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EXHIBIT 2.1
[Execution Copy]
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ECLIPSE SURGICAL TECHNOLOGIES, INC.
RW ACQUISITION CORPORATION
AND
CARDIOGENESIS CORPORATION
DATED AS OF OCTOBER 21, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER.............................................................................2
1.1 The Merger........................................................................2
1.2 Effective Time; Closing...........................................................2
1.3 Effect of the Merger..............................................................2
1.4 Certificate of Incorporation; Bylaws..............................................2
1.5 Directors and Officers............................................................3
1.6 Effect on Capital Stock...........................................................3
1.7 Surrender of Certificates.........................................................4
1.8 No Further Ownership Rights in the Company Common Stock...........................5
1.9 Lost, Stolen or Destroyed Certificates............................................6
1.10 Tax and Accounting Consequences...................................................6
1.11 Taking of Necessary Action; Further Action........................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................6
2.1 Organization of the Company.......................................................7
2.2 Company Capital Structure.........................................................7
2.3 Obligations With Respect to Capital Stock.........................................8
2.4 Authority.........................................................................8
2.5 Company SEC Filings; Company Financial Statements.................................9
2.6 Absence of Certain Changes or Events.............................................10
2.7 Tax..............................................................................11
2.8 Intellectual Property............................................................13
2.9 Compliance; Permits; Restrictions................................................14
2.10 Litigation.......................................................................15
2.11 Brokers' and Finders' Fees.......................................................15
2.12 Employee Benefit Plans and Employment Matters....................................15
2.13 Absence of Liens and Encumbrances................................................19
2.14 Environmental Matters............................................................19
2.15 Labor Matters....................................................................20
2.16 Agreements, Contracts and Commitments............................................20
2.17 Pooling of Interests.............................................................21
2.18 Change of Control Payments.......................................................21
2.19 Registration Statement; Proxy Statement/Prospectus...............................21
2.20 Board Approval...................................................................22
2.21 Fairness Opinion.................................................................22
2.22 Section 203 of the Delaware General Corporation Law Not Applicable...............22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................22
3.1 Organization of Parent...........................................................23
3.2 Parent and Merger Sub Capital Structure..........................................23
3.3 Obligations With Respect to Capital Stock........................................24
3.4 Authority........................................................................24
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TABLE OF CONTENTS
(CONTINUED)
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3.5 Parent SEC Filings; Parent Financial Statements..................................26
3.6 Absence of Certain Changes or Events.............................................26
3.7 Tax..............................................................................27
3.8 Intellectual Property............................................................28
3.9 Compliance; Permits; Restrictions................................................29
3.10 Litigation.......................................................................31
3.11 Brokers' and Finders' Fees.......................................................31
3.12 Employee Benefit Plans and Employment Matters....................................31
3.13 Absence of Liens and Encumbrances................................................34
3.14 Environmental Matters............................................................34
3.15 Labor Matters....................................................................35
3.16 Agreements, Contracts and Commitments............................................35
3.17 Pooling of Interests.............................................................36
3.18 Change of Control Payments.......................................................36
3.19 Registration Statement; Proxy Statement/Prospectus...............................36
3.20 Board Approval...................................................................37
3.21 Fairness Opinion. ..............................................................37
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..................................................37
4.1 Conduct of Business..............................................................37
ARTICLE V ADDITIONAL AGREEMENTS.................................................................39
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings; Board
Recommendations..................................................................39
5.2 Meetings of Stockholders and Shareholders........................................40
5.3 Confidentiality..................................................................41
5.4 No Solicitation..................................................................41
5.5 Public Disclosure................................................................44
5.6 Legal Requirements...............................................................44
5.7 Third Party Consents.............................................................45
5.8 FIRPTA...........................................................................45
5.9 Notification of Certain Matters..................................................45
5.10 Best Efforts and Further Assurances..............................................45
5.11 Stock Options and Employee Benefits..............................................45
5.12 Form S-8.........................................................................46
5.13 Indemnification and Insurance....................................................46
5.14 Nasdaq Listing...................................................................47
5.15 Parent Affiliate Agreement.......................................................47
5.16 Company Affiliate Agreement......................................................47
5.17 Board of Directors and Certain Officers of the Combined Company..................47
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE VI CONDITIONS TO THE MERGER.............................................................48
6.1 Conditions to Obligations of Each Party to Effect the Merger..............48
6.2 Additional Conditions to Obligations of the Company.......................49
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.........49
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................................................50
7.1 Termination...............................................................50
7.2 Notice of Termination; Effect of Termination..............................51
7.3 Fees and Expenses.........................................................52
7.4 Amendment.................................................................53
7.5 Extension; Waiver.........................................................53
ARTICLE VIII GENERAL PROVISIONS.................................................................54
8.1 Non-Survival of Representations, Warranties and Covenants.................54
8.2 Notices...................................................................54
8.3 Interpretation............................................................55
8.4 Counterparts..............................................................55
8.5 Entire Agreement; Third Party Beneficiaries...............................55
8.6 Severability..............................................................55
8.7 Other Remedies; Specific Performance......................................55
8.8 Governing Law.............................................................56
8.9 Rules of Construction.....................................................56
8.10 Assignment................................................................56
8.11 Definition of "Knowledge".................................................56
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INDEX OF EXHIBITS
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Parent Voting Agreement
Exhibit C Certificate of Merger
Exhibit D Form of Parent Affiliate Agreement
Exhibit E Form of Company Affiliate Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
October 21, 1998 among Eclipse Surgical Technologies, Inc., a California
corporation ("PARENT"), RW Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and Cardiogenesis Corporation,
a Delaware corporation ("the COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2) and in accordance with the Delaware General Corporation
Law ("DELAWARE LAW"), Parent, Merger Sub and the Company intend to enter into a
business combination transaction.
B. Immediately upon the Effective Time (as defined in Section 1.2) of
the Merger (as defined herein), the Board of Directors of Parent (as the
combined company resulting from such business combination transaction) will
consist of seven (7) members, with designees of the Company, as set forth
herein, to hold three (3) of such seats and designees of Parent, as set forth
herein, to hold four (4) of such seats. It is also contemplated that the senior
management of the combined company will, as set forth herein, consist of senior
management from both the Company and Parent.
C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of the Company adopt and approve this Agreement
and approve the Merger.
D. The Board of Directors of Parent (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Parent and fair to, and in the best interests of, Parent and its shareholders,
(ii) has approved this Agreement, the Merger and the other transactions
contemplated by this Agreement and (iii) has determined to recommend that the
shareholders of Parent vote to approve the issuance of shares of Parent Common
Stock (as defined herein) to the stockholders of the Company pursuant to the
terms of the Merger.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of the Company are entering into Voting Agreements in substantially
the form attached hereto as Exhibit A (the "COMPANY VOTING AGREEMENTS"). In
addition, concurrently with the execution of this Agreement and as a condition
and inducement to the Company's willingness to enter into this Agreement,
certain affiliates of Parent are entering into Voting Agreements in
substantially the form attached hereto as Exhibit B (the "PARENT VOTING
AGREEMENTS").
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
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G. It is also intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger, substantially in the form of Exhibit C hereto (the
"CERTIFICATE OF MERGER"), with the Secretary of State of the State of Delaware
in accordance with the relevant provisions of Delaware Law (the time of such
filing (or such later time as may be agreed in writing by the parties and
specified in the Certificate of Merger) being the "EFFECTIVE TIME") as soon as
practicable on or after the Closing Date (as defined herein). Unless the context
otherwise requires, the term "AGREEMENT" as used herein refers collectively to
this Agreement and Plan of Reorganization and the Certificate of Merger. The
closing of the Merger (the "CLOSING") shall take place at the offices of Xxxxxx
Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI, or
at such other time, date and location as the parties hereto agree in writing
(the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that Article I of the Certificate of
Incorporation shall be amended to read as follows: "The name of the corporation
is CardioGenesis Corporation."
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(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. Upon the Effective Time, the Board of
Directors of Parent shall be Xxxxxxx Xxxxxx-Xxxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xxxx
X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxx X. Xxxx, Xxxx X. Xxxx and Xxxxxx X. Xxxxxxx
and the officers of the Parent shall include Xxxxxxx Xxxxxx-Churtorian as
Chairman of the Board of Directors, Xxxxx X. Xxxx as Chief Executive Officer and
Xxxxxxx X. Xxxxxx as Executive Vice President of Finance and Administration and
Chief Financial Officer and Secretary, each such director and officer to serve
until his respective successor is duly elected or appointed and qualified. In
addition, at the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of each of the directors of Parent and the officers of
Surviving Corporation shall include each of the officers of Parent all as
identified in the previous sentence, each such director and officer to serve
until his respective successor is duly elected or appointed and qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of Common
Stock, $0.001 par value per share, of the Company (the "COMPANY COMMON STOCK")
issued and outstanding immediately prior to the Effective Time, (other than any
shares of the Company Common Stock to be canceled pursuant to Section 1.6(b))
will be canceled and extinguished and automatically converted (subject to
Sections 1.6(e) and (f)) into the right to receive 0.80 (the "EXCHANGE RATIO")
of a share of Common Stock, no par value, of Parent (the "PARENT COMMON STOCK")
upon surrender of the certificate representing such share of the Company Common
Stock in the manner provided in Section 1.7 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.9). If any shares of the Company Common Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of the Company
Common Stock held by the Company or owned by Merger Sub, Parent or any direct or
indirect wholly-owned subsidiary of the Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all options to purchase the Company Common Stock then
outstanding under the Company's 1993 Equity Incentive Plan (the "1993 PLAN"),
the Company's 1996 Equity Incentive Plan (the "1996 PLAN") and
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the Company's 1996 Directors Stock Option Plan (the "DIRECTORS PLAN" and
together with the 1993 Plan and the 1996 Plan, the "COMPANY STOCK OPTION PLANS")
shall be assumed by Parent in accordance with Section 5.11 hereof. Options
outstanding under the Company's 1996 Employee Stock Purchase Plan (the "COMPANY
PURCHASE PLAN") shall be treated as set forth in Section 5.11.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
$0.001 par value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $0.001 par
value, of the Surviving Corporation. Each certificate evidencing ownership of
shares of Merger Sub Common Stock shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted (such adjustment to be subject to the consent of the Company, which
shall not be unreasonably withheld) to reflect appropriately the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the closing price of one share of Parent
Common Stock on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market System ("NASDAQ").
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select an institution reasonably
satisfactory to the Company to act as the exchange agent (the "EXCHANGE AGENT")
in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent, for exchange in
accordance with this Article I, certificates representing the shares of Parent
Common Stock issuable pursuant to Section 1.6 in exchange for outstanding shares
of Company Common Stock, and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.6(f).
(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6 and cash in lieu of any
fractional shares pursuant to Section 1.6(f), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably
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specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock and cash in lieu of any fractional shares pursuant to Section 1.6(f). Upon
surrender of Certificates for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock and payment in lieu of fractional shares which
such holders have the right to receive pursuant to Section 1.6(f) and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes to evidence only the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.6(f).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(f) hereof and, subject to
applicable law, the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificates surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in the Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of the
Company Common Stock in accordance with the terms hereof (together with any cash
paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
which were outstanding immediately prior to the
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Effective Time. If after the Effective Time Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
(b) It is intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action, so long
as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in writing and referencing a specific
representation in the disclosure letter supplied by the Company to Parent dated
as of the date hereof and certified by a duly authorized officer of the Company
(the "COMPANY SCHEDULES"), as follows:
2.1 Organization of the Company.
(a) The Company and each of its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed
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to do business and is in good standing in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
herein) on the Company.
(b) The Company has delivered to Parent a true and complete list
of all of the Company's subsidiaries, indicating the jurisdiction of
incorporation of each subsidiary and listing the shareholders of each such
subsidiary and the number of shares held by each such shareholder.
(c) The Company has delivered or made available to Parent a true
and correct copy of the Certificate of Incorporation and Bylaws of the Company
and similar governing instruments of each of its subsidiaries, each as amended
to date, and each such instrument is in full force and effect. Neither the
Company nor any of its subsidiaries is in violation of any of the provisions of
its Certificate of Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with the Company, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of the Company and its
subsidiaries taken as a whole except for those changes, events and effects that
are directly caused by (i) conditions affecting the United States economy as a
whole, or (ii) conditions affecting the medical device industry as a whole,
which conditions (in the case of clause (i) or (ii)) do not affect the Company
in a disproportionate manner) or (iii) conditions that in the good faith
judgment of the Company's Board of Directors result principally from the
execution or delivery of this Agreement or the announcement of the pendency of
the Merger.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock, $0.001 par value per share, of which there
were 12,281,076 shares issued and outstanding as of the date of this Agreement
and 2,000,000 shares of Preferred Stock, $0.001 par value per share, of which no
shares are issued or outstanding as of the date of this Agreement. All
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement or document to which the Company is a party or by which it is bound.
(b) As of the date of this Agreement, 2,497,023 shares of Company
Common Stock are reserved for future issuance under the Company Stock Option
Plans and 168,689 shares of Company Common Stock are reserved for future
issuance under the Company Purchase Plan. (Stock options granted by the Company
pursuant to the Company Stock Option Plans are referred to in this Agreement as
"COMPANY STOCK OPTIONS"). Section 2.2(b) of the Company Schedules sets forth the
following information with respect to each Company Stock Option outstanding as
of the date of this Agreement: (i) the name of the optionee; (ii) the particular
plan pursuant to which such Company Stock Option was granted; (iii) the number
of shares of Company Common Stock subject to such Company Stock Option; (iv) the
exercise price of such Company Stock Option; (v) the date on which such Company
Stock Option was granted; and (vi) the date on which such Company Stock Option
expires. The Company has made available to Parent accurate and complete copies
of the Company
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Stock Option Plans and the forms of all agreements evidencing the Company Stock
Options. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. Except as set forth in Section 2.2(b)(i) of the Company
Schedules, there are no commitments or agreements of any character to which the
Company is bound obligating the Company to accelerate the vesting of any Company
Stock Option as a result of the Merger.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of the Company, or any securities exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities the Company owns, directly or indirectly
through one or more subsidiaries, there are no equity securities, partnership
interests or similar ownership interests of any class of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except as set forth in Section
2.2, there are no options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement. There are no registration rights and, to the
knowledge of the Company, as of the date of this Agreement, there are no voting
trusts, proxies or other agreements or understandings (except for the Company
Voting Agreements) with respect to any equity security of any class of the
Company or with respect to any equity security, partnership interest or similar
ownership interest of any class of any of its subsidiaries.
2.4 Authority.
(a) The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders and the filing of the Certificate of Merger pursuant to Delaware
Law. A vote of the holders of a majority of the outstanding shares of Company
Common Stock is required for the Company's stockholders to approve and adopt
this Agreement and approve the Merger. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and, if applicable, Merger Sub, constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
the Company or the equivalent organizational
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documents of any of its subsidiaries, (ii) subject to obtaining the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders as contemplated in Section 5.2 and compliance with the requirements
set forth in Section 2.4(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (iii) assuming the receipt of all material consents, waivers and
approvals referred to in the last sentence of this Section 2.4(a), result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair the Company's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected. The Company Schedules list
all material consents, waivers and approvals under any of the Company's or any
of its subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) the filing of
the Proxy Statement (as defined in Section 2.19) with the Securities and
Exchange Commission ("SEC") in accordance with the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings (if any) as may be
required under applicable federal and state securities laws and the securities
or antitrust laws of any foreign country, and (iv) such other consents,
authorizations, filings, approvals and registrations (if any) which if not
obtained or made would not be material to the Company or Parent or have a
material adverse effect on the ability of the parties to consummate the Merger.
2.5 Company SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC since May 21, 1996, and has made available to
Parent such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that the Company may
file subsequent to the date hereof) are referred to herein as the "COMPANY SEC
REPORTS." As of their respective dates, the Company SEC Reports (i) were
prepared in all material respects with the requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under
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which they were made, not misleading. None of the Company's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports (the
"COMPANY FINANCIALS"), including any Company SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (z) fairly presented the consolidated financial position of the Company and
its subsidiaries as at the respective dates thereof and the consolidated results
of the Company's operations and cash flows for the periods indicated, except
that the unaudited interim financial statements may not contain footnotes and
were or are subject to normal and recurring year-end adjustments. The balance
sheet of the Company contained in the Company SEC Reports as of June 30, 1998 is
hereinafter referred to as the "COMPANY BALANCE SHEET." Except as disclosed in
the Company Financials, since the date of the Company Balance Sheet neither the
Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Company and
its subsidiaries taken as a whole, except liabilities (i) provided for in the
Company Balance Sheet, or (ii) incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practices.
(c) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock, (iv) any granting by the Company or any of its
subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by the Company or any of its
subsidiaries of any bonus, except for bonuses made in the ordinary course of
business consistent with past practice, or any granting by the Company or any of
its subsidiaries of any increase in severance or termination pay or any entry by
the Company or any of its subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company or
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any of its subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any material Company IP Rights (as defined in
Section 2.8) other than licenses in the ordinary course of business consistent
with past practice, (vi) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (vii) any revaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company and each of its subsidiaries have timely
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to Taxes required to be filed by the
Company and each of its subsidiaries, except such Returns which are not material
to the Company, and have paid all Taxes shown to be due on such Returns.
(ii) The Company and each of its subsidiaries as of the
Effective Time will have withheld and paid over, as appropriate, with respect to
its employees all federal and state, local and/or foreign income taxes, Taxes
pursuant to the Federal Insurance Contribution Act ("FICA"), Taxes pursuant to
the Federal Unemployment Tax Act ("FUTA") and other Taxes required to be
withheld.
(iii) Neither the Company nor any of its subsidiaries has
been delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any waiver
of any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the
Company or any of its subsidiaries is presently in progress, nor has the Company
or any of its subsidiaries been notified of any request for such an audit or
other examination.
(v) No adjustment relating to any Returns filed by the
Company or any of its subsidiaries has been proposed formally or informally by
any Tax authority to the Company or any of its subsidiaries or any
representative thereof and, to the knowledge of the Company, no basis exists for
any such adjustment which would be material to the Company.
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17
(vi) Neither the Company nor any of its subsidiaries has
any liability for unpaid Taxes which has not been accrued for or reserved on the
Company Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to the Company, and the Company has not incurred any liability
for Taxes other than in the ordinary course of business since the date of the
Company Balance Sheet.
(vii) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Sections 280G or 404 of
the Code.
(ix) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company.
(x) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xi) No power of attorney that is currently in force has
been granted with respect to any matter relating to Taxes payable by the Company
or any of its subsidiaries.
(xii) Neither the Company nor any of its subsidiaries is
or has been a member of a consolidated, combined or affiliated group or is a
party to or affected by any tax-sharing or allocation agreement or arrangement.
(xiii) The Company Schedules list (A) any Tax exemption,
Tax holiday or other Tax-sparing arrangement that the Company or any of its
subsidiaries has in any jurisdiction, including the nature, amount and lengths
of such Tax exemption, Tax holiday or other Tax-sparing arrangement and (B) any
expatriate tax programs or policies affecting the Company or any of its
subsidiaries. Each of the Company and its subsidiaries is in full compliance
with all terms and conditions of any Tax exemption, Tax holiday or other
Tax-sparing arrangement or order of any Governmental Entity and the consummation
of the transactions contemplated hereby will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sparing arrangement or order.
2.8 Intellectual Property.
(a) To the knowledge of the Company, the Company and its
subsidiaries own, or have the right to use, sell or license all intellectual
property necessary or required for the conduct of their respective businesses as
presently conducted (such intellectual property and the rights thereto are
collectively referred to herein as the "COMPANY IP Rights").
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(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Company IP Rights to
which the Company or any subsidiary of the Company is a party or by which, to
its knowledge, it is bound or affected, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any the
Company IP Rights or materially impair the right of the Company, the Surviving
Corporation or Parent to use, sell or license any the Company IP Rights or
portion thereof.
(c) To the knowledge of the Company, the manufacture, marketing,
license, sale or intended use of any product or technology currently licensed or
sold or under development by the Company or any of its subsidiaries does not
violate any license or agreement between the Company or any of its subsidiaries
and any third party nor infringe any intellectual property right of any other
party.
(d) There is no pending or, to the knowledge of the Company,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any the Company IP Rights, nor has the Company
received any written notice asserting that any the Company IP Rights or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party. Schedule 2.8 of the Company Schedules lists
each patent held by the Company and the expiration date of each such patent.
(e) The Company has taken commercially reasonable steps designed
to safeguard and maintain the confidentiality of, and its proprietary rights in,
all the Company IP Rights.
2.9 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which the Company or any of its subsidiaries or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected. No investigation or review by
any Governmental Entity is pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no agreement, judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of material property by the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of the Company (collectively, the
"COMPANY PERMITS"). The Company and its subsidiaries are in compliance in all
material respects with the terms of the Company Permits.
(c) FDA and Related Matters
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(i) Section 2.9(c) of the Company Schedules sets forth
a list, for the period between January 1, 1996 and the date hereof, of (A) all
Regulatory or Warning Letters, Notices of Adverse Findings and Section 305
Notices and similar letters or notices issued by the Food and Drug
Administration ("FDA") (or any other federal, state, local or foreign
governmental entity that is concerned with the safety, efficacy, reliability or
manufacturing of drug or medical device products (each, a "REGULATORY AGENCY"))
to the Company or any of its subsidiaries that, individually or in the
aggregate, would have a Material Adverse Effect on the Company, (B) all product
recalls, notifications and safety alerts conducted by the Company or any of its
subsidiaries, whether or not required by the FDA, and any request from the FDA
or any Regulatory Agency requesting the Company or any of its subsidiaries to
cease to investigate, test or market any product, which recalls, notifications,
safety alerts or requests would, individually or in the aggregate, have a
Material Adverse Effect on the Company, and (C) any criminal, injunctive,
seizure or civil penalty actions begun or threatened by the FDA or any
Regulatory Agency against the Company or any of its subsidiaries of which the
Company has knowledge, and all related consent decrees (including plea
agreements) issued with respect to the Company or any of its subsidiaries.
Copies of all documents referred to in Section 2.9(c) of the Company Schedules
have been made available to the Parent.
(ii) The Company has made submissions to obtain material
approvals, certifications, authorizations, clearances and permits for marketing,
and has made filings with, or notifications to, the FDA and Regulatory Agencies
(or has documented a basis for not making such filings or notifications)
pursuant to applicable requirements of the Federal Food, Drug and Cosmetics Act,
as amended (the "FDA ACT"), and applicable laws, regulations and rules with
respect to each of the products sold by the Company that is listed on Section
2.9(c) of the Company Schedules. The products listed on Section 2.9(c) of the
Company Schedules collectively constitute in excess of 95% of the gross revenues
generated during the twelve (12)-month period ending December 31, 1997 by that
portion of the business of the Company which is subject to the jurisdiction of
the FDA or any Regulatory Agency. The Company has no knowledge that any of the
material approvals, clearances, authorizations, registrations, certifications,
permits, filings or notifications that it or any of its subsidiaries has
received or made to the FDA or any Regulatory Agency that relate to the
marketing of the products listed on Section 2.9(c) of the Company Schedules have
been or are being revoked; provided, however, that the Parent understands and
acknowledges that the FDA or any other Regulatory Agency may disagree with the
Company's assessment and undertake actions, at any time, to remove from
commercial distribution any such product.
(iii) Except as disclosed in Section 2.9(c) of the Company
Schedules, the Company has no knowledge of any pending regulatory action of any
sort (other than non-material routine or periodic inspections of reviews)
against the Company, or any contract manufacturer (a "CONTRACT MANUFACTURER"),
of certain of the Company's products by the FDA or any Regulatory Agency or any
other duly authorized governmental authority which regulates the sale of drugs
or medical devices in any jurisdiction which could have a Material Adverse
Effect on the Company or in any material way limit or restrict the ability of
the Company to market its existing products. Except as set forth on Section
2.9(c) of the Company Schedules, neither the Company, nor, to the knowledge of
the Company, the Contract Manufacturer, has knowingly committed or permitted to
exist any violation of the rules and regulations of the FDA or any Regulatory
Agency or any other duly authorized governmental authority which regulates the
sale of drugs or medical devices, which has not been cured by the Company, or,
to the knowledge of the Company, the Contract Manufacturers
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or waived by the FDA or any such Regulatory Agency or authority, provided,
however, that the Parent understands and acknowledges that the FDA or any other
Regulatory Agency may disagree with the Company's assessment and undertake
enforcement actions at any time.
2.10 Litigation. Except as disclosed in Section 2.10 of the Company
Schedules, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which the Company or any of its subsidiaries has
received any notice of assertion nor, to the Company's knowledge, is there a
threatened action, suit, proceeding, claim, arbitration or investigation against
the Company or any of its subsidiaries which reasonably would be likely to be
material to the Company, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
2.11 Brokers' and Finders' Fees. Except for fees payable to Bear,
Xxxxxxx and Co. Inc. ("BEAR XXXXXXX") pursuant to an engagement letter between
the Company and Bear Xxxxxxx dated October 5, 1998, a copy of which has been
provided to Parent, the Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.12 Employee Benefit Plans and Employment Matters.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.12(a)(i) below (which definition will apply
only to this Section 2.12 and Section 3.12), for purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "AFFILIATE" means any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "COMPANY EMPLOYEE PLAN" means any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any Company
Employee;
(iii) "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" means the Department of Labor;
(v) "COMPANY EMPLOYEE" means any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
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(vi) "COMPANY EMPLOYEE AGREEMENT" means each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between the Company or any
Affiliate and any Company Employee or consultant;
(vii) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" means the Family Medical Leave Act of 1993, as
amended;
(ix) "COMPANY INTERNATIONAL EMPLOYEE PLAN" means each
Company Employee Plan that has been adopted or maintained by the Company,
whether informally or formally, for the benefit of Company Employees outside the
United States;
(x) "IRS" means the Internal Revenue Service;
(xi) "COMPANY MULTIEMPLOYER PLAN" means any "Company
Pension Plan" (as defined below) which is a "multiemployer plan," as defined in
Section 3(37) of ERISA;
(xii) "PBGC" means the Pension Benefit Guaranty Corporation;
and
(xiii) "COMPANY PENSION PLAN" means each Company Employee
Plan which is an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
(xiv) "WARN" means the Worker Adjustment and Retraining
Notification Act of 1988, as amended.
(b) Schedule. Section 2.12(b) of the Company Schedules contain an
accurate and complete list of each Company Employee Plan and each Company
Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan, to modify any Company Employee Plan or
Company Employee Agreement (except to the extent required by law or to conform
any such Company Employee Plan or Company Employee Agreement to the requirements
of any applicable law, in each case as previously disclosed to Parent in
writing, or as required by this Agreement), or to enter into any Company
Employee Plan or Company Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent: (i) correct
and complete copies of all documents embodying each Company Employee Plan and
each Company Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iv) if the Company Employee Plan
is funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (v) the most recent summary plan description together with the
summary of material modifications thereto, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and rulings relating to Company Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Company Employee Plan; (vii) all material written
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agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all communications material to any Company
Employee relating to any Company Employee Plan and any proposed Company Employee
Plans, in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; (ix) all COBRA forms and related notices; and (x) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan.
(d) Company Employee Plan Compliance. (i) The Company has, to its
knowledge, performed in all material respects all obligations required to be
performed by it under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
letter from the IRS with respect to each such Plan as to its qualified status
under the Code, including all amendments to the Code effected by the Tax Reform
Act of 1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination; (iii) no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Company Employee
Plan; (iv) to the Company's knowledge, there are no actions, suits or claims
pending or threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan; (v) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Parent, the Company or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(vi) to the Company's knowledge, there are no audits, inquiries or proceedings
pending or threatened by the IRS or DOL with respect to any Company Employee
Plan; and (vii) to the Company?s knowledge, neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Company Pension Plans. The Company does not now, nor has it
ever, maintained, established, sponsored, participated in, or contributed to,
any Company Pension Plan which is subject to Title IV of ERISA or Section 412 of
the Code.
(f) Company Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Company Multiemployer
Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Company Employee (either individually or to Company Employees as a group)
or any other person that such Company Employee(s) or other person would be
provided with retiree life
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insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Health Care Continuation Obligations. Neither the Company nor
any Affiliate has, prior to the Effective Time, and in any material respect,
violated any of the health care continuation requirements of COBRA, the
requirements of FMLA or any similar provisions of state law applicable to the
Company Employees.
(i) Effect of Transaction
(i) The execution of this Agreement and the consummation
of the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Company Employee Plan, Company Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Company Employee.
(ii) No payment or benefit which will or may be made by the
Company or its Affiliates with respect to any Company Employee as a result of
the transactions contemplated by this Agreement will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
(j) Employment Matters. To the Company's knowledge, the Company
(i) is in compliance in all material respects with all applicable foreign,
federal, state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Company Employees; (ii) has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and
other payments to Company Employees; (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing; and (iv) is not liable for any material payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Company Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, threatened or reasonably anticipated claims or actions against the
Company under any worker's compensation policy or long-term disability policy.
To the Company's knowledge, no employee of the Company has violated any
employment contract, nondisclosure agreement or noncompetition agreement by
which such employee is bound due to such employee being employed by the Company
and disclosing to the Company or using trade secrets or proprietary information
of any other person or entity.
(k) Company International Employee Plan. Each Company
International Employee Plan has been established, maintained and administered in
material compliance with its terms and conditions and with the requirements
prescribed by any and all statutory or regulatory laws that are applicable to
such Company International Employee Plan. Furthermore, no Company International
Employee Plan has unfunded liabilities, that as of the Effective Time, will not
be offset by insurance or fully accrued. Except as required by law, no condition
exists that would prevent the Company from terminating or amending any Company
International Employee Plan at any time for any reason.
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2.13 Absence of Liens and Encumbrances. The Company and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Company Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to the Company.
2.14 Environmental Matters.
(a) Hazardous Material. To the knowledge of the Company, except
as reasonably would not be likely to result in a material liability to the
Company, no underground storage tanks and no amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws which term shall not include office and
janitorial supplies (insofar as they are stored or used in the ordinary course
of business) (a "HAZARDOUS MATERIAL"), are present, as a result of the actions
of the Company or any of its subsidiaries or any affiliate of the Company, or,
to the Company's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as reasonably would
not be likely to result in a material liability to the Company, neither the
Company nor any of its subsidiaries has transported, stored, used, manufactured,
disposed of, released or exposed its employees or others to Hazardous Materials
in violation of any law in effect on or before the Closing Date, nor has the
Company or any of its subsidiaries disposed of, transported, sold, used,
released, exposed its employees or others to or manufactured any product
containing a Hazardous Material (collectively "HAZARDOUS MATERIALS ACTIVITIES")
in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted. To the knowledge of the Company, there are no facts or
circumstances indicating that any Company Environmental Permit will or may be
revoked, suspended, canceled or not renewed. All appropriate action in
connection with the renewal or extension of any Company Environmental Permit has
been taken.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Company's
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knowledge, threatened concerning any Company Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company or any of its
subsidiaries. The Company is not aware of any fact or circumstance which could
involve the Company or any of its subsidiaries in any material environmental
litigation or impose upon the Company any material environmental liability. The
Company and its subsidiaries have not received notice, nor to the Company's
knowledge is there a threatened notice, that the Company or its subsidiaries are
responsible, or potentially responsible, for the investigation, remediation,
clean-up, or similar action at property presently or formerly used by the
Company or any of its subsidiaries for recycling, disposal, or handling of
waste.
2.15 Labor Matters. No work stoppage or labor strike against the
Company is pending, threatened or reasonably anticipated. The Company does not
have knowledge of any activities or proceedings of any labor union to organize
any Company Employees. There are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of the Company, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Company Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in any material liability to the
Company. Neither the Company nor any of its subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act.
The Company is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Company Employees and no collective bargaining agreement is being negotiated by
the Company. The Company and its subsidiaries are and have been in compliance in
all material respects with all applicable laws regarding employment practices,
terms and conditions of employment, and wages and hours (including, without
limitation, WARN or any similar state or local law).
2.16 Agreements, Contracts and Commitments. Except as set forth in
Section 2.16 and Section 2.2(b) of the Company Schedules, neither the Company
nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of the
Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty (30) days notice
without liability or financial obligation;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification or guaranty not entered into
in the ordinary course of business other than indemnification agreements between
the Company or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company or any of its subsidiaries to engage in any
line of business or compete with any person or granting any exclusive
distribution rights;
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(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined herein), has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound of the type described in clauses
(a) through (f) above (any such agreement, contract or commitment, a "COMPANY
CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.
2.17 Pooling of Interests. The Company has provided Pricewaterhouse-
Coopers LLP, its independent accountants, all of the information that has been
requested by such firm in connection with such firm's analysis of the
availability of pooling-of-interest accounting for the Merger and, having
conferred with such firm, nothing has come to the Company's knowledge that has
led it to believe that either the Company or any of its directors, officers,
affiliates or stockholders has taken any action which would preclude Parent's
ability to account for the Merger as a pooling of interests.
2.18 Change of Control Payments. The Company Schedules set forth each
plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers or directors of the
Company as a result of or in connection with the Merger.
2.19 Registration Statement; Proxy Statement/Prospectus. The
information to be supplied by the Company for inclusion in the Registration
Statement (as defined in Section 3.4(b)) shall not at the time the Registration
Statement is filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. The information to be supplied by the
Company for inclusion in the proxy statement/prospectus to be sent to the
stockholders of the Company and shareholders of Parent in connection with the
meeting of the Company's stockholders to consider the approval and adoption of
this Agreement and the approval of the Merger (the "COMPANY STOCKHOLDERS'
MEETING") and in connection with the meeting of Parent's shareholders to
consider the approval of the issuance of shares of Parent Common Stock by virtue
of the Merger (the "PARENT SHAREHOLDERS' MEETING") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"PROXY STATEMENT") shall not, on the date the Proxy Statement is first mailed to
the Company's stockholders and Parent's shareholders, at the time of the Company
Stockholders' Meeting or the Parent Shareholders' Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier
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communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting or the Parent Shareholders' Meeting which has become false
or misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
the Company or any of its affiliates, officers or directors should be discovered
by the Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, the Company shall promptly
inform Parent. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
Merger Sub which is contained in any of the foregoing documents.
2.20 Board Approval. The Board of Directors of the Company has, as of
the date of this Agreement, determined (i) that the Merger is fair to, and in
the best interests of the Company and its stockholders, (ii) to propose this
Agreement for approval and adoption by the Company's stockholders and to declare
the advisability of this Agreement, and (iii) to recommend that the stockholders
of the Company approve and adopt this Agreement and approve the Merger.
2.21 Fairness Opinion. The Company has received a written opinion from
Bear, Xxxxxxx and Co. Inc. dated as of the date hereof, to the effect that as of
the date hereof, the Exchange Ratio is fair to the Company's stockholders from a
financial point of view and has delivered to Parent a copy of such opinion.
2.22 Section 203 of the Delaware General Corporation Law Not
Applicable. The Board of Directors of the Company has taken all actions so that
the restrictions contained in Section 203 of the Delaware Law applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or the other transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions specifically disclosed in writing in the disclosure letter
supplied by Parent to the Company dated as of the date hereof and certified by a
duly authorized officer of Parent (the "PARENT SCHEDULES"), as follows:
3.1 Organization of Parent.
(a) Parent and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
herein) on Parent.
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(b) Parent has delivered to the Company a true and complete list
of all of Parent's subsidiaries, indicating the jurisdiction of incorporation of
each subsidiary and listing the shareholders of each such subsidiary and the
number of shares held by each such shareholder.
(c) Parent has delivered or made available to the Company a true
and correct copy of the Articles of Incorporation and Bylaws of Parent and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither Parent nor
any of its subsidiaries is in violation of any of the provisions of its Articles
of Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with Parent, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of Parent and its
subsidiaries taken as a whole except for those changes, events and effects that
are directly caused by (i) conditions affecting the United States economy as a
whole, or (ii) conditions affecting the medical device industry as a whole,
which conditions (in the case of clause (i) or (ii)) do not affect Parent in a
disproportionate manner), or (iii) conditions that in the good faith judgment of
Parent's Board of Directors result principally from the execution or delivery of
this Agreement or the announcement of the pendency of the Merger, or (iv) the
recommendation or other results (including any delay or rejection) of the FDA
panel that is to consider Parent's pre-market approval application for certain
of its products, unless such delay or rejection is announced by the FDA publicly
or to Parent to be due to allegations by the FDA of fraud or criminal action by
Parent.
3.2 Parent and Merger Sub Capital Structure.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of Common Stock, no par value, of which as of October 16, 1998 there were
17,395,885 shares issued and outstanding as of the date of this Agreement and
5,000,000 shares of Preferred Stock, no par value, of which no shares are issued
or outstanding as of the date of this Agreement. All outstanding shares of
Parent Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of Parent or any agreement or document to
which Parent is a party or by which it is bound. The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, $0.001 par value per share,
all of which, as of the date hereof, are issued and outstanding and are held by
Parent. Merger Sub was formed on October 16, 1998, for the purpose of
consummating the Merger, has no material assets or liabilities except as
necessary for such purpose and has not, and prior to the Effective Time will not
have, conducted any business except as necessary for such purpose.
(b) As of the date of this Agreement, Parent had reserved an
aggregate of 4,000,000 shares and 200,000 shares, respectively, of Parent Common
Stock, net of exercises, for issuance to employees, consultants and non-employee
directors pursuant to Parent's Stock Option Plan and Director Stock Option Plan,
under which options are outstanding for an aggregate of 2,797,520 shares and
75,000 shares, respectively. (The Stock Option Plan, Dual Stock Option Plan and
Director Stock Option Plan are collectively referred to in this Agreement as the
"PARENT STOCK
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OPTION PLANS." Stock options granted pursuant to the Parent Stock Option Plans
are referred to in this Agreement as "PARENT STOCK OPTIONS.") Parent has made
available to the Company accurate and complete copies of all Parent Stock Option
Plans and the forms of all agreements evidencing the Parent Stock Options. There
are no commitments or agreements of any character to which Parent is bound
obligating Parent to accelerate the vesting of any Parent Stock Option as a
result of the Merger. As of the date of this Agreement, an aggregate of 250,000
shares of Parent Common Stock have been reserved for issuance pursuant to
Parent's Employee Stock Purchase Plan (the "PARENT PURCHASE PLAN").
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Parent, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities Parent owns, directly or indirectly through
one or more subsidiaries, there are no equity securities, partnership interests
or similar ownership interests of any class of any subsidiary of Parent, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 3.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Parent or any of its subsidiaries is a
party or by which it is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition,
of any shares of capital stock, partnership interests or similar ownership
interests of Parent or any of its subsidiaries or obligating Parent or any of
its subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of Parent, as of the date
of this Agreement, there are no voting trusts, proxies or other agreements or
understandings (except for the Parent Voting Agreements) with respect to any
equity security of any class of Parent or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries.
3.4 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, subject only to the filing of the Certificate of Merger pursuant to
Delaware Law and the approval by Parent's shareholders of the issuance of shares
of Parent Common Stock issuable under the terms of the Merger. A vote of the
holders of a majority of the outstanding shares of Parent Common Stock is
required for Parent's shareholders to approve the issuance of shares of Parent
Common Stock by virtue of the Merger. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes the valid and binding
obligation of each of Parent and Merger Sub, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity. The execution and delivery of this
Agreement by each of Parent and Merger Sub do not, and the performance of this
Agreement by each of Parent and Merger Sub
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will not (i) conflict with or violate the Articles of Incorporation or Bylaws of
Parent or the Certificate of Incorporation or Bylaws of Merger Sub or the
equivalent organizational documents of any of Parent's other subsidiaries, (ii)
subject to obtaining the approval of Parent's shareholders of the issuance of
shares of Parent Common Stock by virtue of the Merger as contemplated in Section
5.2 and compliance with the requirements set forth in Section 3.4(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or any of its subsidiaries (including Merger Sub) or by
which its or any of their respective properties is bound or affected, or (iii)
assuming the receipt of all material consents, waivers and approvals referred to
in the last sentence of this Section 3.4(a), result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Parent's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or any of its subsidiaries (including Merger Sub) pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries (including Merger Sub) is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties are bound or affected.
The Parent Schedules list all material consents, waivers and approvals under any
of Parent's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the Merger, except for (i) the
filing of a Form S-4 Registration Statement (the "REGISTRATION STATEMENT") with
the SEC in accordance with the Securities Act, (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
(iii) the filing of the Proxy Statement with the SEC in accordance with the
Exchange Act, (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings (if any) as may be required under
applicable federal and state securities laws and the securities or antitrust
laws of any foreign country, and (v) such other consents, authorizations,
filings, approvals and registrations (if any) which if not obtained or made
would not be material to Parent or the Company or have a material adverse effect
on the ability of the parties to consummate the Merger.
3.5 Parent SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to
be filed with the SEC since May 31, 1996, and has made available to the Company
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "PARENT SEC
REPORTS." As of their respective dates, the Parent SEC Reports (i) were prepared
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
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
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circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (z) fairly presented the consolidated
financial position of Parent and its subsidiaries as at the respective dates
thereof and the consolidated results of Parent's operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring
year-end adjustments. The balance sheet of Parent contained in Parent SEC
Reports as of June 30, 1998 is hereinafter referred to as the "PARENT BALANCE
SHEET." Except as disclosed in the Parent Financials, since the date of the
Parent Balance Sheet neither Parent nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except liabilities
(i) provided for in the Parent Balance Sheet, or (ii) incurred since the date of
the Parent Balance Sheet in the ordinary course of business consistent with past
practices.
(c) Parent has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Since the date of Parent
Balance Sheet there has not been: (i) any Material Adverse Effect on Parent,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of Parent's
or any of its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by Parent of any of Parent's capital stock or any other securities
of Parent or its subsidiaries or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of Parent's or any of its subsidiaries' capital
stock, (iv) any granting by Parent or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Parent or any of its subsidiaries of any increase in
severance or termination pay or any entry by Parent or any of its subsidiaries
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Parent of the nature contemplated hereby, (v) entry by
Parent or any of its subsidiaries into any licensing or other agreement with
regard to the acquisition or
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disposition of any material Parent IP Rights (as defined in Section 3.8) other
than licenses in the ordinary course of business consistent with past practice,
(vi) any material change by Parent in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by Parent of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
3.7 Tax.
(a) Tax Returns and Audits.
(i) Parent and each of its subsidiaries have timely filed
all Returns relating to Taxes required to be filed by Parent and each of its
subsidiaries, except such Returns which are not material to Parent, and have
paid all Taxes shown to be due on such Returns.
(ii) Parent and each of its subsidiaries as of the
Effective Time will have withheld and paid over, as appropriate, with respect to
its employees all federal and state, local and/or foreign income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) Neither Parent nor any of its subsidiaries has been
delinquent in the payment of any Tax nor is there any Tax deficiency
outstanding, proposed or assessed against Parent or any of its subsidiaries, nor
has Parent or any of its subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of Parent
or any of its subsidiaries is presently in progress, nor has Parent or any of
its subsidiaries been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by Parent
or any of its subsidiaries has been proposed formally or informally by any Tax
authority to Parent or any of its subsidiaries or any representative thereof
and, to the knowledge of Parent, no basis exists for any such adjustment which
would be material to Parent.
(vi) Neither Parent nor any of its subsidiaries has any
liability for unpaid Taxes which has not been accrued for or reserved on the
Parent Balance Sheet, whether asserted or unasserted, contingent or otherwise,
which is material to Parent, and the Company has not incurred any liability for
Taxes other than in the ordinary course of business since the date of the
Company Balance Sheet.
(vii) None of Parent's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Parent or any of its subsidiaries
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Sections 280G or 404 of the Code.
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(ix) Neither Parent nor any of its subsidiaries has filed
any consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Parent.
(x) Parent is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xi) No power of attorney that is currently in force has
been granted with respect to any matter relating to Taxes payable by Parent or
any of its subsidiaries.
(xii) Neither Parent nor any of its subsidiaries is or has
been a member of a consolidated, combined or affiliated group or is a party to
or affected by any tax-sharing or allocation agreement or arrangement.
(xiii) The Parent Schedules list (y) any Tax exemption,
Tax holiday or other Tax-sparing arrangement that Parent or any of its
subsidiaries has in any jurisdiction, including the nature, amount and lengths
of such Tax exemption, Tax holiday or other Tax-sparing arrangement and (z) any
expatriate tax programs or policies affecting Parent or any of its subsidiaries.
Each of Parent and its subsidiaries is in full compliance with all terms and
conditions of any Tax exemption, Tax holiday or other Tax-sparing arrangement or
order of any Governmental Entity and the consummation of the transactions
contemplated hereby will not have any adverse effect on the continued validity
and effectiveness of any such Tax exemption, Tax holiday or other Tax-sparing
arrangement or order.
3.8 Intellectual Property.
(a) To the knowledge of Parent, the Parent and its subsidiaries
own, or have the right to use, sell or license all intellectual property
necessary or required for the conduct of their respective businesses as
presently conducted (such intellectual property and the rights thereto are
collectively referred to herein as the "PARENT IP Rights").
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Parent IP Rights to
which the Parent or any subsidiary of the Parent is a party or by which, to its
knowledge, it is bound or affected, will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of any Parent IP Rights or
materially impair the right of Parent, the Surviving Corporation or the Company
to use, sell or license any Parent IP Rights or portion thereof.
(c) To the knowledge of Parent, the manufacture, marketing,
license, sale or intended use of any product or technology currently licensed or
sold or under development by Parent or any of its subsidiaries does not violate
any license or agreement between Parent or any of its subsidiaries and any third
party or infringe any intellectual property right of any other party.
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(d) There is no pending or, to the knowledge of Parent,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any Parent IP Rights, nor has Parent received
any written notice asserting that any Parent IP Rights or the proposed use,
sale, license or disposition thereof conflicts or will conflict with the rights
of any other party. Schedule 3.8 of the Parent Schedules lists each patent held
by the Parent and the expiration date of each such patent.
(e) Parent has taken commercially reasonable steps designed to
safeguard and maintain the confidentiality of, and its proprietary rights in,
all Parent IP Rights.
3.9 Compliance; Permits; Restrictions.
(a) Neither Parent nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which Parent or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their respective
properties is bound or affected. No investigation or review by any Governmental
Entity is pending or, to Parent's knowledge, threatened against Parent or any of
its subsidiaries, nor has any Governmental Entity indicated an intention to
conduct the same. There is no agreement, judgment, injunction, order or decree
binding upon Parent or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of Parent or any of its subsidiaries, any acquisition of material
property by Parent or any of its subsidiaries or the conduct of business by
Parent as currently conducted.
(b) Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of Parent (collectively, the
"PARENT PERMITS"). Parent and its subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
(c) FDA and Related Matters.
(i) Section 3.9(c) of the Parent Schedules sets forth a
list, for the period between January 1, 1996 and the date hereof, of (A) all
Regulatory or Warning Letters, Notices of Adverse Findings and Section 305
Notices and similar letters or notices issued by the FDA (or any other
Regulatory Agency) to the Parent or any of its subsidiaries that, individually
or in the aggregate, would have a Material Adverse Effect on the Parent, (B) all
product recalls, notifications and safety alerts conducted by the Parent or any
of its subsidiaries, whether or not required by the FDA, and any request from
the FDA or any Regulatory Agency requesting the Parent or any of its
subsidiaries to cease to investigate, test or market any product, which recalls,
notifications, safety alerts or requests would, individually or in the
aggregate, have a Material Adverse Effect on the Parent, and (C) any criminal,
injunctive, seizure or civil penalty actions begun or threatened by the FDA or
any Regulatory Agency against the Parent or any of its subsidiaries of which the
Parent has knowledge, and all related consent decrees (including plea
agreements) issued with respect to the Parent or any of
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its subsidiaries. Copies of all documents referred to in Section 3.9(c) of the
Parent Schedules have been made available to the Company.
(ii) The Parent has made submissions to obtain material
approvals, certifications, authorizations, clearances and permits for marketing,
and has made filings with, or notifications to, the FDA and Regulatory Agencies
(or has documented a basis for not making such filings or notifications)
pursuant to applicable requirements of the FDA Act, and applicable laws,
regulations and rules with respect to each of the products sold by the Parent
that is listed on Section 3.9(c) of the Parent Schedules. The products listed on
Section 3.9(c) of the Parent Schedules collectively constitute in excess of 95%
of the gross revenues generated during the twelve (12)-month period ending
December 31, 1997 by that portion of the business of the Parent which is subject
to the jurisdiction of the FDA or any Regulatory Agency. The Parent has no
knowledge that any of the material approvals, clearances, authorizations,
registrations, certifications, permits, filings or notifications that it or any
of its subsidiaries has received or made to the FDA or any Regulatory Agency
that relate to the marketing of the products listed on Section 3.9(c) of the
Parent Schedules have been or are being revoked; provided, however, that the
Company understands and acknowledges that the FDA or any other Regulatory Agency
may disagree with the Parent's assessment and undertake actions, at any time, to
remove from commercial distribution any such product.
(iii) Except as disclosed in Section 3.9(c) of the Parent
Schedules, the Parent has no knowledge of any pending regulatory action of any
sort (other than non-material routine or periodic inspections of reviews)
against the Parent or any Contract Manufacturer by the FDA or any Regulatory
Agency or any other duly authorized governmental authority which regulates the
sale of drugs or medical devices in any jurisdiction which could have a Material
Adverse Effect on the Parent, or in any material way limit or restrict the
ability of the Parent to market its existing products. Except as set forth on
Section 3.9(c) of the Parent Schedules, neither the Parent, nor, to the
knowledge of the Parent, the Contract Manufacturer, has knowingly committed or
permitted to exist any violation of the rules and regulations of the FDA or any
Regulatory Agency or any other duly authorized governmental authority which
regulates the sale of drugs or medical devices which has not been cured by the
Parent, or, to the knowledge of the Parent, the Contract Manufacturer or waived
by the FDA or any such Regulatory Agency authority, provided, however, that the
Company understands and acknowledges that the FDA or any other Regulatory Agency
may disagree with the Parent's assessment and undertake enforcement actions at
any time.
3.10 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent or any of its
subsidiaries has received any notice of assertion nor, to Parent's knowledge, is
there a threatened action, suit, proceeding, claim, arbitration or investigation
against Parent or any of its subsidiaries which reasonably would be likely to be
material to Parent, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
3.11 Brokers' and Finders' Fees. Except for fees payable to PaineWebber
Incorporated pursuant to an engagement letter dated October 5, 1998, Parent has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders'
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fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.12 Employee Benefit Plans and Employment Matters.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "PARENT EMPLOYEE PLAN" means any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by Parent or any Affiliate for the benefit of any
Parent Employee;
(ii) "PARENT EMPLOYEE" means any current, former, or
retired employee, officer, or director of Parent or any Affiliate;
(iii) "PARENT EMPLOYEE AGREEMENT" means each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between Parent or any
Affiliate and any Employee or consultant;
(iv) "PARENT INTERNATIONAL EMPLOYEE PLAN" means each Parent
Employee Plan that has been adopted or maintained by Parent, whether informally
or formally, for the benefit of Employees outside the United States; and
(v) "PARENT PENSION PLAN" means each Parent Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 3.12(b) of the Parent Schedules contain an
accurate and complete list of each Parent Employee Plan and each Parent Employee
Agreement. Parent does not have any plan or commitment to establish any new
Parent Employee Plan, to modify any Parent Employee Plan or Parent Employee
Agreement (except to the extent required by law or to conform any such Parent
Employee Plan or Parent Employee Agreement to the requirements of any applicable
law, in each case as previously disclosed to the Company in writing, or as
required by this Agreement), or to enter into any Parent Employee Plan or Parent
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) Documents. Parent has provided to the Company: (i) correct
and complete copies of all documents embodying each Parent Employee Plan and
each Parent Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Parent Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Parent Employee Plan or related trust;
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(iv) if the Parent Employee Plan is funded, the most recent annual and periodic
accounting of Parent Employee Plan assets; (v) the most recent summary plan
description together with the summary of material modifications thereto, if any,
required under ERISA with respect to each Parent Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Parent Employee Plans and copies of all applications and correspondence to or
from the IRS or the DOL with respect to any Parent Employee Plan; (vii) all
material written agreements and contracts relating to each Parent Employee Plan,
including, but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; (viii) all communications material to
any Parent Employee relating to any Parent Employee Plan and any proposed Parent
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to Parent; (ix) all COBRA forms and related notices; and (x) all registration
statements and prospectuses prepared in connection with each Parent Employee
Plan.
(d) Parent Employee Plan Compliance. (i) Parent has, to its
knowledge, performed in all material respects all obligations required to be
performed by it under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to each Parent Employee Plan, and
each Parent Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) each Parent Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received a favorable determination letter from the
IRS with respect to each such Plan as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has remaining a period of time under applicable
Treasury regulations or IRS pronouncements in which to apply for such a
determination letter and make any amendments necessary to obtain a favorable
determination; (iii) no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Parent Employee
Plan; (iv) to Parent's knowledge, there are no actions, suits or claims pending
or threatened or reasonably anticipated (other than routine claims for benefits)
against any Parent Employee Plan or against the assets of any Parent Employee
Plan; (v) each Parent Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent or any of its Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (vi) to Parent's knowledge,
there are no audits, inquiries or proceedings pending or threatened by the IRS
or DOL with respect to any Parent Employee Plan; and (vii) to Parent's
knowledge, neither Parent nor any Affiliate is subject to any penalty or tax
with respect to any Parent Employee Plan under Section 402(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) Parent Pension Plans. Parent does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Parent Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code.
(f) Parent Multiemployer Plans. At no time has Parent
contributed to or been requested to contribute to any Parent Multiemployer Plan.
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(g) No Post-Employment Obligations. No Parent Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and Parent has
never represented, promised or contracted (whether in oral or written form) to
any Parent Employee (either individually or to Parent Employees as a group) or
any other person that such Parent Employee(s) or other person would be provided
with retiree life insurance, retiree health or other retiree employee welfare
benefit, except to the extent required by statute.
(h) Health Care Continuation Obligations. Neither Parent nor any
Affiliate has, prior to the Effective Time, and in any material respect,
violated any of the health care continuation requirements of COBRA, the
requirements of FMLA or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction
(i) The execution of this Agreement and the consummation
of the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Parent Employee Plan, Parent Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Parent Employee.
(ii) No payment or benefit which will or may be made by
Parent or its Affiliates with respect to any Parent Employee as a result of the
transactions contemplated by this Agreement will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. To Parent's knowledge, Parent (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Parent Employees; (ii) has withheld all amounts required by law
or by agreement to be withheld from the wages, salaries and other payments to
Parent Employees; (iii) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened or
reasonably anticipated claims or actions against Parent under any worker's
compensation policy or long-term disability policy. To Parent's knowledge, no
Parent Employee has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound due to such employee
being employed by Parent and disclosing to Parent or using trade secrets or
proprietary information of any other person or entity.
(k) Parent International Employee Plan. Each Parent International
Employee Plan has been established, maintained and administered in material
compliance with its terms and conditions and with the requirements prescribed by
any and all statutory or regulatory laws that are
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applicable to such Parent International Employee Plan. Furthermore, no Parent
International Employee Plan has unfunded liabilities, that as of the Effective
Time, will not be offset by insurance or fully accrued. Except as required by
law, no condition exists that would prevent Parent from terminating or amending
any Parent International Employee Plan at any time for any reason.
3.13 Absence of Liens and Encumbrances. Parent and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Parent Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to Parent.
3.14 Environmental Matters.
(a) Hazardous Material. To the knowledge of Parent, except as
reasonably would not be likely to result in a material liability to Parent, no
underground storage tanks and no amount of any Hazardous Material, but excluding
office and janitorial supplies, are present, as a result of the actions of
Parent or any of its subsidiaries or any affiliate of Parent, or, to Parent's
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that Parent or any of its subsidiaries has at any time
owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as reasonably would
not be likely to result in a material liability to Parent, neither Parent nor
any of its subsidiaries has transported, stored, used, manufactured, disposed
of, released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has Parent or
any of its subsidiaries engaged in any Hazardous Materials Activities in
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Parent and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the "PARENT
ENVIRONMENTAL PERMITS") necessary for the conduct of Parent's and its
subsidiaries' Hazardous Material Activities and other businesses of Parent and
its subsidiaries as such activities and businesses are currently being
conducted. To the knowledge of Parent, there are no facts or circumstances
indicating that any Parent Environment Permit will or may be revoked, suspended,
canceled or not renewed. All appropriate action in connection with the renewal
or extension of any Parent Environmental Permit has been taken.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Parent's knowledge, threatened concerning any Parent
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
Parent or any of its subsidiaries. Parent is not aware of any fact or
circumstance which could involve Parent or any of its subsidiaries in any
material environmental litigation or impose upon Parent any material
environmental liability. Parent and its subsidiaries have not received notice,
nor to the Parent's knowledge is there a threatened notice, that Parent or its
subsidiaries are responsible, or potentially responsible, for the investigation,
remediation, clean-up, or similar action at
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property presently or formerly used by Parent or any of its subsidiaries for
recycling, disposal, or handling of waste.
3.15 Labor Matters. No work stoppage or labor strike against Parent is
pending, threatened or reasonably anticipated. Parent does not have knowledge of
any activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of Parent, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Parent. Neither Parent nor any of
its subsidiaries has engaged in any unfair labor practices within the meaning of
the National Labor Relations Act. Parent is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Parent Employees and no collective bargaining agreement
is being negotiated by Parent. Parent and its subsidiaries are and have been in
compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of employment, and wages and hours
(including, without limitation, WARN or any similar state or local law).
3.16 Agreements, Contracts and Commitments. Except as set forth in
Section 3.16 and Section 3.2(b) of the Parent Schedules, neither Parent nor any
of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of Parent's
Board of Directors, other than those that are terminable by Parent or any of its
subsidiaries on no more than thirty days notice without liability or financial
obligation;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any agreement of indemnification or guaranty not entered into
in the ordinary course of business other than indemnification agreements between
Parent or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of Parent or any of its subsidiaries to engage in any line
of business or compete with any person or granting any exclusive distribution
rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement.
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Neither Parent nor any of its subsidiaries, nor to Parent's knowledge
any other party to a Parent Contract (as defined below), has breached, violated
or defaulted under, or received notice that it has breached violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which Parent or any of its subsidiaries
is a party or by which it is bound of the type described in clauses (a) through
(f) above (any such agreement, contract or commitment, a "PARENT CONTRACT") in
such a manner as would permit any other party to cancel or terminate any such
Parent Contract, or would permit any other party to seek damages, which would be
reasonably likely to be material to Parent.
3.17 Pooling of Interests. Parent has provided to Pricewaterhouse-
Coopers LLP, its independent accountants, all of the information that has been
requested by such firm in connection with such firm's analysis of the
availability of pooling-of-interest accounting for the Merger and, having
conferred with such firm, nothing has come to Parent's knowledge that has led it
to believe that neither Parent nor any of its directors, officers, affiliates or
stockholders has taken any action which would preclude Parent's ability to
account for the Merger as a pooling of interests.
3.18 Change of Control Payments. There is no plan or agreement
pursuant to which any amounts may become payable (whether currently or in the
future) to current or former officers or directors of Parent as a result of or
in connection with the Merger.
3.19 Registration Statement; Proxy Statement/Prospectus. The
information to be supplied by Parent for inclusion in the Registration Statement
shall not at the time the Registration Statement is filed with the SEC and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information to be supplied by Parent for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to Parent's
shareholders and the Company's stockholders, at the time of the Parent
Shareholders' Meeting or the Company Stockholders' Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Parent Shareholders' Meeting or the Company Stockholders'
Meeting which has become false or misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time,
any event relating to Parent or any of its affiliates, officers or directors
should be discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Parent shall
promptly inform the Company. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
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3.20 Board Approval. The Board of Directors of Parent has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of Parent and its shareholders, and (ii) to recommend that the
shareholders of Parent approve the issuance of shares of Parent Common Stock by
virtue of the Merger.
3.21 Fairness Opinion. Parent has received a written opinion from
PaineWebber Incorporated, dated as of the date hereof, to the effect that as of
the date hereof, the Exchange Ratio is fair to Parent from a financial point of
view and has delivered to the Company a copy of such opinion.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, the Company (which for the purposes
of this Article 4 shall include the Company and each of its subsidiaries) and
Parent (which for the purposes of this Article 4 shall include Parent and each
of its subsidiaries) agree, except (i) in the case of the Company as provided in
Article 4 of the Company Schedules and in the case of Parent as provided in
Article 4 of the Parent Schedules, or (ii) to the extent that the other of them
shall otherwise consent in writing, to carry on its business diligently and in
accordance with good commercial practice and to carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
to pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, to pay or perform other material obligations when due, and use
its commercially reasonable efforts consistent with past practices and policies
to preserve intact its present business organization, keep available the
services of its present officers and employees and preserve its relationships
with customers, suppliers, distributors, licensors, licensees, and others with
which it has business dealings. In addition, each of the Company and Parent will
promptly notify the other of any material event involving its business or
operations. No information or knowledge obtained in any investigation will
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Merger.
In addition, except as permitted by the terms of this Agreement, and
except in the case of the Company as provided in Article 4 of the Company
Schedules and in the case of Parent as provided in Article 4 of the Parent
Schedules, without the prior written consent of the other, neither the Company
nor Parent shall do any of the following, and neither the Company nor Parent
shall permit its subsidiaries to do any of the following, nor take, or cause or
permit to be taken, any other action that would be reasonably likely to have the
effect of causing any of its respective representatives or warranties contained
in this Agreement to become untrue if such representation or warranty were
deemed made at the time such action is taken:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee,
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consultant or director stock plans or authorize cash payments in exchange for
any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(c) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company IP
Rights or the Parent IP Rights, as the case may be, or enter into grants to
future patent rights, other than in the ordinary course of business consistent
with past practice;
(d) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(e) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date hereof;
(f) Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than (i)
the issuance of shares of Company Common Stock or Parent Common Stock, as the
case may be, pursuant to the exercise of stock options therefor outstanding as
of the date of this Agreement, (ii) the grant of options to purchase shares of
Company Common Stock or Parent Common Stock, as the case may be, to be granted
at fair market value in the ordinary course of business, consistent with past
practice and in accordance with stock option plans existing on the date hereof,
(iii) shares of Company Common Stock or Parent Common Stock, as the case may be,
issuable upon the exercise of the options referred to in clause (ii), and (iv)
shares of Company Common Stock or Parent Common Stock, as the case may be,
issuable to participants in the Parent Purchase Plan or the Company Purchase
Plan consistent with past practice and the terms thereof;
(g) Cause, permit or propose any amendments to any charter
document or Bylaw (or similar governing instruments of any subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a material portion of the assets of,
or by any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company or Parent, as the case may be, or
enter into any material joint ventures, strategic partnerships or alliances;
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(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company or Parent, as the case may be, except in the
ordinary course of business consistent with past practice;
(j) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire debt securities of the
Company or Parent, as the case may be, or guarantee any debt securities of
others;
(k) Adopt or amend any employee benefit or employee stock
purchase or employee option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director or employee, or increase
the salaries or wage rates of its officers or employees other than in the
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures;
(l) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;
(m) Make any grant of exclusive rights to any third party;
(n) Take any action that would be reasonably likely to interfere
with Parent's ability to account for the Merger as a pooling of interests; or
(o) Agree in writing or otherwise to take any of the actions
described in Article 4 (a) through (n) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings;
Board Recommendations.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Parent will prepare, and file with the SEC, the Proxy
Statement and Parent will prepare and file with the SEC the Registration
Statement in which the Proxy Statement will be included. Each of the Company and
Parent will respond to any comments of the SEC, will use its respective best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing and will cause the
Proxy Statement to be mailed to its respective stockholders or shareholders, as
the case may be, at the earliest practicable time. As promptly as practicable
after the date of this Agreement, the Company and Parent will prepare and file
any other filings required under the Exchange Act, the Securities Act or any
other Federal, foreign or Blue Sky laws relating to the Merger and the
transactions contemplated by this Agreement (the "OTHER FILINGS"). Each of the
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Company and Parent will notify the other promptly upon the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff or
any other government officials for amendments or supplements to the Registration
Statement, the Proxy Statement or any Other Filing or for additional information
and will supply the other with copies of all correspondence between such party
or any of its representatives, on the one hand, and the SEC, or its staff or any
other government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement, the Merger or any Other Filing. The Proxy
Statement, the Registration Statement and the Other Filings will comply in all
material respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the Proxy Statement, the
Registration Statement or any Other Filing, the Company or Parent, as the case
may be, will promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of the Company or shareholders of Parent, such amendment
or supplement.
(b) The Proxy Statement will include the recommendation of the
Board of Directors of the Company in favor of adoption and approval of this
Agreement and approval of the Merger (except that the Board of Directors of the
Company may withdraw, modify or refrain from making such recommendation to the
extent that the Board determines, in good faith, after consultation with outside
legal counsel, that compliance with the Board's fiduciary duties under
applicable law would require it to do so). In addition, the Proxy Statement will
include the recommendations of the Board of Directors of Parent in favor of the
issuance of shares of Parent Common Stock by virtue of the Merger (except that
the Board of Directors of Parent may withdraw, modify or refrain from making
such recommendations to the extent that the Board determines, in good faith,
after consultation with outside legal counsel, that compliance with the Board's
fiduciary duties under applicable law would require it to do so).
5.2 Meetings of Stockholders and Shareholders. Promptly after the date
hereof, the Company will take all action necessary in accordance with Delaware
Law and its Certificate of Incorporation and Bylaws to convene the Company
Stockholders' Meeting to be held as promptly as practicable, and in any event
(to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon this Agreement. The Company will consult with Parent and use its
best efforts to hold the Company Stockholders' Meeting on the same day as the
Parent Shareholders' Meeting. Promptly after the date hereof, Parent will take
all action necessary in accordance with the California General Corporation Law
and its Articles of Incorporation and Bylaws to convene the Parent Shareholders'
Meeting to be held as promptly as practicable, and in any event (to the extent
permissible under applicable law) within 45 days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon the
issuance of shares of Parent Common Stock by virtue of the Merger. Parent will
consult with the Company and will use its best efforts to hold the Parent
Shareholders' Meeting on the same day as the Company Stockholders' Meeting. For
so long as the Board of Directors of the Company continues to make the
recommendation set forth in Section 5.1(b), the Company will use its best
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and the approval of the Merger and will take all
other action necessary or advisable to secure the vote or consent of its
shareholders required by the rules of the National Association of Securities
Dealers, Inc. or Delaware Law to obtain such approvals; provided, however, that
if the Board of Directors of the Company
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withdraws such recommendation in accordance with Section 5.4(b)(ii) of this
Agreement, it shall nevertheless, without recommendation, submit this Agreement
and the Merger to the Company's stockholders for approval and adoption at the
Company Stockholder Meeting unless otherwise excused from doing so upon
termination of this Agreement in accordance with Article VII hereof. For so long
as the Board of Directors of Parent continues to make the recommendations set
forth in Section 5.1(b), Parent will use its best efforts to solicit from its
shareholders proxies in favor of the issuance of shares of Parent Common Stock
by virtue of the Merger and will take all other action necessary or advisable to
secure the vote or consent of its shareholders required by the rules of the
National Association of Securities Dealers, Inc. or the California General
Corporation Law to obtain such approvals.
5.3 Confidentiality. The parties acknowledge that the Company and Parent
have previously executed each other's form of Confidentiality Agreement, each
dated September 20, 1998 (collectively, the "CONFIDENTIALITY AGREEMENT"), which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms.
5.4 No Solicitation.
(a) Restrictions on Parent.
(i) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, Parent and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than the Company and its affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any non-public
information concerning Parent or any of its subsidiaries to, or afford any
access to the properties, books or records of Parent or any of its subsidiaries
to, or otherwise assist or facilitate, or enter into any agreement or
understanding with, any person, entity or group (other than the Company and its
affiliates, agents and representatives), in connection with any Acquisition
Proposal with respect to Parent. Parent will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. For the purposes of this
Agreement, an "ACQUISITION PROPOSAL" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of substantial
assets or similar transactions involving the entity or any subsidiaries of the
entity (other than sales of assets or inventory in the ordinary course of
business or as permitted under the terms of this Agreement), (ii) sale of 15% or
more of the outstanding shares of capital stock of the entity (including without
limitation by way of a tender offer or an exchange offer), (iii) the acquisition
by any person of beneficial ownership or a right to acquire beneficial ownership
of, or the formation of any "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) which beneficially owns,
or has the right to acquire beneficial ownership of, 15% or more of the then
outstanding shares of capital stock of the entity (except for acquisitions for
passive investment purposes only in circumstances where the person or group
qualifies for and files a Schedule 13G with respect thereto and only for so long
as such person or group continues to be eligible to report its beneficial
ownership of such capital stock on Schedule 13G); or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the
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foregoing. Parent will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Parent will (i) notify the Company as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) as promptly as practicable notify the Company of the
significant terms and conditions of any such Acquisition Proposal. In addition,
subject to the other provisions of this Section 5.4(a), from and after the date
of this Agreement until the earlier of the Effective Time and termination of
this Agreement pursuant to its terms, Parent and its subsidiaries will not, and
will instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than the
Company); provided, however, that nothing herein shall prohibit Parent's Board
of Directors from taking and disclosing to Parent's shareholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act.
(ii) Notwithstanding the provisions of paragraph (a)(i)
above, prior to the Effective Time, Parent may, to the extent the Board of
Directors of Parent determines, in good faith, after consultation with outside
legal counsel, that the Board's fiduciary duties under applicable law require it
to do so, participate in discussions or negotiations with, and, subject to the
requirements of paragraph (a)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to Parent in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of Parent in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Merger to the stockholders of Parent (a
"PARENT SUPERIOR PROPOSAL"). In addition, notwithstanding the provisions of
paragraph (a)(i) above, in connection with a possible Acquisition Proposal,
Parent may refer any third party to this Section 5.4(a) or make a copy of this
Section 5.4(a) available to a third party. In the event Parent receives a Parent
Superior Proposal, nothing contained in this Agreement (but subject to the terms
hereof) will prevent the Board of Directors of Parent from recommending such
Parent Superior Proposal to Parent's shareholders, if the Board determines, in
good faith, after consultation with outside legal counsel, that such action is
required by its fiduciary duties under applicable law; in such case, the Board
of Directors of Parent may withdraw, modify or refrain from making its
recommendations set forth in Section 5.1(b), and, to the extent it does so,
Parent may refrain from soliciting proxies and taking such other action
necessary to secure the vote of its shareholders as may be required by Section
5.2; provided, however, that Parent shall not recommend to its shareholders a
Parent Superior Proposal for a period of not less than 48 hours after the
Company's receipt of a copy of such Parent Superior Proposal (or a description
of the significant terms and conditions thereof, if not in writing).
(iii) Notwithstanding anything to the contrary herein,
Parent will not provide any non-public information to a third party unless: (x)
Parent provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (y)
such non-public information is the same information previously delivered to the
Company.
(iv) Notwithstanding the foregoing provisions of this
Section 5.4(a), Parent shall be permitted to undertake the transaction involving
its Microheart, Inc. subsidiary described in
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Article IV of the Parent Schedules and such transaction shall not be considered
an "Acquisition Proposal" for purposes of this Agreement.
(b) Restrictions on the Company.
(i) From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement pursuant to its
terms, the Company and its subsidiaries will not, and will instruct their
respective directors, officers, employees, representatives, investment bankers,
agents and affiliates not to, directly or indirectly, (i) solicit or knowingly
encourage submission of, any proposals or offers by any person, entity or group
(other than Parent and its affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any non-public
information concerning the Company or any of its subsidiaries to, or afford any
access to the properties, books or records of the Company or any of its
subsidiaries to, or otherwise assist or facilitate, or enter into any agreement
or understanding with, any person, entity or group (other than Parent and its
affiliates, agents and representatives), in connection with any Acquisition
Proposal with respect to the Company. The Company will immediately cease any and
all existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company will (i) notify
Parent as promptly as practicable if any inquiry or proposal is made or any
information or access is requested in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) as promptly as practicable notify Parent
of the significant terms and conditions of any such Acquisition Proposal. In
addition, subject to the other provisions of this Section 5.4(b), from and after
the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, the Company and its
subsidiaries will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, make or authorize any public statement, recommendation
or solicitation in support of any Acquisition Proposal made by any person,
entity or group (other than Parent); provided, however, that nothing herein
shall prohibit the Company's Board of Directors from taking and disclosing to
the Company's stockholders a position with respect to a tender offer pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
(ii) Notwithstanding the provisions of paragraph (b)(i)
above, prior to the Effective Time, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (b)(iii), below, furnish information to
any person, entity or group after such person, entity or group has delivered to
the Company in writing, an unsolicited bona fide Acquisition Proposal which the
Board of Directors of the Company in its good faith reasonable judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable than the Merger to the stockholders of
the Company (a "COMPANY SUPERIOR PROPOSAL"). In addition, notwithstanding the
provisions of paragraph (b)(i) above, in connection with a possible Acquisition
Proposal, the Company may refer any third party to this Section 5.4(b) or make a
copy of this Section 5.4(b) available to a third party. In the event the Company
receives a the Company Superior Proposal, nothing contained in this Agreement
(but subject to the terms hereof) will prevent the Board of Directors of the
Company from recommending such the Company Superior Proposal to its
stockholders, if the Board determines, in good faith, after
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consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law; in such case, the Board of Directors of
the Company may withdraw, modify or refrain from making its recommendation set
forth in Section 5.1(b), and, to the extent it does so, the Company may refrain
from soliciting proxies and taking such other action necessary to secure the
vote of its stockholders as may be required by Section 5.2; provided, however,
that the Company shall not recommend to its stockholders a the Company Superior
Proposal for a period of not less than 48 hours after Parent's receipt of a copy
of such the Company Superior Proposal (or a description of the significant terms
and conditions thereof, if not in writing); and provided further, that nothing
contained in this Section shall limit the Company's obligation to hold and
convene the Company Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of the Company shall have been
withdrawn, modified or not yet made).
(iii) Notwithstanding anything to the contrary in paragraph
(b), the Company will not provide any non-public information to a third party
unless: (x) the Company provides such non-public information pursuant to a
nondisclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreement; and (y) such non-public information is the same information
previously delivered to Parent.
5.5 Public Disclosure. Parent and the Company will consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger, this Agreement or an Acquisition Proposal and will
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or Nasdaq.
5.6 Legal Requirements. Each of Parent, Merger Sub and the Company will
use its respective reasonable commercial efforts to take all actions necessary
or desirable to comply promptly with all legal requirements which may be imposed
on them with respect to the consummation of the transactions contemplated by
this Agreement (including furnishing all information required in connection with
approvals by or filings with any Governmental Entity, and prompt resolution of
any litigation prompted hereby) and will promptly cooperate with and furnish
information to any party hereto necessary in connection with any such filings
with or investigations by any Governmental Entity, and any other such
requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement. Parent will use its commercially reasonable efforts to take such
steps as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of Parent Common Stock
pursuant hereto. The Company will use its commercially reasonable efforts to
assist Parent as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of Parent Common Stock pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Parent and the Company will each use its commercially reasonable efforts
to obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
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5.8 FIRPTA. At or prior to the Closing, the Company, if requested by
Parent, shall deliver to the IRS a notice that the Company Common Stock is not a
"U.S. Real Property Interest" as defined and in accordance with the requirements
of Treasury Regulation Section 1.897-2(h)(2).
5.9 Notification of Certain Matters. Parent and Merger Sub will give
prompt notice to the Company, and the Company will give prompt notice to Parent,
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause (a) any representation or
warranty contained in this Agreement and made by it to be untrue or inaccurate
in any material respect at any time from the date of this Agreement to the
Effective Time such that the conditions set forth in Section 6.2(a) or 6.3(a),
as the case may be, would not be satisfied as a result thereof or (b) any
material failure of Parent and Merger Sub or the Company, as the case may be, or
of any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement. Notwithstanding the above, the delivery of any notice
pursuant to this section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.10 Best Efforts and Further Assurances. Subject to the respective
rights and obligations of Parent and the Company under this Agreement, each of
the parties to this Agreement will use its best efforts to effectuate the Merger
and the other transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement; provided that neither
Parent nor the Company nor any subsidiary or affiliate thereof will be required
to agree to any divestiture by itself or any of its affiliates of shares of
capital stock or of any business, assets or property, or the imposition of any
material limitation on the ability of any of them to conduct their businesses or
to own or exercise control of such assets, properties and stock. Subject to the
foregoing, each party hereto, at the reasonable request of another party hereto,
will execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
5.11 Stock Options and Employee Benefits.
(a) At the Effective Time, each outstanding Company Stock Option
under the Company Stock Option Plans, whether or not exercisable, will be
assumed by Parent. Each Company Stock Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable the Company Stock Option Plan immediately
prior to the Effective Time (including, without limitation, any repurchase
rights), except that (i) each Company Stock Option will be exercisable (or will
become exercisable in accordance with its terms) for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such the Company Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per share of the Company Common Stock
at which such the Company Stock Option was exercisable immediately prior to the
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Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
After the Effective Time, Parent will issue to each holder of an outstanding
Company Stock Option a notice describing the foregoing assumption of such the
Company Stock Option by Parent.
(b) It is intended that the Company Stock Options assumed by
Parent shall qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent the Company Stock Options
qualified as incentive stock options immediately prior to the Effective Time.
(c) Parent has reserved sufficient shares of Parent Common Stock
for issuance under Section 5.11(a) and under Section 1.6(c) hereof.
(d) At the Effective Time, each outstanding purchase right under
the Company Purchase Plan shall be deemed to constitute a purchase right to
acquire, on the same terms and conditions as were applicable under the Company
Purchase Plan immediately prior to the Effective Time, shares of Parent Common
Stock appropriately adjusted for the Exchange Ratio.
5.12 Form S-8. Parent agrees to file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options as soon as is reasonably practicable after the Effective
Time.
5.13 Indemnification and Insurance.
(a) The Bylaws of the Surviving Corporation will honor, and
Parent will cause the Surviving Corporation to honor, the provisions with
respect to indemnification set forth in the Bylaws of the Company immediately
prior to the Effective Time, which provisions will not be amended, repealed or
otherwise modified for a period of six (6) years after the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) Parent will and will cause the Surviving Corporation to honor
and fulfill the obligations of the Company pursuant to indemnification
agreements with the Company's directors and officers existing at or before the
Effective Time.
(c) For a period of six (6) years after the Effective Time,
Parent will or will cause the Surviving Corporation to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been made available to Parent) on terms
comparable to those now applicable to directors and officers of the Company;
provided, however, that in no event will Parent or the Surviving Corporation be
required to expend in excess of 125% of the annual premium currently paid by the
Company for such coverage; and provided further, that if the premium for such
coverage exceeds such amount, Parent or the Surviving Corporation will purchase
a policy with the greatest coverage available for such 125% of the annual
premium.
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5.14 Nasdaq Listing. Parent agrees to authorize for listing on Nasdaq
the shares of Parent Common Stock issuable, and those required to be reserved
for issuance, in connection with the Merger, upon official notice of issuance.
5.15 Parent Affiliate Agreement. Set forth on the Parent Schedules is a
list of those persons who may be deemed to be, in Parent's reasonable judgment,
affiliates of Parent within the meaning of Rule 145 promulgated under the
Securities Act (each a "PARENT AFFILIATE"). Parent will provide the Company with
such information and documents as the Company reasonably requests for purposes
of reviewing such list. Parent will use its best efforts to deliver or cause to
be delivered to the Company, as promptly as practicable on or following the date
hereof, from each Parent Affiliate an executed affiliate agreement in
substantially the form attached hereto as Exhibit D, each of which will be in
full force and effect as of the Effective Time.
5.16 Company Affiliate Agreement. Set forth on the Company Schedules is
a list of those persons who may be deemed to be, in the Company's reasonable
judgment, affiliates of the Company within the meaning of Rule 145 promulgated
under the Securities Act (each a "COMPANY AFFILIATE"). The Company will provide
Parent with such information and documents as Parent reasonably requests for
purposes of reviewing such list. The Company will use its best efforts to
deliver or cause to be delivered to Parent, as promptly as practicable on or
following the date hereof, from each the Company Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit E (the "COMPANY
AFFILIATE AGREEMENT"), each of which will be in full force and effect as of the
Effective Time. Parent will be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Company Affiliate Agreement.
5.17 Board of Directors and Certain Officers of the Combined Company.
(a) The Board of Directors of Parent will take all actions
necessary to cause the Board of Directors of Parent and the Surviving
Corporation, immediately after the Effective Time, to consist of the seven (7)
persons named in Section 1.5 hereof, four (4) of whom were directors of Parent
immediately prior to the Effective Time, and three (3) of whom were directors of
the Company prior to the Effective Time (the "COMPANY DESIGNEES"). If, prior to
the Effective Time, any of the Company Designees or the Parent's designees shall
decline or be unable to serve as a director of Parent or the Surviving
Corporation, the Company (if such person was designated by the Company) or
Parent (if such person was designated by Parent) shall designate another person
to serve in such person's stead, which person shall be reasonably acceptable to
the other party.
(b) The Board of Directors of Parent will take all actions
necessary to cause the officers of Parent and the Surviving Corporation,
immediately after the Effective Time, to include the persons named in Section
1.5 hereof.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder and Shareholder Approval. This Agreement shall
have been approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the stockholders of the Company; and
the issuance of shares of Parent Common Stock by virtue of the Merger shall have
been duly approved by the requisite vote under applicable law and the rules of
the National Association of Securities Dealers, Inc. by the shareholders of
Parent.
(b) Registration Statement Effective; Proxy Statement. The SEC
shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement, shall have been initiated or
threatened in writing by the SEC.
(c) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(d) Tax Opinions. Parent and the Company shall each have received
written opinions from their respective counsel, Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, and Xxxxxx Xxxxxx White & XxXxxxxxx, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. The parties to this Agreement agree to make
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable to
stockholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on Nasdaq upon official notice of issuance.
(f) Opinion of Accountants. Each of Parent and the Company shall
have received a letter from PricewaterhouseCoopers LLP, dated within two (2)
business days prior to the Effective Time, as follows:
(i) A letter from PricewaterhouseCoopers LLP, independent
accountants for the Company, and addressed to the Company, reasonably
satisfactory in form and substance to Parent and PricewaterhouseCoopers LLP,
independent accountants for the Parent, to the effect that, after reasonable
investigation, the independent accountants for the Company are not aware of any
fact concerning the Merger or any of the stockholders or affiliates of the
Company that could preclude Parent from accounting for the Merger as a "pooling
of interests" in accordance with generally
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accepted accounting principles, Accounting Principles Board Opinion No. 16 and
all published rules, regulations and policies of the SEC.
(ii) A letter from PricewaterhouseCoopers LLP, independent
accountants for the Parent, and addressed to the Parent, reasonably satisfactory
in form and substance to Parent, to the effect that, after reasonable
investigation, the independent accountants for Parent are not aware of any fact
concerning Parent or any of its shareholders or affiliates that could preclude
Parent from accounting for the Merger as a "pooling of interests" and that
PricewaterhouseCoopers LLP concurs with Parent management's conclusion that the
Merger may be accounted for as a "pooling of interests", in each case in
accordance with generally accepted accounting principles, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and policies of the
SEC.
6.2 Additional Conditions to Obligations of the Company. The obligation
of the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
true and correct in all material respects as of the date of this Agreement. In
addition, the representations and warranties of Parent and Merger Sub contained
in this Agreement shall be true and correct in all material respects on and as
of the Effective Time except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except in such cases (other than the representations in Sections 3.2, 3.3
and 3.21) where the failure to be so true and correct would not have a Material
Adverse Effect on Parent. The Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with
respect to Parent shall have occurred since the date of this Agreement.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of each
of the following conditions, any of which may be waived, in writing, exclusively
by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects as of
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the date of this Agreement. In addition, the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects on and as of the Effective Time except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), with the same force and
effect as if made on and as of the Effective Time, except in such cases (other
than the representations in Sections 2.2, 2.3 and 2.21) where the failure to be
so true and correct would not have a Material Adverse Effect on the Company.
Parent shall have received a certificate with respect to the foregoing signed on
behalf of the Company by the President and Chief Executive Officer and the Chief
Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and the Parent shall have received a certificate to such effect
signed on behalf of the Company by the President and Chief Executive Officer and
the Chief Financial Officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect with
respect to the Company shall have occurred since the date of this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the stockholders of the Company or the approval of the issuance of Parent
Common Stock in connection with the Merger by the shareholders of Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have
been consummated by February 28, 1999; provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
(c) by either the Company or Parent if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action (an
"ORDER"), in any case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either the Company or Parent if the required approvals of
the stockholders of the Company or the shareholders of Parent contemplated by
this Agreement shall not have been obtained by reason of the failure to obtain
the required vote upon a vote taken at a meeting of
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stockholders or shareholders, as the case may be, duly convened therefor or at
any adjournment thereof (provided that the right to terminate this Agreement
under this Section 7.1(d) shall not be available to any party where the failure
to obtain shareholder or stockholder approval of such party shall have been
caused by the action or failure to act of such party in breach of this
Agreement);
(e) by Parent, if the Board of Directors of the Company
recommends a Company Superior Proposal to the stockholders of the Company, or if
the Board of Directors of the Company shall have withheld, withdrawn or modified
in a manner adverse to Parent its recommendation in favor of adoption and
approval of this Agreement and approval of the Merger;
(f) by the Company, if the Board of Directors of Parent
recommends a Parent Superior Proposal to the shareholders of Parent, or if the
Board of Directors of Parent shall have withheld, withdrawn or modified in a
manner adverse to the Company its recommendation in favor of approving the
issuance of the shares of Parent Common Stock by virtue of the Merger;
(g) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided that if
such inaccuracy in Parent's representations and warranties or breach by Parent
is curable prior to February 28, 1999 by Parent through the exercise of its
commercially reasonable efforts, then the Company may not terminate this
Agreement under this Section 7.1(g) provided Parent continues to exercise such
commercially reasonable efforts to cure such breach; or
(h) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable prior to February 28, 1999 by the Company through the
exercise of its commercially reasonable efforts, then Parent may not terminate
this Agreement under this Section 7.1(h) provided the Company continues to
exercise such commercially reasonable efforts to cure such breach.
7.2 Notice of Termination; Effect of Termination 7.2 Notice of
Termination; Effect of Termination. Any termination of this Agreement under
Section 7.1 above will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Section 7.3 and Article 8 (miscellaneous), each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 Fees and Expenses.
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(a) General. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' and
accountants' fees and expenses, incurred in relation to the printing and filing
of the Proxy Statement (including any preliminary materials related thereto) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) Company Payment.
(i) If (x) the Board of Directors of the Company shall have
withheld, withdrawn or modified in a manner adverse to Parent its recommendation
in favor of the adoption and approval of this Agreement and the Merger or (y)
the Board of Directors of the Company recommends a Company Superior Proposal to
the stockholders of the Company, the Company shall pay to Parent an amount equal
to $3.0 million within one (1) business day following the first to occur of (A)
termination of this Agreement pursuant to Section 7.1(e) hereof and (B) a
Company Negative Vote (as defined below).
(ii) If no payment is required pursuant to Section 7.3(b)(i)
above, and if (x) the vote of the stockholders of the Company approving and
adopting this Agreement and approving the Merger shall not have been obtained by
reason of the failure to obtain the required vote upon a vote taken at a meeting
of stockholders duly convened therefor or at any adjournment thereof (a "COMPANY
NEGATIVE VOTE") and (y) this Agreement shall have been terminated by Parent
pursuant to Section 7.1(d) and (z) within nine (9) months following such Company
Negative Vote, the Company shall execute and deliver a definitive agreement with
respect to an Acquisition Proposal or otherwise consummates an Acquisition
Proposal, the Company shall pay to Parent an amount equal to $3.0 million within
one (1) business day following demand therefor by Parent.
(iii) If no payment is required pursuant to Section 7.3(b)(i)
or (ii) above, and if (x) the Company Stockholders' Meeting is not held on or
prior to February 28, 1999 and (y) this Agreement shall have been terminated by
Parent pursuant to Section 7.1(b) and (z) within nine (9) months following such
termination, the Company shall enter into a definitive agreement with respect to
an Acquisition Proposal or otherwise consummates an Acquisition Proposal, the
Company shall pay to Parent an amount equal to $3.0 million within one (1)
business day following demand therefor by Parent.
(c) Parent Payment.
(i) If (x) the Board of Directors of the Parent shall have
withheld, withdrawn or modified in a manner adverse to the Company its
recommendation in favor of the approval of the issuance of the shares of Parent
Common Stock under the terms of the Merger or (y) the Board of Directors of the
Parent recommends a Parent Superior Proposal to the shareholders of the Parent,
the Parent shall pay to the Company an amount equal to $3.0 million within one
(1) business day following the first to occur of (A) termination of this
Agreement pursuant to Section 7.1(f) hereof and (B) a Parent Negative Vote (as
defined below).
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(ii) If no payment is required pursuant to Section 7.3(c)(i)
above, and if (x) the vote of the stockholders of the Parent approving the
issuance of the shares of Parent Common Stock under the terms of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote taken at a meeting of shareholders duly convened therefor or at
any adjournment thereof (a "PARENT NEGATIVE VOTE") and (y) this Agreement shall
have been terminated by the Company pursuant to Section 7.1(d) and (z) within
nine (9) months following such Parent Negative Vote, the Parent shall execute
and deliver a definitive agreement with respect to an Acquisition Proposal or
otherwise consummates an Acquisition Proposal, the Parent shall pay to the
Company an amount equal to $3.0 million within one (1) business day following
demand therefor by the Company.
(iii) If no payment is required pursuant to Section 7.3(c)(i)
or (ii) above, and if (x) the Parent Shareholders' Meeting is not held on or
prior to February 28, 1999 and (y) this Agreement shall have been terminated by
the Company pursuant to Section 7.1(b) and (z) within nine (9) months following
such termination, the Parent shall enter into a definitive agreement with
respect to an Acquisition Proposal or otherwise consummates an Acquisition
Proposal, the Parent shall pay to the Company an amount equal to $3.0 million
within one (1) business day following demand therefor by the Company.
(d) Not in Lieu of Damages. Payment of the fees described in
Section 7.3(b) and (c) above shall not be in lieu of damages incurred in the
event of a breach of this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
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8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Eclipse Surgical Technologies, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
(b) if to the Company, to:
Cardiogenesis Corporation
000 Xxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000)000-0000
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
8.3 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used
herein shall be deemed in each case to be followed by the words "without
limitation." 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
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interpretation of this Agreement. When reference is made herein to "THE BUSINESS
OF" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be "deemed to include" all direct and indirect subsidiaries
of such entity. References herein to "Sections" are references to Sections
hereof unless otherwise stated herein.
8.4 Counterparts. This Agreement may be executed in 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 party, it being understood that all parties need not sign
the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedules and the
Parent Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder except as otherwise provided in Section
5.13.
8.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with 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 hereof 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.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
the Delaware Chancery Court and the federal district court for the District of
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Delaware, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of Delaware for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Definition of "Knowledge". Wherever used in this Agreement, the
term "KNOWLEDGE" shall mean the actual knowledge of: (a) in the case of the
Company, its (i) President and Chief Executive Officer, (ii) Executive Vice
President and Chief Financial Officer and (iii) other Executive Vice Presidents;
and (b) in the case of Parent and Merger Sub, Parent's (i) Chief Executive
Officer, (ii) President and Chief Operating Officer and (iii) Chief Financial
Officer.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
ECLIPSE SURGICAL TECHNOLOGIES, INC.
By: /s/ XXXXXXX XXXXXX-XXXXXXXXX
------------------------------------
Name: Xxxxxxx Xxxxxx-Xxxxxxxxx
Title: Chief Executive Officer and
President
RW ACQUISITION CORPORATION
By: /s/ XXXXXXX XXXXXX-XXXXXXXXX
------------------------------------
Name: Xxxxxxx Xxxxxx-Xxxxxxxxx
Title: Chief Executive Officer
CARDIOGENESIS CORPORATION
By: /s/ XXXXX X. XXXX
------------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer and
President
****SIGNATURE PAGE TO REORGANIZATION AGREEMENT ****
