrument, arrangement or
commitment involving revenues to the Company in excess of $500,000
which has not been terminated or performed in its entirety and not
renewed which may be, by its terms, terminated by reason of the
execution of this Agreement or the Tender Agreement or the consummation
of the Offer or the other transactions contemplated by this Agreement
or the Tender Agreement; or
(E) any agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment that provides for an
express non-competition covenant with any person or in any geographic
area and which limits in any material respect the ability of the
Company to compete in its current business lines.
(ii) All contracts, policies, agreements, leases, licenses,
Permits, documents, instruments, arrangements and other commitments listed in
Section 2.1(p) of the Company Disclosure Schedule or otherwise disclosed in the
Company SEC Documents are valid and binding agreements of the Company or a
subsidiary of the Company and are in full force and effect, and neither the
Company, any of its subsidiaries nor, to the knowledge of the Company, any other
party thereto, is in default in any material respect under the terms of any such
contract, plan, arrangement, agreement, lease, license, Permit, instrument or
other commitment.
(iii) Neither the Company nor any subsidiary of the Company is
in default in any material respect under the terms of any exclusive license or
distribution agreement or arrangement that, by its terms, provides for payments
to the Company or any of its subsidiaries of $500,000 or more per annum, or any
other material license or distribution agreement or arrangement. To the
knowledge of the Company, none of the parties to any of the contracts identified
in Section 2.1(p) of the Company Disclosure Schedule or otherwise disclosed in
the Company SEC Documents has terminated, or materially reduced the amount of
its business with the Company or any of its subsidiaries in the future.
(iv) Set forth in Section 2.1(p) of the Company Disclosure
Schedule is (A) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its subsidiaries in an aggregate principal
amount in excess of $500,000 is outstanding or may be incurred and (B) the
respective principal amounts currently outstanding thereunder. For purposes of
this Section 2.1(p), "Indebtedness" shall mean, with respect to any person,
without duplication, (A) all obligations of such person for borrowed money, or
with respect to deposits or advances of any kind to such person, (B) all
obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (C) all obligations of such person upon which interest charges are
customarily paid, (D) all obligations of such person under conditional sale or
other title retention agreements relating to property purchased by such person,
(E) all obligations of such person issued or assumed as the deferred purchase
price of property or services (excluding obligations of such person to creditors
for raw materials, inventory, services and supplies incurred in the ordinary
course of such person's business), (F) all capitalized lease obligations of such
person, (G) all obligations of others secured by any Lien on property or assets
owned or acquired by such person, whether or not the obligations secured thereby
have been assumed, (H) all obligations of such person under interest rate or
currency swap transactions (valued at the termination value thereof), (I) all
letters of credit issued for the
13
account of such person (excluding letters of credit issued for the benefit of
suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations of such person to purchase securities
(or other property) which arises out of or in connection with the sale of the
same or substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(q) TITLE TO PROPERTIES. (i) Each of the Company and its subsidiaries
has good and marketable title to, or valid leasehold interests in, all its
properties and assets, free and clear of all Liens, except for defects in title,
easements, restrictive covenants and similar encumbrances or impediments that,
in the aggregate, do not and could not reasonably be expected to have a Company
Material Adverse Effect.
(ii) Each of the Company and its subsidiaries has complied in
all material respects with the terms of all leases to which it is a party and
under which it is in occupancy, and all such leases are in full force and
effect. Each of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
(r) [DELIBERATELY OMITTED.]
(s) INTERESTS OF OFFICERS AND DIRECTORS. Except as described in the
Company SEC Documents or as set forth in Section 2.1(s) of the Company
Disclosure Schedule, none of the Company's officers or directors has any
material direct or indirect interest in any material property, real or personal,
tangible or intangible, including inventions, patents, copyrights, trademarks,
trade names, trade secrets or know-how, used in or pertaining to the business of
the Company or that of its subsidiaries, or any supplier, distributor or
customer of the Company or any of its subsidiaries, except for the normal rights
of a stockholder and rights under existing employee benefit plans.
(t) INTELLECTUAL PROPERTY. (i) For purposes of this Section 2.1(t),
"Intellectual Property" shall mean all software, patents, trademarks, trade
names, service marks, and domain names and registered copyrights and material
non-registered copyrights used by the Company or any subsidiary of the Company
in connection with the conduct of the Company's business, and all registrations
of or applications for registration of any of the foregoing, including any
additions thereto or extensions, continuations, renewals or divisions thereof,
together with all trade dress, trade secrets, processes, formulae, designs,
know-how and other intellectual property rights that are so used. BioShield has
heretofore been furnished with a true and correct summary of each U.S. and
foreign registration or application for U.S. and foreign registration of
patents, trademarks and tradenames which is registered with, or in respect of
which any application for registration has been filed with, any Governmental
entity. All such registrations and applications are valid and subsisting, in
full force and effect, and have not been cancelled, expired or abandoned (except
as otherwise noted in such reports). The Company is listed in the records of the
appropriate Governmental Entity or foreign government equivalent entity as the
sole owner of record for each such application and registration.
(ii) The Intellectual Property includes all of the
intellectual property rights owned, licensed, or used by the Company and its
subsidiaries that are reasonably necessary to conduct the Company's business as
it is now conducted. Except as specified in Section 2.1(t) of the Company
Disclosure Schedule, (A) the Company, directly or through its subsidiaries, has
good, marketable and exclusive title to, and the valid power and right to use,
the Intellectual Property owned by the Company or its subsidiaries free and
clear of all Liens and (B) no person or entity other than the Company and its
subsidiaries has any right or interest of any kind or nature in or with respect
to the Intellectual Property or any portion thereof or any rights to use, market
or exploit the Intellectual Property or any portion thereof other than pursuant
to agreements entered into in the ordinary course of business.
14
(iii) To the extent set forth in Section 2.1(f) of the Company
Disclosure Schedule, the Company and its subsidiaries take reasonable measures
to protect the confidentiality of its material trade secrets, know-how or other
confidential information, including by generally requiring independent sales
representatives having access thereto to execute written non-disclosure
agreements that adequately protect the Company's and its subsidiaries'
proprietary interests in and to such trade secrets, know-how and other
confidential information.
(u) NO INFRINGEMENT. (i) Except as specified in Section 2.1(u)
of the Company Disclosure Schedule, neither the existence nor the sale, license,
lease, transfer, use, reproduction, distribution, modification or other
exploitation by the Company or any subsidiary of the Company of any Intellectual
Property, as Intellectual Property, as the case may be, is or was, or is
currently contemplated to be, sold, licensed, leased, transferred, used or
otherwise exploited by such persons, does, did or will (i) infringe on any
patent, trademark, copyright or other right of any person, (ii) constitute a
misuse or misappropriation of any trade secret, know-how, process, proprietary
information or other right of any other person, or (iii) entitle any other
person to any interest therein, or right to compensation from the Company, any
subsidiary of the Company or any of their respective successors or assigns, by
reason thereof (it being understood and agreed that, insofar as the foregoing
representation and warranty relates to Intellectual Property that is licensed to
the Company or any subsidiary of the Company by any third party, or as it
relates to patents and trademarks, such representation and warranty is made only
to the Company's knowledge). Except as specified in Section 2.1(u) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries has
received any complaint, assertion, threat or allegation or otherwise has notice
of any lawsuit, claim, demand, proceeding or investigation involving matters of
the type contemplated by the immediately preceding sentence or is aware of any
facts or circumstances that could reasonably be expected to give rise to any
lawsuit, claim, demand, proceeding or investigation. Except as specified in
Section 2.1(u) of the Company Disclosure Schedule, there are no material
restrictions on the ability of the Company, any subsidiary of the Company or any
of their respective successors or assigns to sell, license, lease, transfer,
use, reproduce, distribute, modify or otherwise exploit any Intellectual
Property.
(ii) Except as specified in Schedule 2.1(u) of the Company
Disclosure Schedule, the Company and its subsidiaries are not aware of any
material infringement, misappropriation or other violation of any Intellectual
Property.
(v) CHANGE OF CONTROL. Except as described in Section 2.1(v)
of the Company Disclosure Schedule, the execution and delivery of this Agreement
and the Tender Agreement and the consummation of the transactions contemplated
hereby and thereby will not (i) result in any payment (including severance,
unemployment compensation, tax gross-up, bonus or otherwise) becoming due to any
current or former director, employee or independent contractor of the Company or
any of its subsidiaries, from the Company or any of its subsidiaries under any
Stock Plan, Benefit Plan, agreement or otherwise, (ii) materially increase any
benefits otherwise payable under any Stock Plan, Benefit Plan, agreement or
otherwise or (iii) result in the acceleration of the time of payment, exercise
or vesting of any such benefits.
SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF BIOSHIELD.
BioShield represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. BioShield is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. BioShield is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) could not reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), business, assets or results of
operations of BioShield and its subsidiaries taken as a whole (a "BioShield
Material Adverse Effect").
15
BioShield has provided the Company with complete and correct copies of its
certificate of incorporation and by-laws.
(b) CAPITAL STRUCTURE. Except as set forth on the BioShield Disclosure
Schedule, as of the date of this Agreement, the authorized capital stock of
BioShield consists of 40,000,000 shares of BioShield Common Stock and 10,000,000
shares of preferred stock, no par value ("BioShield Preferred Stock"). At the
close of business on May 15, 2000, (i) 8,339,073 shares of BioShield Common
Stock were issued and outstanding, and (ii) 500 shares of BioShield Series B
Preferred Stock were issued and outstanding. All outstanding shares of capital
stock of BioShield are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. As of the date of this
Agreement, other than the BioShield Series B Preferred Stock, there are
outstanding no bonds, debentures, notes or other indebtedness of BioShield
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of BioShield may
vote.
(c) AUTHORITY; NONCONTRAVENTION. BioShield has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by BioShield and the consummation by BioShield of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of BioShield. This Agreement has been duly executed
and delivered by BioShield and constitutes a valid and binding obligation of
BioShield, enforceable against it in accordance with its terms. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of BioShield or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of BioShield, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to BioShield or
any of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to BioShield, any subsidiary of BioShield or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not reasonably be expected to (x) have a
BioShield Material Adverse Effect, (y) impair the ability of BioShield to
perform its obligations under this Agreement or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement. No
Consent is required by or with respect to BioShield in connection with the
execution and delivery by BioShield of this Agreement or the consummation by
BioShield of the transactions contemplated by this Agreement, except for (i) the
filing with the SEC of (A) the Form S-4, (B) the Offer Documents, and (C) such
reports under the Exchange Act as may be required in connection with this
Agreement, the Tender Agreement and the transactions contemplated hereby and
thereby, (ii) such filings as may be required under state securities or "blue
sky" laws, (iii) such filings with and approvals of NASDAQ to permit the shares
of BioShield Common Stock that are to be issued upon consummation of the Offer
to be listed on NASDAQ, and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be made or obtained individually or in the aggregate could not reasonably be
expected to (x) have a BioShield Material Adverse Effect, (y) impair BioShield's
ability to perform its obligations under this Agreement or (z) prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
(d) SEC DOCUMENTS; FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.
BioShield has filed all required reports, forms and other documents with the SEC
since January 1, 1999 (the "BioShield SEC Documents"). As of their respective
dates, the BioShield SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations
16
of the SEC promulgated thereunder applicable to such BioShield SEC Documents,
and none of the BioShield SEC Documents 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. The financial
statements of BioShield included in the BioShield SEC Documents as of their
respective dates comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved and fairly present in all material respects the consolidated financial
position of BioShield and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments not material in amount).
(e) INFORMATION SUPPLIED. Neither the Offer Documents nor the Form S-4,
nor any of the information supplied or to be supplied by BioShield or its
subsidiaries or representatives for inclusion or incorporation by reference in
the Schedule 14D-9 will, at the respective times any such documents or any
amendments or supplements thereto are filed with the SEC, are first published,
sent or given to shareholders or become 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 to make the statements therein
not misleading. The Offer Documents and the Form S-4 will comply as to form in
all material respects with the requirements of all applicable laws, including
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations thereunder. No representation or warranty is made by BioShield with
respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by reference
therein.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
documents and reports filed by BioShield with the SEC prior to the date of this
Agreement (the "BioShield SEC Documents"), from March 31, 2000 to the date of
this Agreement, there has not been any event, occurrence or development of a
state of circumstances that has had or could reasonably be expected to have a
BioShield Material Adverse Effect.
(g) LITIGATION. Except as disclosed in the BioShield SEC Documents, as
of the date of this Agreement, there is no suit, action or proceeding pending
or, to the knowledge of BioShield, threatened against or affecting BioShield or
any of its subsidiaries that, individually or in the aggregate, could reasonably
be expected to (i) have a BioShield Material Adverse Effect, (ii) impair the
ability of BioShield to perform its obligations under this Agreement or (iii)
prevent or materially delay the consummation of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against BioShield or any of
its subsidiaries having, or which is reasonably likely to have, any such effect.
(h) COMPLIANCE WITH APPLICABLE LAWS. As of the date of this Agreement,
each of BioShield and its subsidiaries has in effect all Permits necessary for
it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except for the absence of Permits and for defaults under Permits which
absence or default, individually or in the aggregate, could not reasonably be
expected to have a BioShield Material Adverse Effect. As of the date of this
Agreement, BioShield and its subsidiaries have been, and are, in compliance with
all applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for such failures to comply or violations as,
individually or in the aggregate, could not reasonably be expected to have a
BioShield Material Adverse Effect.
(i) BROKERS. No broker, investment banker, financial advisor or other
person, other than White Capital Group Ltd., the fees and expenses of which will
be paid by BioShield, is entitled to any broker's, finder's,
17
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement or the Tender Agreement based upon
arrangements made by or on behalf of BioShield.
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ARTICLE III
COVENANTS OF THE COMPANY
SECTION 3.1. CONDUCT OF BUSINESS. Except as expressly provided in this
Agreement or with the prior written consent of BioShield, during the period from
the date of this Agreement to the Appointment Time, the Company shall, and shall
cause its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use all reasonable efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Appointment Time. Except as
expressly provided in this Agreement, without limiting the generality of the
foregoing, during the period from the execution and delivery of this Agreement
to the Appointment Time, the Company shall not, and shall not permit any of its
subsidiaries to:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries (other than internal restructuring of wholly owned subsidiaries
consistent with past practice) or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
Shares upon the exercise of Company Options outstanding on the date of this
Agreement);
(c) amend the Company's or any subsidiary's certificate of
incorporation, by-laws or other comparable charter or organizational documents;
(d) acquire or agree to acquire (including by merger,
consolidation or acquisition of stock or assets) any business, including through
the acquisition of any interest in any corporation, partnership, joint venture,
association or other business organization or division thereof;
(e) (i) mortgage or otherwise encumber or subject to any Lien
or, except in the ordinary course of business consistent with past practice or
pursuant to existing contracts or commitments, sell, lease, transfer or
otherwise dispose of any of the Company Intellectual Property Rights or any
other material properties or assets or (ii) except in the ordinary course of
business consistent with past practice or pursuant to existing contracts or
commitments, license any of the Company Intellectual Property Rights;
(f) make or agree to make any new capital expenditures which
in the aggregate are in excess of $250,000;
(g) make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
(h) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or
19
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
and in accordance with their terms, of (i) liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Company SEC
Documents, (ii) liabilities incurred in the ordinary course of business
consistent with past practice, or (iii) other liabilities or obligations not to
exceed in the aggregate $500,000 or waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party;
(i) commence a lawsuit other than (i) for the routine
collection of amounts owed or (ii) in such cases where the Company in good faith
determines that the failure to commence suit would result in a material
impairment of a valuable aspect of the Company's business, provided that the
Company consults with BioShield prior to filing such suit;
(j)(i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its subsidiaries, guarantee any debt securities of another person, enter into
any "Keep Well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short-term borrowings incurred in the ordinary
course of business (or to refund existing or maturing indebtedness) consistent
with past practice and except for intercompany indebtedness between the Company
and any of its wholly owned subsidiaries or between such subsidiaries, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other person;
(k)(i) enter into or amend any employment agreement with any
executive or, other than in the ordinary course of business, any other employee,
(ii) enter into any agreement pursuant to which the Company or any of its
subsidiaries will provide services for a term of more than 30 days at a fixed or
capped price other than pursuant to terms that are consistent with agreements
entered into by the Company or any of its subsidiaries in the ordinary course of
business, (iii) enter into any customer sale or license agreement on terms
outside the ordinary course of business as disclosed in Section 3.1(k) of the
Company Disclosure Schedule, (iv) pay commissions to sales employees except on
the basis of executed customer contracts with respect to products actually
delivered to customers, (v) other than customer licenses and sales contracts,
enter into any contract or series of related contracts in excess of $250,000,
(vi) enter into or amend any agreement or arrangement for obtaining professional
services or advice involving payments of more than $100,000 to any one service
provider (provided that this clause (vi) does not apply to legal services or
advice obtained in connection with the transactions contemplated by this
Agreement), (vii) enter into any product swap transactions that would be in
violation of generally accepted accounting principles, (viii) make any
determination as to amounts payable under any plan, arrangement, or agreement,
providing for discretionary incentive compensation or bonus to any officer,
director, employee or independent contractor of the Company or any of its
subsidiaries, or (ix) enter into or adopt, or amend any agreement, arrangement,
or Benefit Plan so as to increase the liability (whether or not contingent) of
the Company or BioShield or any of their subsidiaries in respect of compensation
or benefits except as may be required by applicable law; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 3.2. STATE TAKEOVER STATUTES. The Company and its Board of
Directors shall (i) take all reasonable actions necessary to ensure that no
"Fair Price", "Control Share Acquisition", "Moratorium" or other anti-takeover
statute, or similar statute or regulation, is or becomes applicable to this
Agreement or the Tender Agreement, or to the Offer or any of the other
transactions contemplated hereby or thereby, and (ii) if any "Fair Price",
"Control Share Acquisition", "Moratorium" or other anti-takeover statute, or
similar statute or regulation, becomes applicable to this Agreement or the
Tender Agreement, or to the Offer or any other
20
transaction contemplated hereby or thereby, take all action necessary to ensure
that the Offer and the other transactions contemplated hereby and thereby, may
be consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on the Offer and
the other transactions contemplated hereby and thereby.
SECTION 3.3. ACCESS TO INFORMATION. Subject to applicable law, the
Company shall, and shall cause each of its subsidiaries to, afford to BioShield,
and to BioShield's officers, employees, accountants, counsel, financial advisers
and other representatives, full access during normal business hours during the
period prior to the Appointment Time to all their respective properties, books,
contracts, commitments, personnel (including for the purpose of interviewing
such personnel in connection with the integration process) and records and their
accounts' work papers and, during such period, the Company shall, and shall
cause each of its subsidiaries to, furnish promptly to BioShield (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws, (ii) a copy of each material tax return, report and information statement
filed by it during such period, and (iii) all other information concerning its
business, assets, properties and personnel as BioShield may reasonably request;
provided that no investigation pursuant to this Section 3.3 shall affect any
representation or warranty given by the Company to BioShield hereunder.
SECTION 3.4. NO SOLICITATION BY THE COMPANY. (a) From the date of this
Agreement until the Appointment Time or, if earlier, the termination of this
Agreement in accordance with its terms, the Company shall not (whether directly
or indirectly through advisors, agents or other intermediaries), and the Company
shall use its best efforts to cause its and its subsidiaries' respective
officers, directors, advisors, representatives and other agents not to, directly
or indirectly, (i) solicit, initiate or knowingly encourage, or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
or (ii) participate or engage in substantive discussions or negotiations with,
or disclose or provide any non-public information relating to the Company or its
subsidiaries or afford access to the properties, books or records of the Company
or its subsidiaries to, any person (including any "person" as defined in Section
13(d)(3) of the Exchange Act) that has made an Acquisition Proposal or with or
to any Person in contemplation of an Acquisition Proposal or (iii) enter into
any agreement or agreement in principle providing for or relating to an
Acquisition Proposal; provided, however, that if and only if (A) a person has
submitted an unsolicited written Acquisition Proposal (under circumstances in
which the Company has complied with its obligations under this Section 3.4(a))
to the Company's Board of Directors, (B) the Company's Board of Directors
believes in good faith, based on such matters as it deems relevant, including
the advice of the Company's financial advisor (if any), that such Acquisition
Proposal is a Superior Proposal and (C) the Company's Board of Directors
determines in good faith, based on such matters as it deems relevant, including
consultation with the Company's outside legal counsel, that engaging in such
negotiations or discussions or providing such information is required to satisfy
the fiduciary duties of the Board of Directors of the Company under applicable
law, then the Company may furnish information to such person with respect to the
Company and its subsidiaries (so long as the Company has entered into a
customary confidentiality agreement with such party) and participate in
negotiations and discussions with such person regarding such Acquisition
Proposal; provided further that, after the third business day following
BioShield's receipt of written notice advising BioShield that the Company's
Board of Directors is prepared to accept such Superior Proposal, which notice
specifies the material terms and conditions of such Superior Proposal and
identifies the person making such Superior Proposal, the Board of Directors of
the Company may, in response to a Superior Proposal which was not solicited by
the Company and which did not otherwise result from a breach of this Section
3.4(a), terminate this Agreement, if the Board of Directors of the Company
determines in good faith, based on such matters as it deems relevant, including
consultation with the Company's outside legal counsel, that it is required to do
so in order to comply with its fiduciary duties to the Company's stockholders
under applicable law, and, concurrently with such termination, causes the
Company to pay the fee payable pursuant to Section 6.4(a) hereof by reason
thereof. Nothing contained in this Agreement shall prohibit the Company or the
Company's Board of Directors from taking and disclosing to the Company's
stockholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and
21
14e-2(a) promulgated under the Exchange Act or from making any disclosure
required by applicable law or, in the case of the Company's Board of Directors,
making any other disclosure to the Company's stockholders that the Company's
Board of Directors determines in good faith is required to be made to satisfy
the fiduciary duties of the Company's Board of Directors under applicable law.
The Company shall immediately cease and cause to be terminated and shall cause
its affiliates and subsidiaries and its or their respective officers, directors,
employees, representatives or agents, to terminate all existing discussions or
negotiations, if any, with any persons conducted heretofore with respect to, or
that could reasonably be expected to lead to, an Acquisition Proposal.
(b) For purposes of this Agreement, "Acquisition Proposal"
shall mean any inquiry, proposal or offer from any person (other than BioShield
or any of its affiliates) relating to any merger, consolidation,
recapitalization, liquidation or other direct or indirect business combination,
involving the Company or any subsidiary or the issuance or acquisition of shares
of capital stock or other equity securities of the Company or any subsidiary
representing 20% or more (by voting power) of the outstanding capital stock of
the Company or such subsidiary or any tender or exchange offer that if
consummated would result in any person, together with all affiliates thereof,
beneficially owning shares of capital stock or other equity securities of the
Company or any subsidiary representing 20% or more (by voting power) of the
outstanding capital stock of the Company or such subsidiary, or the acquisition,
license, purchase or other disposition of a substantial portion of the
technology, business or assets of the Company or any subsidiary outside the
ordinary course of business or inconsistent with past practice; and the term
"Superior Proposal" means any bona fide Acquisition Proposal which is on terms
that the Board of Directors of the Company determines in its good faith judgment
(after receipt of the advice of the Company's financial advisor, if any)
provides for consideration which would exceed the value of the consideration
provided for in the Offer, after taking into account all relevant factors,
including any conditions to such Acquisition Proposal, the timing of the closing
thereof, the risk of nonconsummation, the ability of the person making the
Acquisition Proposal to finance the transaction contemplated thereby and any
required governmental or other consents, filings and approvals.
(c) In addition to the other obligations of the Company set
forth in this Section 3.4, the Company shall promptly advise BioShield orally
and in writing of any request for information with respect to any Acquisition
Proposal, or any inquiry with respect to or which is reasonably likely to result
in an Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person making the same.
The Company shall inform BioShield on a prompt basis of the status and content
of any discussions regarding any Acquisition Proposal with a third party and as
promptly as practicable of any change in the price, structure or form of the
consideration or material terms of and conditions regarding the Acquisition
Proposal.
SECTION 3.5. LITIGATION. The Company shall give BioShield the
opportunity to participate in the defense of any litigation against the Company
and/or its directors relating to the transactions contemplated by this Agreement
and the Tender Agreement.
SECTION 3.6. ENVIRONMENTAL AUDIT. The Company shall promptly
cause its premises to be subject to a Phase II environmental audit (the
"Audit"). A complete and accurate copy of the audit report, together with any
remediation plan, shall be promptly provided to BioShield. The costs of the
Audit shall be split 50-50 between the Company and BioShield.
ARTICLE IV
COVENANTS OF BIOSHIELD
22
SECTION 4.1. LISTING. BioShield shall use its reasonable best efforts
to cause the BioShield Common Stock to be issued upon the consummation of the
Offer and to be issuable upon exercise of Company Options to be approved for
listing on the principal market on which the BioShield Common Stock is traded,
subject to official notice of issuance, as promptly as practicable after the
date hereof, and in any event prior to the Appointment Time.
SECTION 4.2. INDEMNIFICATION. (a) For two years after the Appointment
Time, BioShield and the Company will indemnify and hold harmless (including
advancement of expenses) the current and former directors and officers of the
Company in respect of acts or omissions occurring on or prior to the Appointment
Time to the extent provided in the Company's certificate of incorporation,
by-laws and indemnity agreements in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law. BioShield will use its best efforts to cause
directors and officers' liability insurance to be procured following the closing
so long as the annual premium is not in excess of $75,000. It is understood
that, unless made by a court, any determination as to whether a person seeking
indemnification pursuant to this Section 4.2 has met any applicable legal
standard for indemnification shall be made by a committee consisting of at least
two of BioShield's independent directors.
(b) In the event BioShield or the Company or any of their
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or Company or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all its properties and
assets to any person, then, and in each such case, to the extent necessary to
effectuate the purposes of this Section 4.2, proper provision shall be made so
that the successors and assigns of BioShield and the Company assume the
obligations set forth in this Section 4.2; provided that, in the case of any
such assignment by BioShield or the Company, BioShield and the Company shall
remain liable for all of their respective obligations under this Agreement.
SECTION 4.3. EMPLOYEES. (a) BioShield agrees to honor in accordance
with their terms all Benefit Plans and all employment and severance agreements
in each case listed in Section 4.3 of the Company Disclosure Schedule (or filed
as exhibits to the Company SEC Documents), and all accrued benefits vested
thereunder; it being understood and agreed that nothing in this Section 4.3(a)
shall prevent BioShield from terminating any Benefit Plan or other agreement in
accordance with its terms.
(b) BioShield agrees to provide employees of the Company and
its subsidiaries retained by BioShield with employee benefits in the aggregate
no less favorable than those benefits provided to BioShield's similarly situated
employees; provided that BioShield shall be under no obligation to retain any
employee or group of employees of the Company or its subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. REASONABLE EFFORTS; NOTIFICATION. (a) Each of the parties
agrees to use all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Offer and the
other transactions contemplated by this Agreement and the Tender Agreement,
including (i) the obtaining of all necessary consents, approvals or waivers from
Governmental Entities and third parties, (ii) the preparation of the Form S-4,
the Offer Documents, and the Schedule 14D-9, and (iii) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement and the
Tender Agreement.
23
(b) The Company shall give prompt notice to BioShield, and
BioShield shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate in
any material respect or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) The Company shall give prompt notice to BioShield, and
BioShield shall give prompt notice to the Company, of:
(i) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement or the Tender Agreement;
(ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated by this
Agreement or the Tender Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting it or any of its subsidiaries
which, if pending on the date of this Agreement would have been required to have
been disclosed pursuant to Section 4.1 or 4.2 or which relate to the
consummation of the transactions contemplated by this Agreement or the Tender
Agreement.
SECTION 5.2. PUBLIC ANNOUNCEMENTS. BioShield and the Company will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the Offer,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement will be
in the form previously agreed to by the parties.
SECTION 5.3. CONFIDENTIALITY. The parties hereto agree that the
Confidentiality and Non-Disclosure Agreement, dated as of April 3, 2000, shall
remain in full force and effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER, FEES AND EXPENSES
SECTION 6.1. TERMINATION. This Agreement may be terminated at any time
prior to the Appointment Time:
(a) by mutual written consent of BioShield and the Company;
(b) by either BioShield or the Company:
(i) if the Offer shall have expired or been
terminated in accordance with the terms of this Agreement without BioShield
having accepted for exchange any Shares pursuant to the Offer (provided that
BioShield shall not be permitted to terminate this Agreement if the Offer is
terminated or expires without Shares being accepted for exchange in violation
of this Agreement);
24
(ii) if the Offer shall not have been consummated
on or before November 30, 2000, unless the failure to consummate the Offer is
the result of a willful and material breach of this Agreement by the party
seeking to terminate this Agreement; or
(iii) if any statute, rule, regulation,
injunction or decree having the effects set forth in subclause (a) or (b) of
clause (5) of Annex A shall be in effect and shall have become final and
nonappealable;
(c) by BioShield, upon the occurrence of any Trigger Event
described in clauses (i) through (iv) of Section 6.5(a); or
(d) by the Company, in accordance with Section 3.4(a);
provided that, in order for the termination of this Agreement pursuant to this
clause (d) to be deemed effective, the Company shall have complied with all
provisions of Section 3.4.
SECTION 6.2. EFFECT OF TERMINATION. Except for any willful and
material breach of this Agreement by any party hereto (which breach and
liability therefor shall not be affected by the termination of this Agreement),
if this Agreement is terminated by either the Company or BioShield as provided
in Section 6.1, this Agreement shall become void and have no further effect,
without any liability or obligation on the part of BioShield, or the Company,
other than the provisions of this Section 6.2, Section 6.4 and Article VII
(except Section 7.10).
SECTION 6.3. AMENDMENT. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
SECTION 6.4. EXTENSION; WAIVER. At any time prior to the
Appointment Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) waive compliance
with any of the agreements or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by each of the parties hereto. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 6.5. FEES AND EXPENSES.
(a) The Company agrees to pay BioShield the Breakup Fee, as
such term is hereinafter defined, in immediately available funds, promptly, but
in no event later than one business day, after the termination of this Agreement
(or one day after consummation of a transaction pursuant to an Acquisition
Proposal in the case of clause (i) or (ii) below), if BioShield terminates this
Agreement pursuant to Section 6.1 (c) as a result of the occurrence of any of
the events set forth below (a "Trigger Event"):
(i) the Company shall have received an Acquisition
Proposal, and at any time prior to, or within one year after (unless this
Agreement is terminated pursuant to Section 6.1(a)), the termination of this
Agreement, the Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or an agreement in principle (other
than a confidentiality agreement permitted by Section 3.4) with respect to any
Acquisition Proposal;
25
(ii) any person or group (defined in Section 13(d)(3)
of the Exchange Act) (other than BioShield or any of its subsidiaries) shall
have become the beneficial owner (defined in Rule 13d-3 promulgated under the
Exchange Act) of at least 20% of the outstanding the Shares or shall have
acquired, directly or indirectly, at least 20% of the assets of the Company and
its subsidiaries and at any time prior to, or within one year after (unless this
Agreement is terminated pursuant to Section 6.1(a)), the termination of this
Agreement, the Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or an agreement in principle (other
than a confidentiality agreement permitted by Section 3.4) with respect to any
Acquisition Proposal;
(iii) the Company shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set forth
in subclause (c) or (d) of clause (5) of Annex I, and (B) is incapable of being
or has not been cured by the Company within 10 calendar days after giving
written notice to the Company of such breach or failure to perform (provided,
however, that the Breakup Fee shall not be payable by the Company in the event
of termination of this Agreement as a result of a breach of the Company's
representations or warranties contained in Sections 2.1(b), and 2.1(i) through
2.1(v), if at the time such misrepresentation was made, no officer or director
of the Company had actual knowledge that such representation was, or was likely
to be, false and no Breakup Fee shall be payable as the result of any matter
revealed in the Phase II environmental audit contemplated by Section 3.6 which
was not previously in the actual knowledge of Xxxxxx Xxxxxx, Xxxx Xxxxxx or Xxxx
Xxxxxx);
(iv) (1) the Board of Directors of the Company (or
any committee thereof) shall have withdrawn or materially modified or amended in
a manner adverse to BioShield its approval or recommendation of the Offer or
this Agreement or its approval of the entry by BioShield into the Tender
Agreement, or shall have failed to make such favorable recommendation, or (2)
the Board of Directors of the Company (or any committee thereof) shall have
recommended to the shareholders of the Company any Acquisition Proposal or shall
have resolved to, or publicly announced an intention to, do so.
For purposes hereof, "Breakup Fee" shall mean the greater of (i) $690,000.00 or
(ii), 25% of the Excess Value, as hereinafter defined, of the consideration to
be paid by the acquirer pursuant to an Acquisition Proposal, if applicable.
"Excess Value" shall mean the amount per share in excess of $5.00 paid by the
acquirer for Shares in connection with the Acquisition Proposal, including (a)
the market value of any publicly-traded securities (valued for these purposes at
the average of the closing bid prices for such securities on the principal
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets for the twenty consecutive trading days preceding
the date of termination of this Agreement); (b) the market value of any
restricted securities or other non-cash consideration, based upon an estimate
(which estimate shall be prepared in writing by an investment banking firm of
national reputation) of the price which an unrelated third party dealing at
arm's length would be likely to pay for such securities or non-cash
consideration; (c) the face amount of any debt of the Company assumed by the
acquirer; and (d) the present value (using a discount rate of 10% per annum) of
any deferred payout arrangements, multiplied by the number of outstanding shares
of capital stock of the Company at the time of consummation of any transaction
pursuant to such Acquisition Proposal.
(b) Except as set forth in this Section 6.5, all fees and
expenses incurred in connection with the Offer, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Offer is consummated; provided, that
if the Offer is not consummated, expenses incurred in connection with the
printing and mailing of the documents distributed or to be distributed to
stockholders of the Company, all SEC and other regulatory filing fees with
respect to the Form S-4 and the NASDAQ listing fee with respect to the listing
of BioShield Company Stock to be issued in the Offer shall be shared equally by
BioShield and the Company; provided, further, that if this Agreement is
terminated as a result of the occurrence of a Trigger Event, in addition to any
amounts paid or payable by the Company to BioShield
26
pursuant to Section 6.5(a), the Company shall assume and pay, or reimburse
BioShield for, all reasonably documented out-of-pocket fees payable and expenses
incurred by BioShield (including the fees and expenses of its counsel) in
connection with this Agreement and the transactions contemplated hereby, up to a
maximum of $500,000.00 (which amount shall include the fees and expenses
allocated to or paid by the Company pursuant to the proviso of the immediately
preceding sentence).
27
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Appointment
Time. This Section 7.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Appointment Time.
SECTION 7.2. NOTICES. All notices, requests and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) or by telecopy (with copies by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to BioShield, to:
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxx Moss Kline & Xxxxx LLP
000 Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 000
0000 Xxxxxxxxx Xxxx, XX
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Company, to:
Arrow-Magnolia International, Inc.
0000 Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx & Xxxxxx, P.C.
0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 7.3. INTERPRETATION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this
28
Agreement, they shall be deemed to be followed by the words "without
limitation". References herein to the "knowledge of the company" shall mean the
knowledge of the executive officers of the Company after reasonable inquiry,
except as set forth in Section 6.5(a)(iii).
SECTION 7.4. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 7.5. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement and the Confidentiality Agreement (a) constitute the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and (b) is not intended to confer upon any person other than the parties any
rights or remedies hereunder.
SECTION 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. THE
PARTIES HEREBY AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN XXXXXX COUNTY,
GEORGIA, SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OVER ANY DISPUTE ARISING
FROM OR RELATING TO THIS AGREEMENT AND THE PARTIES HERETO EXPRESSLY WAIVE
DEFENSES OF LACK OF PERSONAL JURISDICTION AND INCONVENIENT FORUM.
SECTION 7.7. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties; any instrument purporting to
make such assignment shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 7.8. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 7.9. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
29
SECTION 7.10. LIQUIDATED DAMAGES. If BioShield shall default
in its obligation to accept and pay for Shares pursuant to the Offer, provided
that all the conditions to the Offer shall have been satisfied, then the Company
shall be entitled, as its sole and exclusive remedy for such breach, to a
payment by BioShield of $690,000 (plus all reasonably documented out-of-pocket
fees payable and expenses incurred by the Company (including the fees and
expenses of its counsel) in connection with this Agreement and the transactions
contemplated hereby, up to a maximum of $500,000.00). Such payment represents
liquidated damages, and not a penalty.
BioShield and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
BIOSHIELD TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ARROW-MAGNOLIA INTERNATIONAL, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
30
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, subject to
the terms of this Agreement, BioShield shall not be required to accept for
exchange or exchange or deliver any Shares for, (subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to BioShield's obligation to pay for or return tendered Shares after
the termination or withdrawal of the Offer)) any Shares tendered, if by the
expiration of the Offer (as it may be extended in accordance with the
requirements of Section 1.1), (1) the Minimum Condition shall not have been
satisfied, (2) the Form S-4 shall not have become effective under the Securities
Act or shall be the subject of any stop order or proceedings seeking a stop
order, (3) the shares of BioShield Common Stock to be issued in the Offer shall
not have been approved for listing on the NASDAQ, subject to official notice of
issuance, or (4) at any time on or after the date of this Agreement and prior to
the acceptance for exchange of Shares pursuant to the Offer, any of the
following conditions exist:
(a) there shall be instituted or pending any action or
proceeding by any Governmental Entity, (i) challenging or seeking to make
illegal, to delay materially or otherwise directly or indirectly to restrain or
prohibit the making of the Offer, the acceptance for exchange of, or the
exchange or delivery of shares of BioShield Common Stock for, some of or all the
Shares by BioShield, seeking to obtain material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Tender Agreement,
this Agreement, or the Offer, (ii) seeking to restrain or prohibit BioShield's
ownership or operation (or that of their respective subsidiaries or affiliates)
of all or any portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or of BioShield and its subsidiaries, taken as a
whole, or to compel BioShield or any of its subsidiaries or affiliates to
dispose of or hold separate all or any portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of BioShield and its
subsidiaries, taken as a whole, (iii) seeking to impose limitations on the
ability of BioShield or any of its subsidiaries or affiliates effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote any Shares acquired or owned by BioShield or any of its
subsidiaries or affiliates on all matters properly presented to the Company's
stockholders or (iv) seeking to require divestiture by BioShield or any of its
subsidiaries or affiliates of any Shares; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Tender Agreement, this
Agreement, the Offer, by any Governmental Entity that, in the judgment of
BioShield, is reasonably likely, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (iv) of paragraph (a) above,
subject as aforesaid; or
(c) the Company shall have breached or failed to perform in
any material respect any of its covenants, obligations or agreements under this
Agreement; or
(d) the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be true
and correct as of the date of this Agreement and as of the expiration of the
Offer (including any extension thereof) (except to the extent expressly made as
of an earlier date, in which case as of such date), or any of the
representations and warranties set forth in this Agreement that are not so
qualified shall not be true and correct in any material respect as of the date
of this Agreement and as of the expiration of the Offer (except to the extent
expressly made as of an earlier date, in which case as of such date); or the
"due diligence" examination of the Company conducted by BioShield and its agents
and financing sources shall reveal any condition or state of facts that,
individually or in the aggregate, has had or could reasonably be expected to
have, a Company Material
31
Adverse Effect; or
(e) this Agreement shall have been terminated in accordance
with its terms; or
(f) (1) the Board of Directors of the Company (or any
committee thereof) shall have withdrawn or materially modified or amended in a
manner adverse to BioShield its approval or recommendation of the Offer or this
Agreement, or its approval of the entry by BioShield into the Tender Agreement,
or shall have failed to make such favorable recommendation or (2) the Board of
Directors of the Company (or any committee thereof) shall have recommended to
the shareholders of the Company any Acquisition Proposal or shall have resolved
to, or publicly announced an intention to, do so; or
(g) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or agreement in
principle (other than a confidentiality agreement permitted by Section 3.4 of
this Agreement) with respect to any Acquisition Proposal;
(h) any person or group (defined in Section 13(d)(3) of the
Exchange Act) (other than BioShield or any of its subsidiaries) shall have
become the beneficial owner (defined in Rule 13d-3 promulgated under the
Exchange Act) of at least 20% of the outstanding Shares or shall have acquired,
directly or indirectly, at least 20% of the assets of the Company and its
subsidiaries;
(i) There shall not have been a final report issued pursuant
to the Phase II environmental audit conducted by the Company of its premises
reflecting no material environmental contamination (or if there shall be such a
report reflecting any material environmental contamination, a remediation plan
reasonably acceptable to BioShield shall not have been fully and properly
implemented by the Company);
(j) The Average Closing Bid Price shall be less than $7.50;
(k) the net working capital of the Company (which, for
purposes hereof, shall mean the total current assets of the Company less the
total current liabilities, as shown on a balance sheet prepared in accordance
with GAAP consistently applied, shall fall below the sum of $6,000,000); or
(l) the employment agreements of Xx. Xxxxxx, Xx. Xxxx Xxxxxx,
Xx. Xxxx Xxxxxx shall be amended and restated in the manner contemplated by the
attached Schedule "A-1";
which, in the good faith judgment of BioShield in any such case, and regardless
of the circumstances (including any action or omission by BioShield) giving rise
to any such condition, makes it inadvisable to proceed with such acceptance for
exchange or exchange.
The foregoing conditions are for the sole benefit of BioShield
and may be asserted by BioShield regardless of the circumstances (including any
action or omission by BioShield) giving rise to any such condition or (other
than the Minimum Condition) may, subject to the terms of this Agreement, be
waived by BioShield in their reasonable discretion in whole at any time or in
part from time to time. The failure by BioShield at any time to exercise its
rights under any of the foregoing conditions shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right which may be
asserted at any time or from time to time.
