AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
ENDOREX CORPORATION,
ROADRUNNER ACQUISITION, INC.,
AND
CORPORATE TECHNOLOGY DEVELOPMENT, INC.
DATED AS OF JULY 31, 2001
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER............................................................ 2
1.1 The Merger........................................................... 2
1.2 Closing; Effective Time.............................................. 2
1.3 Effect of the Merger................................................. 2
1.4 Certificate of Incorporation; Bylaws................................. 2
1.5 Directors and Officers............................................... 3
1.6 Merger Consideration................................................. 3
1.7 Dissenting Shares.................................................... 5
1.8 Surrender of Certificates............................................ 6
1.9 Lost, Stolen or Destroyed Certificates............................... 8
1.10 Closing of Company's Transfer Books.................................. 9
1.11 Tax Consequences..................................................... 9
1.12 No Liability......................................................... 9
1.13 Affiliates........................................................... 9
1.14 Taking of Necessary Action; Further Action........................... 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDERS OF COMPANY................................................ 9
2.1 Organization, Standing and Power..................................... 9
2.2 Capital Structure.................................................... 10
2.3 Authority............................................................ 11
2.4 No Conflicts; Required Filings and Consents.......................... 11
2.5 Permits; Compliance with Laws........................................ 12
2.6 Financial Statements................................................. 13
2.7 Absence of Certain Changes........................................... 13
2.8 Absence of Undisclosed Liabilities................................... 14
2.9 Litigation........................................................... 14
2.10 Restrictions on Business Activities.................................. 14
2.11 Title to Property.................................................... 15
2.12 Intellectual Property................................................ 15
2.13 Taxes................................................................ 17
2.14 Employee Benefit Plans............................................... 20
2.15 Employees; Employee Matters.......................................... 21
2.16 Interested Party Transactions........................................ 22
2.17 Complete Copies of Materials; Bank Accounts.......................... 22
2.18 Material Contracts................................................... 22
2.19 No Breach of Material Contracts...................................... 23
2.20 Brokers.............................................................. 23
2.21 No Business Activity Restriction..................................... 23
2.22 Environmental Matters................................................ 24
2.23 Company Stockholders' Approval....................................... 25
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2.24 No Excess Parachute Payments......................................... 26
2.25 Completeness of the Company Information.............................. 26
2.26 Insurance............................................................ 26
2.27 Guaranties........................................................... 26
2.28 Subsidiaries......................................................... 26
2.29 Anti-Takeover Matters................................................ 27
2.30 FDA Matters.......................................................... 27
2.31 Studies.............................................................. 27
2.32 Employment Agreements................................................ 27
2.33 Patent and Trademark Applications.................................... 28
2.34 McDonald License Agreement........................................... 28
2.35 Allergan Transaction................................................. 29
2.36 Liquidation Amount................................................... 29
2.37 Parent Securities.................................................... 29
2.38 Dissolution.......................................................... 29
2.39 Common Stock......................................................... 29
2.40 Representations Complete............................................. 29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............. 29
3.1 Organization and Standing............................................ 30
3.2 Capital Structure of Parent.......................................... 30
3.3 Authority............................................................ 30
3.4 No Conflict; Required Filings and Consents........................... 30
3.5 SEC Filings; Financial Statements of Parent.......................... 31
3.6 Litigation........................................................... 31
3.7 No Undisclosed Liabilities........................................... 32
3.8 Absence of Certain Changes........................................... 32
3.9 Brokers.............................................................. 33
3.10 Reorganization....................................................... 33
3.11 Representations Complete............................................. 33
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.................................. 33
4.1 Conduct of Business of Company....................................... 33
4.2 Exclusivity.......................................................... 35
4.3 Notices of Certain Events............................................ 37
ARTICLE V ADDITIONAL AGREEMENTS................................................. 37
5.1 Access to Information................................................ 37
5.2 Confidentiality...................................................... 38
5.3 Public Disclosure.................................................... 39
5.4 Reasonable Efforts and Further Assurances............................ 39
5.5 Notification of Certain Matters...................................... 40
5.6 Employment and Consulting Agreements; Employees...................... 40
5.7 No Liability of Parent if Transaction is Not Tax-Free................ 40
5.8 Company Disclosure Schedule.......................................... 40
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5.9 Litigation Support................................................... 41
5.10 Transition........................................................... 41
5.11 Tax Treatment........................................................ 41
5.12 Joint Proxy Statement/Prospectus; Registration Statement............. 41
5.13 Stockholders Meetings................................................ 42
5.14 Affiliate Agreements................................................. 42
5.15 Registration Statement; Joint Proxy Statement/Prospectus............. 43
5.16 Directors' and Officers' Indemnification and Insurance............... 43
5.17 Amendment to Company's Certificate of Incorporation.................. 43
5.18 McDonald License Agreement........................................... 44
5.19 Address Change Notices............................................... 44
5.20 Amendment of the Warrants............................................ 44
5.21 AMEX Noncompliance Notice............................................ 44
ARTICLE VI CONDITIONS TO THE MERGER............................................. 44
6.1 Conditions to Obligations of Each Party to Consummate the Merger..... 44
6.2 Additional Conditions to Obligations of Company...................... 45
6.3 Additional Conditions to Obligations of Parent and Merger Sub........ 46
ARTICLE VII TERMINATION AND AMENDMENT........................................... 48
7.1 Termination.......................................................... 48
7.2 Effect of Termination................................................ 50
7.3 Certain Payments..................................................... 50
ARTICLE VIII REMEDIES, ESCROW AND INDEMNIFICATION............................... 52
8.1 Survival of Representations and Warranties........................... 52
8.2 Escrow Fund.......................................................... 52
8.3 Limitations on Indemnification....................................... 52
8.4 Indemnification by the Stockholders.................................. 53
8.5 Indemnification by Parent and Surviving Corporation.................. 54
8.6 Third Party Claims................................................... 54
ARTICLE IX GENERAL PROVISIONS................................................... 55
9.1 Expenses............................................................. 55
9.2 Notices.............................................................. 55
9.3 Certain Definitions; Interpretation.................................. 56
9.4 Counterparts......................................................... 57
9.5 Entire Agreement; Parties in Interest; Nonassignability.............. 57
9.6 Severability......................................................... 57
9.7 Governing Law........................................................ 57
9.8 Rules of Construction................................................ 57
9.9 Extension; Waiver.................................................... 58
9.10 No Third-Party Beneficiary........................................... 58
9.11 Attorneys' Fees...................................................... 58
9.12 Amendment............................................................ 58
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EXHIBITS
Exhibit A -- Form of
Delaware Certificate of Merger
Exhibit B -- Directors and Officers of Surviving Corporation
Exhibit C -- Form of Escrow Agreement
Exhibit D -- Form of Bier Employment Agreement
Exhibit E -- Company Affiliates
Exhibit F -- Form of Affiliate Agreement
Exhibit G -- Form of Legal Opinions of Counsel to Company
Exhibit H -- Form of Legal Opinion of Counsel to Parent and Merger Sub
Exhibit I -- Executing Stockholders and Form of Voting Agreement
Exhibit J -- Form of Xxxxxxxxxxxxx Consulting Agreement
Exhibit K -- Form of Xxxxxx Noncompetition/Nonsolicitation Agreement
Exhibit L -- Certificate of Incorporation and Bylaws of Surviving Corporation
Exhibit M -- Escrow Shares
Exhibit N -- 2001 Company Budget
Exhibit O -- Form of Amended Warrant
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "AGREEMENT") is
made and entered into as of July 31, 2001, by and among
Endorex Corporation, a
Delaware corporation ("PARENT"); Roadrunner Acquisition, Inc., a
Delaware
corporation and wholly-owned subsidiary of Parent ("MERGER SUB"); and Corporate
Technology Development, Inc., a
Delaware corporation ("COMPANY").
RECITALS
A. The Boards of Directors of Company, Merger Sub and Parent believe it
is in the best interests of their respective corporations and the stockholders
of their respective corporations to enter into a business combination by means
of a statutory merger of Merger Sub with and into Company (the "MERGER") and, in
furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
common stock, $.001 par value per share, of Company (the "COMPANY COMMON STOCK")
and the outstanding shares of Series A Convertible Preferred Stock, par value
$.001 per share, of Company ("SERIES A PREFERRED" and, together with the Company
Common Stock, the "COMPANY STOCK") shall be converted into the right to receive
shares of common stock of Parent, $.001 par value per share (the "PARENT COMMON
STOCK"), on the terms and subject to the conditions set forth herein. Parent
will issue options to acquire Parent Common Stock (the "PARENT OPTIONS")
pursuant to Parent's Amended and Restated 1995 Omnibus Incentive Plan, as
amended (the "PARENT PLAN"), to holders of options (the "COMPANY OPTIONS")
issued pursuant to Company's 1998 Stock Incentive Plan (the "COMPANY PLAN") in
substitution for the Company Options. All outstanding warrants of Company to
acquire shares of Series A Preferred (the "WARRANTS") shall be amended to be
substantially in the form set forth in EXHIBIT O attached hereto (the "AMENDED
WARRANTS") prior to the Effective Time (defined in Section 1.2), and Parent
shall issue warrants exercisable for shares of Parent Common Stock in
substitution for the Amended Warrants (the "PARENT WARRANTS").
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and the Treasury Regulations promulgated
thereunder, and intend that the Merger qualify as a reorganization within the
meaning of Section 368(a) of the Code.
D. Concurrently with the execution of this Agreement, each of the
security holders of the Company set forth on EXHIBIT I attached hereto is
executing and delivering to Parent a Voting Agreement substantially in the form
set forth in EXHIBIT I attached hereto (the "VOTING AGREEMENT").
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt of which is 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 set forth in this Agreement and the
applicable provisions of the
Delaware General Corporation Law ("
DELAWARE LAW"),
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation and as a wholly-owned subsidiary of Parent. Company, as the
surviving corporation after the Merger, is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 CLOSING; EFFECTIVE TIME. The closing of the Merger (the "CLOSING")
shall take place as soon as practicable after the satisfaction or waiver of each
of the conditions set forth in Article VI or at such other time as the parties
hereto agree (the "CLOSING DATE"). The Closing shall take place at the offices
of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxxxxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000, or at such other location as the parties hereto
agree. At the Closing and simultaneously therewith, the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger
substantially in the form attached hereto as EXHIBIT A (the "
DELAWARE
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 filing of
the
Delaware Certificate of Merger being the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Delaware Certificate of Merger 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 Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation, and the Surviving Corporation shall be a wholly-owned subsidiary of
Parent.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) CERTIFICATE OF INCORPORATION. Unless otherwise determined by
Parent prior to the Effective Time, 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
(except the name of the Surviving Corporation shall be amended to become
"Corporate Technology Development, Inc.") until thereafter amended, as provided
by Delaware Law and such Certificate of Incorporation.
(b) BYLAWS. Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, until thereafter amended, as
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provided by Delaware Law, the Surviving Corporation's Certificate of
Incorporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS.
(a) SURVIVING CORPORATION. From and after the Effective Time, the
directors and officers of the Surviving Corporation shall be as set forth on
EXHIBIT B annexed hereto, in each case until their respective successors are
duly elected or appointed and qualified.
(b) PARENT. Parent shall take, or cause to be taken, such action so
that, at the Effective Time, the Board of Directors of Parent (the "PARENT
BOARD") shall consist of nine (9) members, three of whom shall be Xx. Xxxxx
Xxxx, Xx. Xxx Xxxx and Xx. Xxxxx Xxxxx, who shall serve until their successors
are duly elected and qualified. Without limiting the foregoing, if necessary to
comply with this Section 1.5(b), Parent shall cause the number of directors that
shall constitute the Parent Board to be increased by resolution of the Parent
Board. Xx. Xxxx will become the Chief Executive Officer of Parent and be
appointed by the Parent Board as the Chairman of the Parent Board and Xx. Xxxx
shall serve as the Chairman until such time as a successor is appointed by the
Parent Board.
1.6 MERGER CONSIDERATION.
(a) CONVERSION OF COMPANY STOCK. At the Effective Time by virtue of
the Merger and without any action on the part of the holders of Company Common
Stock, each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (excluding those held in the treasury of Company),
and all rights in respect thereof, shall forthwith cease to exist and be
converted into .271443 of a share (the "COMMON STOCK EXCHANGE RATIO") of Parent
Common Stock. At the Effective Time by virtue of the Merger and without any
action on the part of the holders of shares of Series A Preferred, each share of
Series A Preferred issued and outstanding immediately prior to the Effective
Time (excluding those held in the treasury of Company), and all rights in
respect thereof, shall forthwith cease to exist and be converted into 1.008466
shares of Parent Common Stock (the "PREFERRED STOCK EXCHANGE RATIO," and,
together with the Common Stock Exchange Ratio, the "EXCHANGE RATIOS"). At the
Effective Time by virtue of the Merger and without any action on the part of the
holders of the Company Options, each Company Option issued and outstanding
immediately prior to the Effective Time, and all rights in respect thereof,
shall forthwith cease to exist and Parent Options shall be substituted therefor.
Each such Parent Option shall be evidenced by a new stock option agreement
issued by Parent to each of the holders of a Company Option (each a "PARENT
GRANT AGREEMENT"). Each such Parent Grant Agreement shall have, and be subject
to, the same terms and conditions set forth in the applicable stock option
agreements for the Company Options, as in effect on the date hereof (each a
"COMPANY OPTION AGREEMENT"), except that each Parent Option will be exercisable
for the number of shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were subject to such corresponding
Company Option immediately prior to the Effective Time multiplied by the Common
Stock Exchange Ratio, rounded down to the nearest whole share, and the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such Parent Option will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Option
was exercisable immediately prior to
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the Effective Time by the Common Stock Exchange Ratio, rounded up to the nearest
whole cent. At the Effective Time by virtue of the Merger and without any action
on the part of the holders of the Amended Warrants, each Amended Warrant issued
and outstanding immediately prior to the Effective Time, and all rights in
respect thereof, shall forthwith cease to exist and Parent Warrants shall be
substituted therefor. Each such Parent Warrant shall have, and be subject to,
the same terms and conditions set forth in the applicable Amended Warrant,
except that each Parent Warrant will be exercisable for the number of shares of
Parent Common Stock equal to the product of the number of shares of Series A
Preferred that were subject to such corresponding Amended Warrant immediately
prior to the Effective Time multiplied by the Common Stock Exchange Ratio,
rounded down to the nearest whole share, and the per share exercise price for
the shares of Parent Common Stock issuable upon exercise of such Parent Warrent
will be equal to the quotient determined by dividing the exercise price per
share of Series A Preferred at which such Amended Warrant was exercisable
immediately prior to the Effective Time by the Common Stock Exchange Ratio,
rounded up to the nearest whole cent. Except pursuant to the terms of Sections
1.6(d) or 8.5, in no event shall Parent be required to issue any Parent Common
Stock or options, warrants or other securities exercisable for or convertible
into in excess of 10,000,000 shares of Parent Common Stock pursuant to the terms
of this Agreement, including, but not limited to, the Parent Common Stock
issuable upon exercise of the Parent Options, the Parent Common Stock issuable
upon exercise of the Parent Warrants, the Parent Common Stock to be issued to
Xxxxxxxx Xxxxxxxxxxxxx pursuant to Section 1.6(g) and the Parent Common Stock to
be issued to Xxxxx Xxxxxx pursuant to Section 1.6(h). An aggregate of 1,350,000
shares of the Merger Consideration (as defined below) payable to the
stockholders of Company (the "STOCKHOLDERS") as set forth on EXHIBIT M attached
hereto shall be subject to escrow pursuant to Sections 1.8(b) and 8.2. The
aggregate number of shares of Parent Common Stock issuable (i) pursuant to this
Section 1.6(a), (ii) upon exercise of the Parent Options and the Parent
Warrants, and (iii) pursuant to Section 1.6(d) are collectively referred to
herein as the "MERGER CONSIDERATION". The aggregate number of shares of Parent
Common Stock that the holders of the Series A Preferred receive pursuant to this
Section 1.6(a) is referred to herein as the "SERIES A PREFERRED MERGER
CONSIDERATION."
(b) CANCELLATION OF CAPITAL STOCK OWNED BY COMPANY. At the Effective
Time, all shares of capital stock of Company that are held in the treasury of
Company or owned by Company or any subsidiary of Company immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof and without payment of any consideration therefor.
(c) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of certificates that immediately prior to the Effective Time
represented outstanding shares of Company Stock (the "COMPANY CERTIFICATES"), no
dividend or distribution of Parent shall relate to such fractional share
interests, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Parent.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Company Certificates delivered by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount equal to such fractional
part of a share of Parent Common Stock multiplied by the Closing Date Fair
Market Value (as defined in Section 8.3(d)).
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(d) ADJUSTMENTS TO EXCHANGE RATIOS. The Exchange Ratios shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or securities of Company), reorganization, recapitalization
or other like change with respect to Parent Common Stock or securities of
Company occurring after the date hereof and prior to the Effective Time;
PROVIDED, HOWEVER, that the Exchange Ratios shall not be adjusted for any
dividend of Parent's securities on Parent's Series B Convertible Preferred Stock
or Series C Convertible Preferred Stock pursuant to the terms of Parent's
Amended and Restated Certificate of Incorporation.
(e) CONVERSION OF MERGER SUB COMMON STOCK. At the Effective Time,
each share of common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall remain outstanding and shall represent one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(f) OUTSTANDING CAPITAL STOCK OF COMPANY. After the Effective Time,
no share of capital stock of Company shall be deemed to be outstanding or to
have any rights other than those set forth in this Section 1.6.
(g) XXXXXXXXXXXXX PAYMENT. At the Closing, Xxxxxxxx Xxxxxxxxxxxxx
shall receive 133,334 shares of Parent Common Stock from Parent as payment of a
bonus pursuant to Section 3(a)(iv) of the Xxxxxxxxxxxxx Employment Agreement (as
defined in Section 5.6(c)).
(h) XXXXXX PAYMENT. At the Closing, Xxxxx Xxxxxx shall receive
250,000 shares of Parent Common Stock from Parent as payment of a bonus related
to his employment with CTD.
1.7 DISSENTING SHARES.
(a) DISSENTER'S RIGHTS. Notwithstanding any provision of this
Agreement to the contrary, any capital stock of Company held by a holder who has
exercised such holder's dissenter's rights in accordance with Section 262 of
Delaware Law, and who, as of the Effective Time, has not effectively withdrawn
or lost such dissenter's rights ("DISSENTING SHARES"), shall not be converted
into or represent a right to receive Parent Common Stock pursuant to Section
1.6, but the holder of the Dissenting Shares shall only be entitled to such
rights as are granted by Section 262 of Delaware Law.
(b) LOSS OF DISSENTER'S RIGHTS. Notwithstanding the provisions of
Section 1.7(a), if any holder of capital stock of Company who demands
dissenter's rights with respect to such capital stock shall effectively withdraw
or lose (through failure to perfect or otherwise) his rights to receive payment
for the fair market value of such capital stock under Delaware Law, then, as of
the later of the Effective Time or the occurrence of such event, such holder's
capital stock of Company shall automatically be converted into and represent
only the right to receive Parent Common Stock and payment for fractional shares
as provided in Section 1.6(c), without interest, upon surrender of the Company
Certificates representing such shares to Parent pursuant to Section 1.8.
(c) NOTICE. Company shall give Parent (i) prompt notice of any
written demands for payment with respect to capital stock of Company pursuant to
Section 262 of
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Delaware Law, withdrawals of such demands, and any other instruments served
pursuant to Delaware Law and received by Company, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
dissenter's rights under Delaware Law. Company shall not, except with the prior
written consent of Parent, voluntarily make any payment with respect to any
demands for dissenter's rights with respect to capital stock of Company or offer
to settle or settle any such demands.
1.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE PROCEDURES.
(i) From and after the Effective Time, all shares of capital
stock of Company shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
Company Certificate shall cease to have any rights with respect thereto,
except the holders of Company Stock shall have the right, upon surrender to
Parent of Company Certificates for cancellation, to receive in exchange
therefor a certificate (a "PARENT CERTIFICATE") representing the number of
whole shares of Parent Common Stock, less the number of shares of Parent
Common Stock to be deposited into escrow on such holder's behalf pursuant
to Article VIII and the Escrow Agreement (as defined in Section 6.1(c)),
plus cash in lieu of fractional shares, if any, and the Company Certificate
so surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Company Certificate that, prior to the Effective Time,
represented shares of Company Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence only the right to receive that number of whole
shares of Parent Common Stock issuable in exchange for such shares of
Company Stock, plus cash in lieu of fractional shares, if any.
(ii) As soon as reasonably practicable after the Effective Time,
Parent shall mail to each holder of record of Company Certificates whose
shares were converted pursuant to Section 1.6 into the right to receive
shares of Parent Common Stock, (A) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of the Company
Certificates to Parent and shall be in such form and have such other
provisions as Parent and Company may reasonably specify) and (B)
instructions for effecting the surrender of the Company Certificates in
exchange certificates representing shares of Parent Common Stock, plus cash
in lieu of fractional shares, if any. Upon surrender of a Company
Certificate for cancellation to Parent or to such other agent or agents as
may be appointed by Parent, together with such letter of transmittal, duly
executed, the holder of such Company Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of
whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article I, plus cash in lieu of
fractional shares, if any.
(b) ESCROW. Subject to and in accordance with the provisions of
Article VIII and the Escrow Agreement and subject to the surrender to Parent of
all Company Certificates held by the Stockholders, Parent shall cause to be
distributed to the Escrow Agent (as defined in Section 8.2) a certificate or
certificates representing 1,350,000 shares of the Merger
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Consideration issuable to the Stockholders pursuant to Section 1.6 (the "ESCROW
SHARES"). The Escrow Shares shall be held in escrow and shall be available to
compensate Parent for certain damages as provided in Article VIII. To the extent
not used to compensate Parent for such damages, such shares shall be released to
the Stockholders, all as provided in Article VIII and the Escrow Agreement.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Company Certificate shall surrender
such Company Certificate to Parent as provided in Section 1.8(a)(ii). Subject to
applicable law, following surrender of any such Company Certificate, there shall
be paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of any such dividends or other distributions with
a record date after the Effective Time theretofore payable (but for the first
sentence of this Section 1.8(c)) with respect to such shares of Parent Common
Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued, or any cash is to be paid, in a name other than
that in which the Company Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Company
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will have paid to
Parent or any agent designated by it any transfer or other Taxes (as defined in
Section 2.13(m)(i)) required by reason of the issuance of a certificate for
shares of Parent Common Stock (or the payment of cash) in any name other than
that of the registered holder of the Company Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such Tax has been paid or is not payable.
(e) OPTIONS.
(i) From and after the Effective Time, all Company Options shall
no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a Company Option shall cease
to have any rights with respect thereto, except the holders of Company
Options shall have the right, upon surrender to Parent of a Company Grant
Agreement for cancellation, to receive in exchange therefor a Parent Grant
Agreement, and the Company Grant Agreement so surrendered shall forthwith
be canceled. Until so surrendered, each outstanding Company Option that,
prior to the Effective Time, represented the right to acquire shares of
Company Stock will be deemed from and after the Effective Time, for all
purposes, to evidence only the right to receive Parent Options as described
in Section 1.6(a).
(ii) As soon as reasonably practicable after the Effective Time,
Parent shall mail to each holder of record of Company Options which were
converted pursuant to Section 1.6 into the right to receive Parent Options,
(A) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Company Options shall pass,
only upon delivery of the Company Grant Agreement to Parent and
7
shall be in such form and have such other provisions as Parent and Company
may reasonably specify) and (B) instructions for effecting the surrender of
the Company Grant Agreement in exchange for a Parent Grant Agreement. Upon
surrender of a Company Grant Agreement for cancellation to Parent or to
such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly executed, the holder of such Company Grant
Agreement shall be entitled to receive in exchange therefor a Parent Grant
Agreement representing that number of Parent Options which such holder has
the right to receive pursuant to the provisions of this Article I.
(f) AMENDED WARRANTS.
(i) From and after the Effective Time, all Amended Warrants
shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of an Amended Warrant
shall cease to have any rights with respect thereto, except the holders of
Amended Warrants shall have the right, upon surrender to Parent of an
Amended Warrant for cancellation, to receive in exchange therefor a Parent
Warrant, and the Amended Warrant so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Amended Warrant that,
prior to the Effective Time, represented the right to acquire shares of
Series A Preferred will be deemed from and after the Effective Time, for
all purposes, to evidence only the right to receive Parent Warrants as
described in Section 1.6(a).
(ii) As soon as reasonably practicable after the Effective Time,
Parent shall mail to each holder of record of an Amended Warrant which was
converted pursuant to Section 1.6 into the right to receive a Parent
Warrant, (A) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Amended Warrent shall
pass, only upon delivery of the Amended Warrant to Parent and shall be in
such form and have such other provisions as Parent and Company may
reasonably specify) and (B) instructions for effecting the surrender of the
Amended Warrant in exchange for a Parent Warrant. Upon surrender of an
Amended Warrant for cancellation to Parent or to such other agent or agents
as may be appointed by Parent, together with such letter of transmittal,
duly executed, the holder of such Amended Warrant shall be entitled to
receive in exchange therefor a Parent Warrant exercisable for the number of
shares of Parent Common Stock determined pursuant to the formula set forth
in Section 1.6(a).
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Company
Certificates shall have been lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Company Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 1.6; PROVIDED, HOWEVER, that
Parent may, in its discretion and as a condition precedent to the issuance and
payment thereof, require the owner of such lost, stolen or destroyed Company
Certificates to deliver to Parent an affidavit of loss, theft or destruction in
form reasonably satisfactory to Parent and to indemnify and hold harmless Parent
from and against any claim that may be made against Parent, the Surviving
Corporation, Company or any of their directors, officers, employees, affiliates
or agents with respect to the Company Certificates alleged to have been lost,
stolen or destroyed.
8
1.10 CLOSING OF COMPANY'S TRANSFER BOOKS. At and after the Effective Time,
holders of Company Stock shall cease to have any rights as stockholders of
Company, except for the right to receive shares of Parent Common Stock, plus
cash in lieu of fractional shares, if any, pursuant to Section 1.6. At the
Effective Time, the stock transfer books of Company shall be closed and no
transfer of shares of Company Stock and any other securities of Company,
including, but not limited to, any options and warrants, which were outstanding
immediately prior to the Effective Time shall thereafter be made.
1.11 TAX CONSEQUENCES. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Code.
1.12 NO LIABILITY. Notwithstanding anything to the contrary in this Article
I, none of Parent, Merger Sub, the Surviving Corporation or any party hereto
shall be liable to any person in respect of any shares of Parent Common Stock
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.13 AFFILIATES. Notwithstanding anything herein to the contrary, Company
Certificates surrendered for exchange by any Affiliate (as defined in Section
5.14) of Company shall not be exchanged until Parent has received an executed
Affiliate Agreement (as defined in Section 5.14) from such Affiliate.
1.14 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 Parent with control over, and to vest the
Surviving Corporation with full right, title and possession to, all assets,
property, rights, privileges, powers and franchises of Company, the officers and
directors of Company, Parent and Merger Sub shall, in the name of their
respective corporations or otherwise, take all such lawful and necessary action
as may be requested by Parent.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS OF COMPANY
Except for specific references to, and as set forth in the Company
Disclosure Schedule attached hereto and referring by numbered section (and,
where applicable, by lettered subsection) of the representations and warranties
in this Article II (the "COMPANY DISCLOSURE SCHEDULE"), Company represents and
warrants to Parent and Merger Sub as follows:
2.1 ORGANIZATION, STANDING AND POWER. Company and each of its direct or
indirect corporate or non-corporate subsidiaries and any other entity in which
Company or such subsidiaries have a direct or indirect equity participation
("SUBSIDIARIES") is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Company and each of
its Subsidiaries has the corporate power to own its properties and to carry on
its business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction where it
is required by law to be so qualified, except where such failure to qualify
would not have a Material Adverse Effect (as
9
defined in Section 9.3) on Company or any of its Subsidiaries. Section 2.1 of
the Company Disclosure Schedule sets forth (i) the name of Company and each of
its Subsidiaries, (ii) the jurisdiction of organization of the Company and each
of its Subsidiaries, (iii) each jurisdiction in which Company and each of its
Subsidiaries is duly qualified to do business and in good standing, and (iv) all
former names and all fictitious or assumed names under which Company and each of
its Subsidiaries does or has done business. True, correct and complete copies of
the Certificate of Incorporation and Bylaws or other charter documents, as
applicable, of each of Company and its Subsidiaries, as amended to the date of
this Agreement, have been delivered to Parent and are included in Section 2.1 of
the Company Disclosure Schedule. Neither Company nor any of its Subsidiaries is
in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or other charter documents, as applicable. Neither Company nor any of its
Subsidiaries owns or ever has owned directly or indirectly any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, joint venture,
limited liability company or other business association or entity, other than
Company's current ownership interest in its Subsidiaries. Section 2.1 of the
Company Disclosure Schedule sets forth a list of each of the officers and
directors of Company and each of its Subsidiaries.
2.2 CAPITAL STRUCTURE. The authorized capital stock of Company consists of
25,000,000 shares of Common Stock, par value $.001 per share, of which 5,000,000
shares were issued and outstanding as of the date hereof, and 10,000,000 shares
of Preferred Stock, par value $.001 per share, of which 9,515,000 shares are
designated Series A Convertible Preferred Stock, of which 7,628,750 shares were
issued and outstanding as of the date hereof. As of the date hereof, Company has
Company Options outstanding to acquire 1,322,725 shares of Company Common Stock
at the exercise prices and for the time periods set forth in Section 2.2 of the
Company Disclosure Schedule, all of which, except as set forth in Section 2.2 of
the Company Disclosure Schedule, are fully vested. As of the date hereof,
Company has Warrants outstanding to acquire 762,875 shares of Series A Preferred
at the exercise prices and for the time periods set forth in Section 2.2 of the
Company Disclosure Schedule, all of which, except as set forth in Section 2.2 of
the Company Disclosure Schedule, are fully vested. At the Effective Time, no
Warrants will be outstanding. All of the security holders of Company and each of
its Subsidiaries and their respective holdings, including any holders of
options, warrants or any other right to acquire securities of Company or any of
its Subsidiaries, as of the date hereof, are as set forth on Section 2.2 of the
Company Disclosure Schedule. Other than such securities, there are no other
outstanding shares of capital stock or other securities of Company or any of its
Subsidiaries and no outstanding commitments to issue any shares of capital stock
or securities of Company or any of its Subsidiaries after the date hereof. All
outstanding shares of capital stock of Company and its Subsidiaries are duly
authorized, validly issued, fully paid and non-assessable and are free and clear
of any restrictions on transfer (other than restrictions under the Securities
Act of 1933, as amended (the "ACT") and state securities laws), Taxes, security
interests, charges, liens, encumbrances, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands), and are not subject to
preemptive rights or rights of first refusal created by statute, the Certificate
of Incorporation or Bylaws or other charter documents, as applicable, of the
respective entity or any agreement to which the respective entity is a party or
by which it is bound. Except for the rights created pursuant to this Agreement,
there are no other options, warrants, calls, rights, commitments, contracts or
agreements of any character to which any of Company, its Subsidiaries or
security holders of Company is a party or
10
by which they are bound obligating the respective person or entity to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock or other securities of
Company or any of its Subsidiaries or any securities convertible or exchangeable
therefor or obligating Company or any of its Subsidiaries to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. Except for this
Agreement, as contemplated hereby or as set forth in Section 2.18(h) of the
Company Disclosure Schedule, there are no contracts, commitments, trusts,
proxies or agreements relating to voting, purchase or sale of Company's or any
of its Subsidiaries' securities (i) between or among the respective entity and
any of its security holders, and (ii) between or among any of the respective
entity's security holders. There are no outstanding or authorized stock
appreciation rights, phantom stock, profit participation, dividend equivalent
rights, or similar rights with respect to Company or any of its Subsidiaries.
All outstanding securities of Company and each of its Subsidiaries were issued
in compliance with all applicable federal and state securities laws.
2.3 AUTHORITY. Company and each security holder of Company that is not a
natural person has all requisite corporate power and authority to execute and
deliver this Agreement (if applicable), the Escrow Agreement (if applicable),
the Voting Agreement (if applicable), the Affiliate Agreement (if applicable)
and any other agreement contemplated hereunder (the "TRANSACTION AGREEMENTS"),
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each security holder of Company
that is a natural person has full legal right, power and authority to execute
and deliver the Transaction Agreements, to perform their obligations thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of the Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Company and each
security holder of Company that is not a natural person, subject only to the
approval of the Merger by the stockholders of Company as contemplated by Section
6.1(d). This Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally, and is subject to general principles of
equity.
2.4 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) NO CONFLICT. Except as set forth in Section 2.4(a) of the Company
Disclosure Schedule, the execution and delivery of the Transaction Agreements by
Company and each security holder of Company do not, and the performance by
Company and each security holder of Company of their obligations hereunder and
thereunder, and the consummation of the Merger will not, (i) conflict with or
violate any provision of the Certificate of Incorporation, Bylaws or other
charter document, as applicable, of Company or any of its Subsidiaries or any
security holder of Company, (ii) conflict with or violate any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license applicable to Company or any of its Subsidiaries or any security
holder of Company or by which any property or asset of Company or any of its
Subsidiaries or any security holder of Company is bound or affected, or (iii)
conflict with, result in any breach of, violate or constitute a default (or an
event which with the giving of notice or lapse of time or both could reasonably
be expected to become a default)
11
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien, security interest, charge
or other encumbrance on any property or asset of Company or any of its
Subsidiaries or any security holder of Company pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation, except where such breach or default would not
have a Material Adverse Effect on Company or any of its Subsidiaries or any
security holder of Company or impair Company's or any security holder of
Company's ability to consummate the transactions contemplated hereby.
(b) GOVERNMENTAL FILINGS. No filing or registration with, or
notification to, and no permit, authorization, consent or approval of, any
United States Federal, state or local or any foreign governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
arbitral body ("GOVERNMENT ENTITY") is necessary for the execution and delivery
of the Transaction Agreements by Company and any security holder of Company or
the consummation by Company and any security holder of Company of the
transactions contemplated by the Transaction Agreements, except (i) the filing
of the Delaware Certificate of Merger, (ii) the filing of the Joint Proxy
Statement (as defined in Section 5.15) with the U.S. Securities and Exchange
Commission (the "SEC") in accordance with the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), (iii) such filings, registrations,
notifications, permits, authorizations, registrations, declarations and filings
as may be required under applicable state securities laws, and (iv) such
filings, registrations, notifications, permits, authorizations, consents or
approvals that result from the specific legal or regulatory status of Parent or
as a result of any other facts that specifically relate to the business or
activities in which Parent is engaged other than the business of Company.
(c) THIRD PARTY CONSENTS AND NOTICES. Except as set forth in Section
2.4(c) of the Company Disclosure Schedule, neither Company nor any of its
Subsidiaries is required to obtain the consent of, or give notice to, any third
party by reason of the transactions contemplated by the Transaction Agreements.
2.5 PERMITS; COMPLIANCE WITH LAWS.
Except for such Company Permits (as defined below) the non-compliance
with which would not have a Material Adverse Effect on Company or any of its
Subsidiaries, Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, identification and registration numbers, approvals and orders of
any Government Entity necessary for Company and each of its Subsidiaries to own,
lease and operate their properties or to offer or perform their services or to
develop, produce, store, distribute and market their products or otherwise to
carry on their business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and none of the Company Permits has been suspended or cancelled nor
is any such suspension or cancellation pending or, to the knowledge of Company,
threatened. All of the Company Permits are set forth in Section 2.5 of the
Company Disclosure Schedule. Company and each of its Subsidiaries is not in
conflict with, or in default or violation of, (i) any law, statute, order, rule,
regulation, ordinance or judgment applicable to Company and each of its
Subsidiaries or by which any property or asset of Company or any of its
Subsidiaries is bound or affected or (ii) any Company Permits, except where such
conflict would not have a
12
Material Adverse Effect on Company or any of its Subsidiaries. There are no
actions, proceedings, investigations or surveys pending or, to the knowledge of
Company, threatened against Company and each of its Subsidiaries that could
reasonably be expected to result in the suspension or cancellation of any
Company Permit. Since its inception, neither Company nor any of its Subsidiaries
has received from any Government Entity any written notification with respect to
possible conflicts, defaults or violations of any law, statute, order, rule,
regulation, ordinance or judgment. The Merger will not result in the suspension
or cancellation of any Company Permit.
2.6 FINANCIAL STATEMENTS. Section 2.6 of the Company Disclosure Schedule
includes true, complete and correct copies of Company's audited consolidated
financial statements (balance sheet, statement of operations and statement of
cash flows) as at, and for the fiscal years ended December 31, 1998, December
31, 1999, and December 31, 2000 (collectively, the "FINANCIAL STATEMENTS"). As
soon as reasonably practical after the respective period ends, Company shall
provide Parent true, complete and correct copies of Company's unaudited
consolidated financial statements (balance sheet, statement of operations and
statement of cash flows) as at, and for the quarterly periods ended during
fiscal year 2001 prior to the Effective Time (collectively, the "NEW FINANCIAL
Statements"). The Financial Statements have been, and the New Financial
Statements will be, prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated and with each other. The Financial Statements were, and the
New Financial Statements will be, prepared from and in accordance with the books
and records maintained by Company and fairly present, in all material respects,
the financial condition, operating results and cash flow of Company as of the
dates, and for the periods, indicated therein, subject to the absence of
footnotes and normal year-end audit adjustments which will not be material in
nature or in amount for the New Financial Statements. Company maintains and will
continue to maintain books and records established and administered in
accordance with GAAP.
2.7 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 2.7 of the
Company Disclosure Schedule, since December 31, 2000, Company and each of its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice and there has not occurred (i) any Material
Adverse Effect on Company or any of its Subsidiaries, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of
Company's obligations pursuant to the Transaction Agreements or the consummation
of the Merger by Company, (iii) any change by Company or any of its Subsidiaries
in its accounting methods, principles or practices, (iv) any declaration,
setting aside or payment of any dividend or distribution in respect of the
shares of capital stock of Company or any of its Subsidiaries or any redemption,
purchase or other acquisition of any of Company's or any of its Subsidiaries'
securities, (v) any increase in the compensation or benefits or establishment or
payment of any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any
employees, officers, consultants or directors of Company or any of its
Subsidiaries, (vi) any issuance, grants or sale of any stock, options, warrants,
notes, bonds or other securities, or entering into any agreement with respect
thereto by Company or any of its Subsidiaries, (vii) any amendment to the
Certificate of Incorporation or bylaws or other charter documents, as
applicable, of Company
13
or any of its Subsidiaries, (viii) other than in the ordinary course of business
consistent with past practice, any (w) capital expenditures, (x) purchase, sale,
assignment or transfer of any material amount of assets, (y) mortgage, pledge or
existence of any lien, encumbrance or charge on any assets or properties,
tangible or intangible, except for liens for taxes not yet due and such other
liens, encumbrances or charges which do not, individually or in the aggregate,
have a Material Adverse Effect on Company or any of its Subsidiaries, or (z)
cancellation, compromise, release or waiver of any rights of material value or
any material debts or claims by Company or any of its Subsidiaries, (ix) any
incurrence of any material liability (absolute or contingent) by Company or any
of its Subsidiaries, except for current liabilities and obligations incurred in
the ordinary course of business consistent with past practice, (x) any
incurrence of any damage, destruction or similar loss, whether or not covered by
insurance, materially affecting the business or properties of Company or any of
its Subsidiaries, (xi) any entering into any agreement, contract, lease or
license by Company or any of its Subsidiaries other than in the ordinary course
of business consistent with past practice, (xii) any acceleration, termination,
modification or cancellation of any agreement, contract, lease or license to
which Company or any of its Subsidiaries is a party or by which any of them is
bound, (xiii) any entering into any loan or other transaction by Company or any
of its Subsidiaries with any officers, directors or employees of Company or any
of its Subsidiaries, (xiv) any charitable or other capital contribution or
pledge therefore by Company or any of its Subsidiaries, (xv) any entering into
any transaction of a material nature by Company or any of its Subsidiaries other
than in the ordinary course of business consistent with past practice, or (xvi)
any negotiation or agreement by Company or any of its Subsidiaries to do any of
the things described in the preceding clauses (i) through (xv).
2.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent set forth on
the balance sheet of Company as of December 31, 2000 included in the Financial
Statements (the "COMPANY BALANCE SHEET") and except for current liabilities
incurred in the ordinary course of business consistent with past practice since
December 31, 2000, Company does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP.
2.9 LITIGATION. Except as set forth in Section 2.9 of the Company
Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim, arbitration, complaint, allegation, dispute or, to the
knowledge of Company, investigation pending before any governmental department,
commission, authority, arbitrator, agency, court or tribunal, foreign or
domestic, or, to the knowledge of Company, threatened against Company or any of
its Subsidiaries or any of their assets, Intellectual Property Rights (as
defined in Section 2.12(h)) or properties or any of their officers or directors
(in their capacities as such). There is no judgment, decree, injunction, rule or
order against Company or any of its Subsidiaries, or any of their directors or
officers (in their capacities as such), limiting the conduct of business by
Company or any of its Subsidiaries or that could prevent, enjoin, or alter or
delay any of the transactions contemplated by this Agreement or have an adverse
effect on Company or any of its Subsidiaries. There is no litigation (including
arbitrations) by Company or any of its Subsidiaries which is pending against any
other person or entity.
2.10 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, judgment,
injunction, order or decree binding upon or governmental or regulatory action
taken against or
14
involving Company or any of its Subsidiaries or any of their assets or
properties which has had or could reasonably be expected to have the effect of
prohibiting or impairing any current or future business practice of Company or
any of its Subsidiaries, any acquisition of property by Company or any of its
Subsidiaries or the conduct of business by Company or any of its Subsidiaries as
currently conducted or as currently proposed to be conducted.
2.11 TITLE TO PROPERTY. Neither Company nor any of its Subsidiaries owns
any real property. Section 2.11 of the Company Disclosure Schedule sets forth a
list of material assets and property owned, leased or licensed by Company or any
of its Subsidiaries. Company and each of its Subsidiaries has good and
marketable title to all of its respective assets and properties reflected in the
Company Balance Sheet and in Section 2.11 of the Company Disclosure Schedule, or
with respect to leased properties and assets, valid leasehold interests therein,
free and clear of all mortgages, liens, pledges, charges or encumbrances of any
kind or character, except for (a) mechanic's, materialman's, and similar liens,
(b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings and for which adequate
reserves have been established on the books of Company and its Subsidiaries, and
(c) purchase money liens and liens securing rental payments under capital lease
arrangements. All properties used in the operations of Company or any of its
Subsidiaries are reflected on the Company Balance Sheet to the extent GAAP
requires the same to be reflected and on Section 2.11 of the Company Disclosure
Schedule.
2.12 INTELLECTUAL PROPERTY.
(a) LIST OF COMPANY INTELLECTUAL PROPERTY. Section 2.12(a) of the
Company Disclosure Schedule contains a true and complete list of Company's and
each of its Subsidiaries' license or other agreements relating to Intellectual
Property Rights (including the parties thereto and the date and subject matter
thereof) (each a "LICENSE AGREEMENT" and collectively "LICENSE AGREEMENTS"),
patents, patent applications, registered and unregistered trademarks and
services marks, trade names, trademark and service xxxx applications, Internet
domain names, Internet domain name applications, copyright registrations and
applications and other filings and formal actions made or taken pursuant to
Federal, state, local and foreign laws by Company and each of its Subsidiaries
to protect their interests in their Intellectual Property Rights, and includes
details of all due dates for further filings, registrations, maintenance,
payments or other actions falling due in respect of their Intellectual Property
Rights within twelve (12) months of the Effective Time. Company has delivered,
or has made available, to Parent a copy of each of the items listed in Section
2.12(a) of the Company Disclosure Schedule. All of Company's and each of its
Subsidiaries' patents, patent applications, registered trademarks, trademark
applications and registered copyrights remain in good standing with all fees
paid and filings made. Company has delivered to Parent all letters, analyses,
reports and other documentation concerning the ownership, validity, infringement
of, or freedom to use, the Intellectual Property Rights of Company or any of its
Subsidiaries, any third party Intellectual Property Rights or any License
Agreement.
(b) COMPANY INTELLECTUAL PROPERTY RIGHTS. The Intellectual Property
Rights of Company and each of its Subsidiaries contain only those items and
rights which are: (i) owned by Company or any of its Subsidiaries, or (ii)
rightfully used by Company or any of its Subsidiaries pursuant to a valid and
enforceable License Agreement. Except as set forth in
15
Section 2.12(b) of the Company Disclosure Schedule, Company and each of its
Subsidiaries have all rights, including, without limitation, rights to make,
have made, use, reproduce, modify, adopt, create derivative works based on,
translate, distribute (directly and indirectly), transmit, display, license and,
other than with respect to the License Agreements, assign and sell, in their
Intellectual Property Rights necessary to permit Company and each of its
Subsidiaries to carry out Company's and its Subsidiaries' current activities and
their future activities to the extent such future activities are already
planned.
(c) INFRINGEMENT. To the knowledge of Company, neither (i) the
reproduction, manufacturing, distribution, licensing, sublicensing, testing,
invention, use, sale or offer to sell or any other exercise of Intellectual
Property Rights by Company or any of its Subsidiaries, nor (ii) the conduct of
business by Company or any of its Subsidiaries as currently conducted or as
currently proposed to be conducted, infringes on any third party's Intellectual
Property Rights anywhere in the world. Neither Company nor any of its
Subsidiaries has received notice of any pending or threatened claims (i)
challenging the validity, effectiveness or ownership by Company or any of its
Subsidiaries of any Intellectual Property Rights, or (ii) to the effect that the
use, testing, manufacturing, distribution, licensing, sublicensing, sale or
offer to sell or any other exercise of rights in any product, invention,
know-how, technology or process as now used or offered or proposed for use,
licensing, sublicensing or sale by Company or its Subsidiaries or their agents
or use by their customers infringes or will infringe on or misappropriate any
third party's Intellectual Property Rights. To Company's knowledge there exist
no valid grounds for any bona fide claim of any such kind. All of the rights
within the Intellectual Property Rights of Company and each of its Subsidiaries
are enforceable and subsisting. To the knowledge of Company, there is no
unauthorized use, infringement or misappropriation of any Intellectual Property
Rights of Company and each of its Subsidiaries by any third party, employee or
former employee.
(d) NONDISCLOSURE AGREEMENTS AND ASSIGNMENTS. All personnel,
including employees, agents, consultants and contractors, who have contributed
to or participated in the conception and development of Intellectual Property
Rights on behalf of Company or any of its Subsidiaries, have executed
nondisclosure agreements and either (i) have been a party to an enforceable
agreement with Company or any of its Subsidiaries in accordance with applicable
national and state law that accords Company or any of its Subsidiaries full,
effective, exclusive and original ownership of all tangible and intangible
property, works of authorship, inventions (whether patentable or not) and
developments arising from the efforts of such personnel, or (ii) have executed
appropriate instruments of assignment in favor of Company or any of its
Subsidiaries that have conveyed to Company or any of its Subsidiaries full,
effective and exclusive ownership of all tangible and intangible property
arising from the efforts of such personnel.
(e) NO VIOLATION. The execution or delivery of the Transaction
Agreements, or performance of Company's obligations hereunder or thereunder,
will not cause the diminution, termination or forfeiture of any of the
Intellectual Property Rights of Company or any of its Subsidiaries.
(f) ENCUMBRANCES. Except for restrictions provided for in the License
Agreements, the Intellectual Property Rights of Company and each of its
Subsidiaries are free
16
and clear of any and all mortgages, pledges, liens, security interests,
conditional sale agreements, encumbrances or charges of any kind.
(g) ROYALTIES. Except as set forth in Section 2.12(g) of the Company
Disclosure Schedule, to the knowledge of Company, neither Company nor any of its
Subsidiaries owes any royalties, payments, penalties, milestone payments or
other payments to third parties in respect of Intellectual Property Rights of
Company and each of its Subsidiaries or the License Agreements.
(h) DEFINITION. "INTELLECTUAL PROPERTY RIGHTS" means, collectively,
with respect to any person or entity, all of the following worldwide intangible
legal rights of such person or entity, including those existing or acquired by
ownership, license or other legal operation, whether or not filed, perfected,
registered or recorded and whether now or hereafter existing, filed, issued or
acquired: (i) patents, patent applications, and patent rights, including any and
all continuations, continuations-in-part, divisions, reissues, reexaminations or
extensions thereof; (ii) inventions (whether patentable or not in any country),
invention disclosures, industrial designs, improvements, trade secrets,
proprietary information, know-how, INDs, technology and technical or clinical
data; (iii) rights associated with works of authorship (including audiovisual
works), including, without limitation, copyrights, copyright applications and
copyright registrations, moral rights, database rights, mask work rights, mask
work applications and mask work registrations; (iv) rights in trade secrets,
including, without limitation, rights in industrial property, customer, vendor
and prospect lists and all associated information or databases and other
confidential or proprietary information, and all rights relating to the
protection of the same, including, without limitation, rights under
nondisclosure agreements; (v) any other proprietary rights in technology,
including software, all source and object code, algorithms, architecture,
structure, display screens, layouts, inventions, development tools and all
documentation and media constituting, describing or relating to the above,
including, without limitation, manuals, memoranda, records, business
information, or trade marks, trade dress or names, anywhere in the world; (vi)
any rights analogous thereto in the preceding clauses and any other proprietary
rights relating to intangible property, including, without limitation, brand
names, trademarks, service marks, domain names, trademark and service xxxx
registrations and applications therefor, trade names, rights in trade dress and
packaging and all goodwill associated with the same; (vii) all rights to xxx or
make any claims for any past, present or future infringement, misappropriation
or unauthorized use of any of the foregoing rights and the right to all income,
royalties, damages and other payments that are now or may hereafter become due
or payable with respect to any of the foregoing rights, including, without
limitation, damages for past, present or future infringement, misappropriation
or unauthorized use thereof; and (viii) rights under license agreements for the
foregoing.
2.13 TAXES.
(a) RETURNS. Company and each of its Subsidiaries have duly and
timely filed or caused to be filed all Federal, state, local and foreign income
Tax Returns (as defined in Section 2.13(m)(ii)) and all other material Tax
Returns required to be filed by it to date and will duly and timely file or
cause to be filed all Tax Returns required to be filed by it prior to the
Effective Time. As of the date hereof, Company and each of its Subsidiaries have
not filed any income Tax Returns for the year ended December 31, 2000. All such
Tax Returns (including all
17
amendments thereto) as of the time of filing were or will be complete and
accurate in all material respects. No claim has ever been made by a Taxing
authority in any jurisdiction in which the Company or any of its Subsidiaries
does not file Tax Returns that such person is or may be subject to Taxes in such
jurisdiction.
(b) PAYMENTS. All Taxes payable by Company and each of its
Subsidiaries (whether or not shown on any Tax Return) have been paid or will be
paid, when due, other than Taxes that are being contested in good faith.
(c) RESERVES; ACCRUALS. The liabilities and reserves for Taxes
reflected in the Company Balance Sheet are adequate to cover all liabilities for
unpaid Taxes of Company and each of its Subsidiaries (including those that are
being contested in good faith) for all periods or portions of periods through
the date thereof. Neither Company nor any of its Subsidiaries has incurred or
accrued any Taxes for periods or portions of periods after December 31, 2000,
and will not incur or accrue any Taxes prior to the Effective Time, other than
Taxes arising in the ordinary course of business.
(d) PROCEEDINGS. No action, suit, proceeding or audit concerning any
Tax liability of Company or any of its Subsidiaries is pending or, to the
knowledge of Company, has been threatened against Company or any of it
Subsidiaries. There are no claims or assessments against Company or any of its
Subsidiaries for an alleged Tax deficiency and, to the knowledge of Company, no
such claims or assessments have been proposed.
(e) LIENS. To the knowledge of Company, there are no charges, liens,
encumbrances or adverse claims for Taxes upon any properties or assets of
Company or any of its Subsidiaries, except for liens described in Section
2.11(b).
(f) WITHHOLDINGS. Company and each of its Subsidiaries have properly
withheld and paid over all withholding, employment or other similar Taxes and
all unemployment compensation and similar obligations required to be withheld or
paid over and have complied with all material information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto.
(g) TAX SHARING AGREEMENTS; CONSOLIDATED GROUP. Other than with
respect to Company and its Subsidiaries, neither Company nor any of its
Subsidiaries is a party to any agreement (i) providing for the allocation or
sharing of Taxes with any entity that is not, directly or indirectly, a
wholly-owned corporate subsidiary of Company, or (ii) contractually obligating
Company or any of its Subsidiaries to indemnify any other person with respect to
Taxes (except for agreements to indemnify lenders or security holders in respect
of Taxes as set forth in Section 2.13(g) of the Company Disclosure Schedule).
Neither Company nor any of its Subsidiaries has ever been a member of a
consolidated, unitary or combined group other than a group of which Company is
and has been the common parent.
(h) REAL PROPERTY HOLDING CORPORATION. Neither Company nor any of its
Subsidiaries has been a United States real property holding corporation within
the meaning of Section 897(c)(2) during the period specified in Section
897(c)(1)(A)(ii) of the Code.
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(i) STATUTE OF LIMITATIONS. Neither Company nor any of its
Subsidiaries has consented to extend the time in which any Tax may be assessed
and collected by any Taxing authority.
(j) DOCUMENTS PROVIDED. Company and each of its Subsidiaries has
provided to Parent true, correct and complete copies of all federal, state and
local income and franchise Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Company or any of its Subsidiaries
for the taxable periods ending December 31, 1997, December 31, 1998 and December
31, 1999.
(k) OTHER. Neither Company nor any of its Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code. Neither
Company nor any of its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any period
(or portion thereof) ending after the Closing Date as a result of any (i) change
in method of accounting for a taxable period ending on or prior to the Closing
Date under Code Section 481(c) (or any corresponding or similar provision of
state, local or foreign income Tax law), (ii) "closing agreement" as described
in Code Section 7121 (or any corresponding or similar provision of state, local
or foreign income tax law) executed on or prior to the Closing Date; (iii)
installment sale made prior to the Closing Date; or (iv) deferred intercompany
gain described in Treasury Regulation Section 1.1502-13 or any excess loss
account described in Treasury Regulation Section 1.1502-19 and 1.1502-32 (or any
corresponding or similar provision of federal state, local or foreign law)
arising on or before the Closing Date. Neither Company nor any of its
Subsidiaries is a party to any agreement, contract, arrangement or plan that has
resulted or would result separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Code Section 280G (or similar
provision of state, local or foreign law).
(l) REORGANIZATION. To the knowledge of Company, neither Company nor
any of its affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that could be expected to prevent the Merger
from constituting a "reorganization" under Section 368(a) of the Code. Company
is not aware of any agreement or plan to which Company or any of its affiliates
is a party or other circumstances relating to Company or any of its affiliates
that could reasonably be expected to prevent the Merger from so qualifying as a
reorganization under Section 368(a) of the Code.
(m) CERTAIN DEFINED TERMS. As used in this Agreement:
(i) "TAX" OR "TAXES" means all taxes, charges, fees, duties,
levies or other assessments, however denominated, imposed by any federal,
state, local or foreign government or any agency or political subdivision
of such government, which taxes shall include income or profits, gross
receipts, net proceeds, ad valorem, franchise, sales, use, transfer, value
added, registration, business license, user, excise, utility,
environmental, communications, excess profits, real or personal property
(tangible and intangible), capital stock, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative, add-on minimum, estimated, and other obligations of the
19
same or a similar nature to any of the foregoing, including interest,
penalties, and additions to tax related thereto.
(ii) "TAX RETURNS" means returns, declarations, reports, claims
for refund, information returns or other documents (including any related
or supporting schedules, statements, or information) filed or required to
be filed with any federal, state, local or foreign government entity or
other authority in connection with the determination, assessment or
collection of Taxes of any party or the administration of any laws,
regulations, or administrative requirements relating to any Taxes.
2.14 EMPLOYEE BENEFIT PLANS.
(a) COMPANY EMPLOYEE PLANS. Section 2.14(a) of the Company Disclosure
Schedule lists, with respect to Company and each of its Subsidiaries, (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to a
non-officer employee of Company or any of its Subsidiaries, loans to officers
and directors and any stock option, stock purchase, phantom stock, stock
appreciation right, dividend equivalent right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs or arrangements,
(iii) all bonus, pension, profit sharing, savings, deferred compensation or
incentive plans, programs or arrangements, (iv) other fringe or employee benefit
plans, programs or arrangements, and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, for the
benefit of, or relating to, any present or former employee, consultant or
director of Company or any of its Subsidiaries (together, the "COMPANY EMPLOYEE
PLANS").
(b) COMPANY EMPLOYEE PLAN ACTIONS. (i) There have been no prohibited
transactions within the meaning of Section 406 or 407 of ERISA or Code Section
4975 with respect to any of the Company Employee Plans that could result in
penalties, taxes or liabilities which, singly or in the aggregate, would have a
Material Adverse Effect on Company or any of its Subsidiaries, (ii) none of the
Company Employee Plans promises or provides retiree medical or other retiree
welfare benefits to any person, except as required by applicable law, (iii) all
contributions required to be made by Company or any of its Subsidiaries to any
Company Employee Plan have been timely made, (iv) each Company Employee Plan can
be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent or Company or any of
their subsidiaries (other than ordinary administrative expenses typically
incurred in a termination event), (v) to the extent applicable, Company and each
of its Subsidiaries has materially complied with the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the regulations thereunder, (vi) neither Company
nor any of its Subsidiaries currently maintain, sponsor, participate in or
contribute to, or has ever maintained, established, sponsored, participated in,
or contributed to, any pension plan (within the meaning of Section 3(2) of
ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of
ERISA or Section 412 of the Code, (vii) neither Company nor any of its
Subsidiaries is a party to, or has made any contribution to or otherwise
incurred any obligation to contribute to, any "multiemployer plan" as defined in
Section 3(37) of ERISA, (viii) each of the Company
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Employee Plans has been operated and administered in all material respects in
accordance with applicable laws during the period of time covered by the
applicable statute of limitations, and (ix) to the knowledge of Company, there
are no pending, threatened or anticipated claims involving any of the Company
Employee Plans other than claims for benefits in the ordinary course.
(c) PLAN DOCUMENTS. Company has furnished to Parent a copy of each of
the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, Forms 5500, Internal Revenue
Service determination letters and any material employee communications relating
thereto).
2.15 EMPLOYEES; EMPLOYEE MATTERS.
(a) SALARIES. Section 2.15(a) of the Company Disclosure Schedule
contains a true and complete list of the names and salaries of all current
employees, consultants and independent contractors of Company and each of its
Subsidiaries.
(b) COMPLIANCE WITH LAWS. Company and each of its Subsidiaries are in
compliance with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment,
wages, hours and occupational safety and health and employment practices, except
for instances of noncompliance that would not have a Material Adverse Effect on
Company or any of its Subsidiaries, and are not engaged in any unfair labor
practice. Company and each of its Subsidiaries have withheld all amounts
required by law or by agreement to be withheld from the wages, salaries, and
other payments to employees; and are not liable for any arrears of wages or any
Taxes or any penalty for failure to comply with any of the foregoing, except for
any such liabilities that would not, individually or in the aggregate, have a
Material Adverse Effect on Company or any of its Subsidiaries.
(c) NO VIOLATIONS. To Company's knowledge, no employees, consultants
or independent contractors of Company or any of its Subsidiaries are in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, consulting agreement or any restrictive covenant to a
third party relating to the right of any such employee, consultant or
independent contractor to be employed or engaged by Company or any of its
Subsidiaries because of the nature of the business conducted or presently
proposed to be conducted by Company or any of its Subsidiaries or to the use of
trade secrets or proprietary information of others.
(d) CONTROVERSIES. There are no material controversies pending or, to
the knowledge of Company, threatened between Company or any of its Subsidiaries
on the one hand and any representatives of any of their employees on the other
hand.
(e) ORGANIZATIONAL EFFORTS. To the knowledge of Company, there are no
organizational efforts presently being made involving any of the presently
unorganized employees of Company or any of its Subsidiaries.
21
(f) WARN ACT. Neither Company nor any of its Subsidiaries is in
violation of the Worker Adjustment and Retraining Notification Act of 1988, or
any similar state or local law, in each case that would have a Material Adverse
Effect on Company or any of its Subsidiaries.
(g) SEVERANCE. The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of Company or any of its Subsidiaries to severance benefits or
any other payment, except as expressly provided in this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or service provider.
2.16 INTERESTED PARTY TRANSACTIONS. Neither Company nor any of its
Subsidiaries is indebted to any director, officer, employee, consultant, agent
or affiliate ("INTERESTED PARTY") of Company or any of its Subsidiaries (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses), and no Interested Party is indebted to Company or any of its
Subsidiaries (except for cash advances for ordinary business expenses). Except
as set forth in Section 2.16 of the Company Disclosure Schedule, there have been
no agreements, transactions or understandings between Company or any of its
Subsidiaries on the one hand and any Interested Party on the other hand which
were not arm's length transactions entered into in the ordinary course of
business and consistent with past practice.
2.17 COMPLETE COPIES OF MATERIALS; BANK ACCOUNTS. Company has delivered or
made available true, correct and complete copies of each document which has been
requested by Parent or its legal counsel or accountants in connection with their
legal and accounting review of Company and each of its Subsidiaries. Company has
furnished to Parent a true and complete list setting forth the names and
addresses of all banks, other institutions and state governmental departments at
which Company and each of its Subsidiaries have accounts, deposits or the like,
and the names of all persons authorized to draw on or give instructions with
respect thereto or holding a power-of-attorney on behalf of Company or any of
its Subsidiaries.
2.18 MATERIAL CONTRACTS. Section 2.18 of the Company Disclosure Schedule
sets forth the material contracts, agreements and arrangements (written or oral)
to which Company or any of its Subsidiaries is a party (collectively, the
"MATERIAL CONTRACTS"), including, without limitation:
(a) any sales, advertising, distribution, co-branding, sponsorship,
agency, investor relations or public relations contract;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than five
thousand dollars ($5,000) per year;
(c) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(d) any contract for capital expenditures;
22
(e) any contract pursuant to which Company or any of its Subsidiaries
is a lessor of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property, pursuant to which payments in excess of
five thousand dollars ($5,000) remain outstanding;
(f) any employment contract, arrangement or policy (including without
limitation any collective bargaining contract or union agreement);
(g) any stockholders agreement, voting agreement, registration rights
agreement or other agreement to which Company, any of its Subsidiaries or any
stockholder of Company or any of its Subsidiaries is a party;
(h) any contract with any person or entity with whom Company or any
of its Subsidiaries does not deal at arm's length within the meaning of the
Code;
(i) any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other person;
(j) any consulting, independent contractor, license, joint venture,
collaboration, development or similar agreements; or
(k) any lease agreement for real property.
2.19 NO BREACH OF MATERIAL CONTRACTS. Except as set forth in Section 2.19
of the Company Disclosure Schedule, Company and each of its Subsidiaries are
entitled to all material benefits under each, and are not in or alleged to be in
material default, breach or violation of, any Material Contract. Each of the
Material Contracts is valid, binding and in full force and effect with respect
to Company and each of its Subsidiaries and, to the knowledge of Company, with
respect to the other parties thereto, and has not been amended, and, except as
set forth in Section 2.19 of the Company Disclosure Schedule, there exists no
default, breach or violation or event of default or event, occurrence, condition
or act, with respect to Company or any of its Subsidiaries or, to Company's
knowledge, with respect to the other contracting party, which, with the giving
of notice, the lapse of time or the happening of any other event or conditions,
would become a default or event of default under any Material Contract. True,
correct and complete copies of all Material Contracts have been delivered to
Parent. Except for the Material Contracts, there are no other material contracts
or other arrangements under which goods, equipment or services are provided,
leased or rendered by, or are to be provided, leased or rendered to, Company or
any of its Subsidiaries.
2.20 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of Company or any of its
Subsidiaries.
2.21 NO BUSINESS ACTIVITY RESTRICTION. There is no non-competition or other
similar agreement, commitment, judgment, injunction, order or decree to which
Company or any of its Subsidiaries is a party or subject to that has or could
reasonably be expected to have the effect of prohibiting or impairing the
conduct of business by Company or any of its Subsidiaries. Neither
23
Company nor any of its Subsidiaries has entered into any agreement under which
Company or any of its Subsidiaries is restricted from selling, licensing or
otherwise distributing any of its technology or products to, or providing
services to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or in any segment of the market or
line of business.
2.22 ENVIRONMENTAL MATTERS.
(a) NO VIOLATION. To the knowledge of Company, (i) Company and each
of its Subsidiaries have conducted their respective businesses in compliance
with all applicable Environmental Laws (as defined in Section 2.22(b)),
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned or leased by Company or
any of its Subsidiaries contain any Hazardous Substance (as defined in Section
2.22(c)) as a result of any activity of Company or any of its Subsidiaries in
amounts exceeding the levels permitted by applicable Environmental Laws, (iii)
neither Company nor any of its Subsidiaries has received any notices, demand
letters or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that Company or any of its
Subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, (iv) there are
no civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened against Company or any of
its Subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
by Company or any of its Subsidiaries concerning the release of any Hazardous
Substance or the threatened or actual violation of any Environmental Law, (vi)
no Hazardous Substance has been disposed of, released or transported in
violation of any applicable Environmental Law from any properties owned or
leased by Company or any of its Subsidiaries during the time such properties
were owned, leased or operated by Company or any of its Subsidiaries, (vii)
there have been no environmental investigations, studies, audits, tests, reviews
or other analyses regarding compliance or noncompliance with any applicable
Environmental Law conducted by or which are in the possession of Company or any
of its Subsidiaries, (viii) there are no underground storage tanks on, in or
under any properties owned or leased by Company or any of its Subsidiaries and
no underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
Company or any of its Subsidiaries, (ix) there is no asbestos or asbestos
containing material present in any of the properties owned or leased by Company
and its Subsidiaries, and no asbestos has been removed from any of such
properties during the time such properties were owned, leased or operated by
Company or any of its Subsidiaries, and (x) none of Company, its Subsidiaries
nor any of their respective properties are subject to any material liabilities
or expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (x) that, individually or in the aggregate, would not have a
Material Adverse Effect on Company or any of its Subsidiaries.
(b) ENVIRONMENTAL LAW. For purposes of this Agreement, "ENVIRONMENTAL
LAW" means any Federal, state, local or foreign law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent, legal
doctrine, order, judgment, decree,
24
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in
each case as amended. The term Environmental Law includes, without limitation,
(i) the Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Safe Drinking Water Act, the Hazardous Materials Transportation
Act, the Federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal
and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide
and Rodenticide Act, the Federal Occupational Safety and Health Act of 1970,
each as amended, or any state counterpart thereof, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries, damages or penalties due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) HAZARDOUS SUBSTANCE. For purposes of this Agreement, "HAZARDOUS
SUBSTANCE" means any substance presently or hereafter listed, defined,
designated or classified as hazardous, toxic, radioactive, or dangerous, or
otherwise regulated, under any Environmental Law. Hazardous Substance includes
any substance to which exposure is regulated by any government authority or any
Environmental Law including, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
2.23 COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of stockholders
of Company required for approval and adoption of this Agreement and the Merger
is a majority of the votes represented by the outstanding shares of Company
Common Stock and Series A Preferred, on a combined basis. The affirmative vote
of stockholders of Company required to amend the Certificate of Incorporation as
contemplated by Section 5.17 is a majority of the votes represented by the
outstanding shares of Company Common Stock and Series A Preferred, on a combined
basis, and the consent of the holders of Series A Preferred representing at
least two thirds of the outstanding shares of Series A Preferred. Except for
shares of Company Stock, the Amended Warrants and the Company Options set forth
in Section 2.23 of the Company Disclosure Schedule, immediately prior to the
Effective Time, no options, warrants, capital stock, securities or other rights
to exchange for or convert into Company securities will be outstanding. Except
as required to comply with Section 5.17, no other vote of the stockholders of
Company is required by law, the Certificate of Incorporation, as amended, or
Bylaws of Company or otherwise in order for Company to consummate the Merger and
the transactions contemplated hereby. The Voting Agreements executed and
delivered to Parent secure the number of votes of securities of Company
necessary to approve and adopt this Agreement and the Merger at the meeting of
stockholders of Company called to approve same and such Voting
25
Agreements and the irrevocable proxies granted in connection therewith are in
full force and effect.
2.24 NO EXCESS PARACHUTE PAYMENTS. Neither Company nor any of its
Subsidiaries has any contracts, arrangements or understandings pursuant to which
any person may receive any amount or entitlement from Company or any of its
Subsidiaries (including cash or property or the vesting of property) that may be
characterized as an "EXCESS PARACHUTE PAYMENT" (as such term is defined in Code
Section 280G(b)(1)) as a result of any of the transactions contemplated by this
Agreement. No person is entitled to receive any additional payment from Company,
its Subsidiaries or any other person in the event that the 20 percent (20%)
parachute excise tax of Code Section 4999(a) is imposed on such person.
2.25 COMPLETENESS OF THE COMPANY INFORMATION. Company has delivered to
Parent, Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP or Ernst & Young LLP all material
documents, items and other information responsive to all requests of Parent,
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP or Ernst & Young LLP (the "Company
Information"), as the case may be.
2.26 INSURANCE. Except to the extent there would be no Material Adverse
Effect on Company or any of its Subsidiaries, all of Company's and each of its
Subsidiaries' liability, theft, health, fire, worker's compensation and other
forms of insurance, surety bonds and umbrella policies, insuring Company and any
of its Subsidiaries and their directors, officers, employees, independent
contractors, properties, assets and business (the "POLICIES"), are valid and in
full force and effect without any premium past due or pending notice of
cancellation, and are, in the reasonable judgment of Company, adequate for the
business of Company and each of its Subsidiaries as now conducted. There are no
claims, singly or in the aggregate, under the Policies in excess of $5,000,
which, in any event, are not in excess of the limitations of coverage set forth
in the Policies. All of the Policies are "OCCURRENCE" policies and no Policy is
a "CLAIMS MADE" policy. Company has no knowledge of any fact indicating that
such policies will not continue to be available to Company and each of its
Subsidiaries upon substantially similar terms subsequent to the Effective Time.
The provision and/or reserves in the most recent Financial Statements are
adequate for any and all self insurance programs maintained by Company or any of
its Subsidiaries. Section 2.26 of the Company Disclosure Schedule sets forth a
list of the Policies and self insurance programs maintained by Company or any of
its Subsidiaries and a description of the general terms and coverages thereof.
2.27 GUARANTIES. Neither Company nor any of its Subsidiaries is a guarantor
or otherwise is liable for any liability or obligation (including indebtedness)
of any other person.
2.28 SUBSIDIARIES. None of Company and any of its Subsidiaries controls
directly or indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary set forth in Section 2.1 of the Company Disclosure Schedule. No
outstanding securities of any Subsidiary is convertible into or exchangeable for
any securities of Company or any other Subsidiaries of Company, whether by their
terms or pursuant to any other agreement or arrangement, and no holder of
securities of any of any Subsidiary has any right by agreement, arrangement or
otherwise to receive any Parent Common Stock issued as Merger Consideration.
26
2.29 ANTI-TAKEOVER MATTERS. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation is applicable
to Company or (by reason of Company's participation therein) the Merger or the
other transactions contemplated by this Agreement.
2.30 FDA MATTERS. Company and each of its Subsidiaries are in compliance
with all statutes, rules and regulations of the U.S. Food and Drug
Administration or similar United States or foreign governmental authority
("FDA") with respect to the evaluation, testing, labeling and manufacturing of
all of their products, in whatever stage of development, to the extent that the
same are applicable to Company's and each of its Subsidiaries' business as it is
currently conducted. To the knowledge of Company, Company and each of its
Subsidiaries, as well as their contractors, adhere to "Good Laboratory
Practices," "Good Clinical Practices" and "Good Manufacturing Practices," as
required by the FDA. Company and each of its Subsidiaries has all requisite FDA
permits, designations, approvals or the like to conduct Company's and each of
its Subsidiaries' business as it is currently conducted. Company has previously
delivered to Parent an index of all information concerning all Investigational
New Drug Applications obtained by Company and each of its Subsidiaries from the
FDA or required in connection with the conduct of Company's and each of its
Subsidiaries' business as it is currently conducted and has made all such
information available to Parent. Section 2.30 of the Company Disclosure Schedule
contains a list of (a) all communications between Company and each of its
Subsidiaries on the one hand and the FDA on the other hand from inception
through the date hereof, and (b) all designations or approvals by the FDA or any
similar governmental or quasi-governmental agencies throughout the world of
orphan drug designations or any applications with the FDA for Investigational
New Drug Applications, New Drug Applications or Biologics License Applications,
or any similar applications with any similar governmental or quasi-governmental
agencies throughout the world.
2.31 STUDIES. To the knowledge of Company, the clinical, preclinical and
other studies and tests conducted by or on behalf of or sponsored by Company or
any of its Subsidiaries or in which Company or any of its Subsidiaries or
Company's or any of its Subsidiaries' products or product candidates under
development have participated, were and, if still pending, are being conducted
in accordance with standard medical and scientific research procedures. Neither
Company nor any of its Subsidiaries has received any notices or other
correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any clinical or pre-clinical studies
or tests.
2.32 EMPLOYMENT AGREEMENTS.
(a) XXXXXX EMPLOYMENT AGREEMENT PAYMENTS. Other than the payment
referred to in Section 1.6(h), all amounts owed to Xxxxx X. Xxxxxx (cash, equity
or otherwise) pursuant to the terms of the Xxxxxx Employment Agreement (as
defined in Section 5.6(b)) or otherwise, including but not limited to any and
all amounts (cash, equity or otherwise) owed under Section 3 of the Xxxxxx
Employment Agreement, have been paid in full or waived by Xx. Xxxxxx, and
Company owes no amounts (cash, equity or otherwise) to Xx. Xxxxxx other than the
periodic payment of his base salary pursuant to the Xxxxxx Employment Agreement.
27
(b) XXXXXXXXXXXXX EMPLOYMENT AGREEMENT. Other than the payment
referred to in Section 1.6(g), all amounts owed to Xxxxxxxx Xxxxxxxxxxxxx (cash
equity or otherwise) pursuant to the Xxxxxxxxxxxxx Employment Agreement (as
defined in Section 5.6(c)) or otherwise have been paid in full or waived by Xx.
Xxxxxxxxxxxxx, and Company owes no amounts (cash equity or otherwise) to Xx.
Xxxxxxxxxxxxx other than the periodic payment of his base salary pursuant to the
Xxxxxxxxxxxxx Employment Agreement.
2.33 PATENT AND TRADEMARK APPLICATIONS.
(a) XX. XXXXXXXX. Pursuant to the terms of the Consulting Agreement
dated October 1, 1998 by and between Dr. Xxxxxx XxXxxxxx and Enteron
Pharmaceuticals, Inc. ("ENTERON"), Xx. XxXxxxxx has assigned all right, title
and interest in the following patent applications to Enteron: (i) Use of Oral
Beclomethasone Dipropionate to Treat Liver Inflammation, filed January 3, 2001,
(ii) Method of Long-Term Treatment of Graft-Versus-Host Disease Using Topical
Active Corticosteroids, filed January 3, 2001, and (iii) Method of Treating
inflammatory disorders of the Gastrointestinal Tract using Topically Active
Corticosteroids, filed March 15, 2001.
(b) XX. XXXXXXX. Pursuant to the terms of the Consulting Agreement
dated June 8, 1999 by and between Dr. Xxxx Xxxxxxx and Oral Solutions, Inc.
("ORAL SOLUTIONS"), Xx. Xxxxxxx has assigned all right, title and interest in
the following U.S. and PCT patent applications to Oral Solutions: (i) Topical
Azathioprine for the Treatment of Oral Autoimmune Disorders, No. 09/433,418,
filed November 4, 1999, and (ii) Topical Azathioprine for the Treatment of Oral
Immune Disorders, No. PCT/US/00/21959, filed August 11, 2000.
(c) XX. XXXXXXXXXXXXX. Xx. Xxxxxxxx Xxxxxxxxxxxxx has assigned all
right, title and interest in the following patent applications to Enteron: (i)
U.S. Patent Application entitled Method of Long-Term Treatment of
Graft-Versus-Host Disease Using Topical Active Corticosteriods, filed January 3,
2001, and (ii) Method of Treating inflammatory disorders of the Gastrointestinal
Tract using Topically Active Corticosteroids, filed March 15, 2001. Xx.
Xxxxxxxxxxxxx has assigned all right, title and interest to all Intellectual
Property Rights that relate to carrying out Company's and each of its
Subsidiary's current activities and their future activities to the extent such
future activities are already planned.
(d) XX. XXXXXX. Xx. Xxxxx X. Xxxxxx has no interest in any
Intellectual Property Rights that relate to carrying out Company's and each of
its Subsidiary's current activities and their future activities to the extent
such future activities are already planned.
(e) INVENTIONS, TRADE SECRETS AND WORKS OF AUTHORSHIP. All inventions
conceived of (whether patentable or not), trade secrets, know-how and works of
authorship developed or created by Xx. Xxxxx X. Xxxxxx and Xx. Xxxxxxxx
Xxxxxxxxxxxxx have been assigned to Company.
(f) TRADEMARK FEE. Company has paid the registration fee for the xxxx
"Metropt" in Japan.
2.34 MCDONALD LICENSE AGREEMENT . Enteron has paid, or Dr. Xxxxxx XxXxxxxx
has waived, all penalty payments owed to him by Enteron pursuant to the terms of
the Exclusive
28
License Agreement dated November 24, 1998 by and between Enteron and Xx.
XxXxxxxx (the "XXXXXXXX LICENSE AGREEMENT") and no amounts are owed to Xx.
XxXxxxxx pursuant to the terms thereof.
2.35 ALLERGAN TRANSACTION.
(a) LICENSE AGREEMENT. The obligations of Intero Corp. ("INTERO") to
Xxxx Xxxxxxx University ("JHC") pursuant to Section 4.2 of the Exclusive License
Agreement effective February 5, 1999, by and between Intero and JHC have been
paid in full and no amounts are owed to JHC pursuant to the terms thereof.
(b) SALE OF ASSETS. Company has paid each stockholder of Intero
his/her/its pro rata portion of the consideration paid or to be paid by Allergan
Botox Limited ("ALLERGAN") to Company in connection with the transactions
consummated pursuant to the Asset Purchase Agreement dated December 1, 1999, by
and between Intero and Allergan, including any milestone payments thereunder.
2.36 LIQUIDATION AMOUNT. At the Effective Time, the total Liquidation
Amount (as defined in Company's Certificate of Incorporation, as amended) due to
all holders of the Series A Preferred in connection with the consummation of the
Merger will not exceed the Series A Preferred Merger Consideration.
2.37 PARENT SECURITIES. Neither Company nor any of its Subsidiaries owns
any outstanding securities of Parent.
2.38 DISSOLUTION. Company's Subsidiaries Neuropath, Inc.; Iopthalmics,
Inc.; Magyar Pharmaceuticals, Inc.; CTD Drug Design, Inc. (formerly known as IDR
Drug Design, Inc.); Institute for Drug Research Publications, Inc.; CTD
Investments, LLC; and Nodolor, Inc. have been dissolved in accordance with the
laws of the respective jurisdictions of their incorporation.
2.39 COMMON STOCK. All the certificates representing shares of Company
Common Stock were issued subsequent to January 5, 1998.
2.40 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Company herein or in any schedule hereto, including the Company
Disclosure Schedule, or certificate or other document furnished by Company or
the security holders of Company pursuant to this Agreement, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as otherwise set forth in any Parent Reports (as defined in Section
3.5(a)) or for specific references to, and as set forth in the Parent Disclosure
Schedule attached hereto
29
and referring by numbered section (and, where applicable, by lettered
subsection) of the representations and warranties in this Article III (the
"PARENT DISCLOSURE SCHEDULE"), Parent and Merger Sub, jointly and severally,
represent and warrant to Company as follows:
3.1 ORGANIZATION AND STANDING. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Parent and Merger Sub has the
corporate power, is duly qualified 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 business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not have, individually or in the aggregate, a
Material Adverse Effect on Parent.
3.2 CAPITAL STRUCTURE OF PARENT. As of May 1, 2001, the authorized capital
stock of Parent consists of 50,000,000 shares of Parent Common Stock, 4,600,000
shares of Preferred Stock, $.001 par value per share, 200,000 shares of Series B
Convertible Preferred Stock, par value $.05 per share, and 200,000 shares of
Series C Convertible Preferred Stock, par value $.05 per share, of which
12,741,858 shares of Parent Common Stock, no shares of Preferred Stock, 102,390
shares of Series B Convertible Preferred Stock and 99,287 shares of Series C
Convertible Preferred Stock were issued and outstanding. All outstanding shares
of Parent Common Stock have been duly authorized, validly issued, fully paid and
are nonassessable and free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. The shares of
Parent Common Stock to be issued pursuant to the Merger will be duly authorized
and validly issued, and, upon receipt by Parent of Company Certificates in
exchange therefor, will be fully paid and non-assessable. The authorized capital
stock of Merger Sub consists of 1,000 shares of common stock, $.001 par value
per share, all of which were issued and outstanding and held of record by Parent
as of the date hereof.
3.3 AUTHORITY. Subject to approval of the Parent Voting Proposal by the
stockholders of Parent, Parent and Merger Sub have all requisite corporate power
and authority to execute and deliver the Transaction Agreements, to perform
their obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Subject to approval of the Parent Voting
Proposal by the stockholders of Parent, the execution, delivery and performance
of the Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. This Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes the valid
and binding obligation of Parent and Merger Sub enforceable against Parent and
Merger Sub in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally and by general principles of equity.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) NO CONFLICT. Except for the filing of the Delaware Certificate of
Merger, any applicable federal or state securities filings (including, without
limitation, the filing with the SEC of the Joint Proxy Statement and the
Registration Statement), and as set forth on Section 3.4(a) of the Parent
Disclosure Schedule and except for such conflicts, violations, breaches or
defaults which would not have a Material Adverse Effect on Parent, the execution
and delivery
30
of this Agreement by Parent and Merger Sub, do not, and the performance by
Parent and Merger Sub of their obligations hereunder and/or thereunder, as the
case may be, and the consummation of the Merger will not, (i) conflict with or
violate any provision of the Certificate of Incorporation or Bylaws of Parent or
Merger Sub, (ii) conflict with or violate any law applicable to Parent or Merger
Sub, or (iii) result in any breach of or constitute a default (or an event which
with the giving of notice or lapse of time or both could reasonably be expected
to become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any material property or asset of Parent or Merger Sub
pursuant to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation.
(b) GOVERNMENTAL FILINGS. Assuming the accuracy of the
representations and warranties of Company set forth in Article II, except for
the filing of the Delaware Certificate of Merger and any applicable federal or
state securities filings (including, without limitation, the filing with the SEC
of the Joint Proxy Statement and the Registration Statement) and except for such
consents, approvals or authorizations, permits or filings which, if not obtained
or made, would not have a Material Adverse Effect on Parent, the execution and
delivery of this Agreement by Parent and Merger Sub do not and the performance
by Parent and Merger Sub of their obligations hereunder and the consummation of
the Merger will not, require any consent, approval, authorization or permit of,
or filing by Parent with or notification by Parent to, any Governmental Entity.
3.5 SEC FILINGS; FINANCIAL STATEMENTS OF PARENT.
(a) PARENT REPORTS. Parent has timely filed all forms, reports,
statements and documents required to be filed by it with the SEC and the
American Stock Exchange (the "AMEX") since December 31, 2000 (collectively
together with any such forms, reports, statements and documents Parent may file
subsequent to the date hereof until the Closing, the "PARENT REPORTS"). Each
Parent Report was prepared in accordance with the requirements of the Act, the
Exchange Act, or the AMEX, as the case may be, and did not at the time it was
filed 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 made therein, in the light of the circumstances under which they were
made, not misleading.
(b) FINANCIAL STATEMENTS. Each of the consolidated financial
statements (including, in each case, any notes thereto) contained in Parent
Reports are true and complete as at, and for the periods reported therein, and
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto) and each
presented fairly, in all material respects, the consolidated financial position
of Parent and the consolidated Subsidiaries of Parent as at the respective dates
thereof and for the respective periods indicated therein, except as otherwise
noted therein (subject, in the case of unaudited statements, to the absence of
notes and normal recurring year-end audit adjustments that will not be material
in nature or in amount).
3.6 LITIGATION. Except as set forth in Section 3.6 of the Parent
Disclosure Schedule, there is (i) no private or governmental action, suit,
proceeding, claim, arbitration or, to the knowledge of Parent, investigation
pending before any agency, court or tribunal, foreign or
31
domestic, or, to the knowledge of Parent, threatened against Parent or any of
its assets or properties or any of its officers or directors (in their
capacities as such), and (ii) no judgment, decree or order against Parent, or,
to the knowledge of Parent, any of its directors or officers (in their
capacities as such), in each case limiting the conduct of business by Parent or
that could prevent, enjoin, or alter or delay any of the transactions
contemplated by this Agreement or have a Material Adverse Effect on Parent.
3.7 NO UNDISCLOSED LIABILITIES. Except to the extent set forth in the
balance sheet of Parent as of December 31, 2000 included in the Parent Reports
and except for liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 2000, Parent does not have any
obligations or liabilities, whether or not accrued, contingent or otherwise,
that individually or in the aggregate would have a Material Adverse Effect on
Parent.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.8 of
the Parent Disclosure Schedule and as contemplated by this Agreement, since
December 31, 2000, Parent and each of its subsidiaries have conducted their
business only in the ordinary course consistent with past practice and there
has not occurred (i) any Material Adverse Effect on Parent or any of its
subsidiaries, (ii) any event that could reasonably be expected to prevent or
materially delay the performance of Parent's obligations pursuant to the
Transaction Agreements or the consummation of the Merger by Parent, (iii) any
change by Parent or any of its subsidiaries in its accounting methods,
principles or practices, (iv) any declaration, setting aside or payment of
any dividend or distribution in respect of the shares of capital stock of
Parent or any of its subsidiaries or any redemption, purchase or other
acquisition of any of Parent's or any of its subsidiaries' securities, (v)
any increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase
in the compensation payable or to become payable to any employees, officers,
consultants or directors of Parent or any of its subsidiaries, (vi) other
than issuances of options pursuant to the Parent Plan, any issuance, grants
or sale of any stock, options, warrants, notes, bonds or other securities, or
entering into any agreement with respect thereto of Parent and any of its
subsidiaries, (vii) any amendment to the Certificate of Incorporation or
Bylaws of Parent or any of its subsidiaries, (viii) other than in the
ordinary course of business consistent with past practice, any (w) capital
expenditures, (x) purchase, sale, assignment or transfer of any material
assets, (y) mortgage, pledge or existence of any lien, encumbrance or charge
on any material assets or properties, tangible or intangible, except for
liens for taxes not yet due and such other liens, encumbrances or charges
which do not, individually or in the aggregate, have a Material Adverse
Effect on Parent, or (z) cancellation, compromise, release or waiver of any
rights of material value or any material debts or claims, (ix) any incurrence
of any material liability (absolute or contingent), except for current
liabilities and obligations incurred in the ordinary course of business
consistent with past practice, (x) any incurrence of any damage, destruction
or similar loss, whether or not covered by insurance, materially affecting
the business or properties of Parent, (xi) any entering into any agreement,
contract, lease or license other than in the ordinary course of business
consistent with past practice, (xii) any acceleration, termination,
modification or cancellation of any agreement, contract, lease or license to
which Parent or any of its subsidiaries is a party or by which any of them is
bound, (xiii) any entering into any loan or other transaction with any
officers, directors or employees of Parent or any of its
32
subsidiaries, (xiv) any charitable or other capital contribution or pledge
therefore, (xv) any entering into any transaction of a material nature other
than in the ordinary course of business consistent with past practice, or
(xvi) any negotiation or agreement by the Parent or any of its subsidiaries
to do any of the things described in the preceding clauses (i) through (xv).
3.9 BROKERS. Other than fees, commissions, reimbursements of costs and
expenses and other payments due under the engagement letter between Parent and
Xxxxx Fargo Xxx Xxxxxx dated as of March 11, 2001 and as set forth on Section
3.9 of the Parent Disclosure Schedule, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent.
3.10 REORGANIZATION. To the knowledge of Parent, neither Parent nor any of
its affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that could be expected to prevent the Merger
from constituting a "reorganization" under Section 368(a) of the Code. Parent is
not aware of any agreement or plan to which Parent or any of its affiliates is a
party or other circumstances relating to Parent or any of its affiliates that
could reasonably be expected to prevent the Merger from so qualifying as a
reorganization under Section 368(a) of the Code.
3.11 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Parent or Merger Sub herein or in a certificate or other document
furnished by Parent or Merger Sub pursuant to this Agreement, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF COMPANY. During the period from and including
the date of this Agreement and continuing until the earlier of the termination
of this Agreement in accordance with its terms or the Effective Time, Company
agrees (except as consented to in writing by Parent) to carry on its and each of
its Subsidiaries' businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. Company further agrees to
pay its and each of its Subsidiaries' debts and Taxes when due, to pay or
perform its and each of its Subsidiaries' other obligations when due, and to use
all reasonable efforts consistent with past practice and policies to preserve
intact its and each of its Subsidiaries' present business organizations, keep
available the services of its and each of its Subsidiaries' present officers and
key employees and preserve its and each of its Subsidiaries' relationships with
customers, suppliers, distributors, licensors, licensees, consultants, joint
venture partners, collaborators, and others having business dealings with it and
each of its Subsidiaries to the end that its and each of its Subsidiaries'
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Company agrees to promptly notify Parent of any event or occurrence not in the
ordinary course of business or which could have a Material Adverse Effect on
Company or any
33
of its Subsidiaries. By way of amplification and not limitation, Company and
each of its Subsidiaries shall not, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of Parent, which consent shall not be
unreasonably withheld:
(a) cause or permit any amendments to their Certificates of
Incorporation, Bylaws or other charter documents, as applicable, except as
contemplated by Section 5.17;
(b) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of their capital stock,
or split, combine or reclassify any of their capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of their capital stock, or repurchase or otherwise
acquire, directly or indirectly, any shares of their capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service;
(c) enter into any material contract or commitment, or violate, amend
or otherwise modify or waive any of the terms of any of the Material Contracts;
(d) issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of their capital stock or securities
exchangeable for or convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating them to issue any such shares or other convertible or exchangeable
securities, other than the issuance of shares of Company Common Stock pursuant
to the exercise of stock options, warrants or other rights or the conversion of
Series A Preferred outstanding as of the date of this Agreement and the issuance
of the Amended Warrants as contemplated by Section 5.20;
(e) transfer to any person or entity any rights to any Intellectual
Property Rights of Company or any of its Subsidiaries;
(f) sell, lease, license or otherwise dispose of or encumber any of
Company's or any of its Subsidiaries' properties or assets;
(g) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(h) enter into any operating lease which is not included in the
fiscal year 2001 Company budget attached hereto as EXHIBIT N (the "BUDGET") or
pursuant to which payments in excess of twenty thousand dollars ($20,000) may be
required;
(i) pay, discharge or satisfy, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) which is
not included in the Budget or in an amount in excess of twenty thousand dollars
($20,000) in any one case or sixty thousand dollars ($60,000) in the aggregate,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Financial Statements or incurred in the ordinary course
of business consistent with past practice and reasonable expenses incurred in
connection with the transactions contemplated by this Agreement, subject to
Section 9.1;
34
(j) make any capital expenditures, capital additions or capital
improvements;
(k) terminate or waive any right of substantial value;
(l) adopt or amend any employee benefit or stock purchase or option
plan, or hire any new director, officer, consultant or employee (other than
secretarial staff), pay any special bonus or special remuneration to any
officer, employee, consultant or director or increase the salaries, wage rates,
bonus or compensation of any director, officer, employee or consultant;
(m) grant any severance or termination pay to any director, officer,
consultant or employee;
(n) commence a lawsuit;
(o) acquire or agree to acquire by merging or consolidating with,
purchasing equity interests, or purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets;
(p) make or change any election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, file any amendment to a material Tax
Return, enter into any closing agreement, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(q) take any other action outside the ordinary course of their
business consistent with past practice; or
(r) take or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (q), or any action which would make any of
Company's representations or warranties contained in this Agreement untrue or
incorrect in any material respect or prevent Company from performing or cause it
not to perform its covenants hereunder in any material respect.
4.2 EXCLUSIVITY.
(a) COMPETING PROPOSAL. Except for the transactions contemplated by
this Agreement, until the earlier of the Effective Time or the date of
termination of this Agreement in accordance with its terms, Company shall not
take (and since February 27, 2001, inclusive, Company has not taken), nor shall
Company authorize, cause or encourage any of its directors, officers, agents,
employees, consultants, affiliates, attorneys, accountants, financial advisers
or other representatives (collectively, "REPRESENTATIVES") to, directly or
indirectly: (i) solicit, encourage, initiate, engage, entertain, review, respond
to, continue or participate in any negotiations or discussions with respect to
an offer or proposal (whether formal or informal, oral, written, or otherwise)
to acquire all or any part of Company's or any of its Subsidiaries' stock or
assets, whether by purchase of stock or assets, license, joint venture, merger,
consolidation, reorganization or other form of business combination, or
otherwise (a "COMPETING PROPOSAL"), (ii) disclose any heretofore nonpublic
information, or afford access to the properties, books or
35
records of Company or any of its Subsidiaries, to any person or entity
concerning Company or any of its Subsidiaries for the purposes of considering or
formulating a Competing Proposal, (iii) assist, cooperate with, facilitate or
encourage any person or entity to make a Competing Proposal, (iv) agree to,
enter into a contract regarding, approve, recommend or endorse any transaction
involving a Competing Proposal, or (v) authorize or permit any of Company's
Representatives to take any action within the scope of the immediately preceding
clauses (i) through (iv). If Company or any of its Subsidiaries or Company's
Representatives becomes aware of a Competing Proposal or if any request for
nonpublic information relating to Company or any of its Subsidiaries or for
access to the properties, books or records of Company or any of its Subsidiaries
is made by any person or entity that has made a Competing Proposal or has
advised Company that it may be considering making a Competing Proposal, Company,
any of its Subsidiaries or Company's Representatives shall within 24 hours
notify Parent of the material details of such Competing Proposal or request
(including the identity of the person or entity making such Competing Proposal,
the terms thereof and the information requested thereby) and shall within 24
hours provide Parent with a copy of any Competing Proposal or request that is
made in writing and copies of all correspondence relating thereto. Thereafter
Company shall keep Parent fully apprised on a current basis of the status of any
such Competing Proposal and of any modifications to the terms thereof. Company,
its Subsidiaries and Company's Representatives shall immediately cease and cause
to be terminated all existing discussions or negotiations with any parties other
than Parent conducted heretofore with respect to any Competing Proposal.
(b) PARENT PROPOSAL. Except for the transactions contemplated by this
Agreement, until the earlier of the Effective Time or the date of termination of
this Agreement in accordance with its terms, Parent shall not take (and since
February 27, 2001, inclusive, Parent has not taken), nor shall Parent authorize,
cause or encourage any of its Representatives to, directly or indirectly: (i)
solicit, encourage, initiate, engage, entertain, review, respond to, continue or
participate in any negotiations or discussions with respect to an offer or
proposal (whether formal or informal, oral, written, or otherwise) for the
acquisition by Parent of all or substantially all of the assets or equity
interests of any entity, whether by purchase of stock or assets, license, joint
venture, merger, consolidation, reorganization or other form of business
combination or otherwise if such proposed acquisition by Parent would materially
adversely effect the ability of Parent to consummate the Merger ("PARENT
PROPOSAL"), (ii) disclose any heretofore nonpublic information, or afford access
to the properties, books or records of Parent or any of its subsidiaries, to any
person or entity concerning Parent or any of its subsidiaries for the purposes
of considering or formulating a Parent Proposal, (iii) assist, cooperate with,
facilitate or encourage any person or entity to make a Parent Proposal, (iv)
agree to, enter into a contract regarding, approve, recommend or endorse any
transaction involving a Parent Proposal, or (v) authorize or permit any of
Parent's Representatives to take any action within the scope of the immediately
preceding clauses (i) through (iv). If the Parent or any of Parent's
Representatives becomes aware of a Parent Proposal or if a Parent Proposal is
hereafter made or if any request for nonpublic information relating to Parent or
any of its subsidiaries or for access to the properties, books or records of
Parent or any of its subsidiaries is made by any person or entity that has made
a Parent Proposal or has advised Parent that it may be considering making a
Parent Proposal, Parent or Parent's Representatives shall within 24 hours notify
Company of the material details of such Parent Proposal or request (including
the identity of the person or entity making such Parent Proposal, the terms
thereof and the information requested thereby) and shall
36
within 24 hours provide Company with a copy of any Parent Proposal or request
that is made in writing and copies of all correspondence relating thereto.
Thereafter Parent shall keep Company fully apprised on a current basis of the
status of any such Parent Proposal and of any modifications to the terms
thereof. Parent and Parent's Representatives immediately shall cease and cause
to be terminated all existing discussions or negotiations with any parties other
than Company conducted heretofore with respect to any Parent Proposal.
(c) REMEDY. Each party (i) acknowledges that a breach of any of its
covenants contained in this Section 4.2 will result in irreparable harm to
Parent or Company, as the case may be, which will not be compensable in money
damages, and (ii) agrees that such covenants shall be specifically enforceable
and that specific performance and injunctive relief shall be a remedy properly
available to the parties for a breach of such covenants.
4.3 NOTICES OF CERTAIN EVENTS. Each of Parent and Company shall give
prompt notice to the other of (i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting Parent, Merger Sub or
Company or any of its Subsidiaries, or that relate to the consummation of the
Merger; (iv) the occurrence of a default or event that, with the giving of
notice or lapse of time or both, will become a default under any Material
Contract; and (v) any change that would have a Material Adverse Effect on Parent
or a Material Adverse Effect on Company or any of its Subsidiaries, or delay or
impede the ability of Parent, Merger Sub, Company or the security holders of
Company to perform their respective obligations pursuant to the Transaction
Agreements and to effect the consummation of the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 ACCESS TO INFORMATION.
(a) ACCESS. Each party to this Agreement shall afford any other party
hereto reasonable access during normal business hours, on reasonable advance
notice, during the period prior to the earlier of the Effective Time or the date
of termination of this Agreement in accordance with its terms, to (i) all of
such party's and each of its subsidiaries' properties, books, contracts,
commitments and records, and (ii) all other information concerning the business,
operations, properties, assets, taxes, condition (financial or other) results of
operations and personnel of such party and any of its subsidiaries as the other
party may reasonably request. Each party agrees to provide to the other party
and its Representatives copies of internal financial statements promptly upon
request.
(b) CONFERENCES. Subject to compliance with applicable law, from the
date hereof until the earlier of the Effective Time or the date of termination
of this Agreement in accordance with its terms, each of Parent and Company shall
confer on a regular basis with one
37
or more Representatives of the other party to consult with respect to
operational matters of materiality and the general status of ongoing operations
prior to taking any actions with respect thereto.
(c) REPRESENTATIONS AND WARRANTIES. No information or knowledge
obtained in any investigation pursuant to this Section 5.1 shall 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.
(d) REVIEW OF COMPANY TAX FILINGS.
(i) All income Tax Returns of Company and each of its
Subsidiaries for the year ended December 31, 2000 that are filed on or
before the Closing Date shall be prepared in a manner consistent with
Company's past Tax accounting practices.
(ii) A draft of each income Tax Return or any amendment thereto
that is filed by Company or any of its Subsidiaries after the date hereof
and prior to the Closing Date shall be delivered to Parent no later than
thirty (30) days prior to the time such Tax Return or amendment is to be
filed. Parent may request in writing changes to be made to any such draft
returns or amendment no later than fifteen (15) days after receipt of such
Tax Return or amendment. Company shall consider such request and prepare a
final Tax Return or amendment considering, in Company's reasonable
discretion, Parent's requests.
5.2 CONFIDENTIALITY.
(a) CONFIDENTIAL INFORMATION. Prior to the Effective Time, each of
the parties will treat and hold as such all of the Confidential Information (as
defined below) and refrain from using any of the Confidential Information except
in connection with this Agreement. In the event that any party is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that party will notify the
party providing such Confidential Information (the "PROVIDING PARTY") promptly
of the request or requirement so that the Providing Party may seek an
appropriate protective order or waive compliance with the provisions of this
Section 5.2(a). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the parties is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that party may disclose the Confidential Information to the tribunal;
PROVIDED, HOWEVER, that the disclosing party shall use its reasonable best
efforts to obtain, at the request and expense of the Providing Party, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as the Providing Party
shall designate. For purposes of this Agreement, "CONFIDENTIAL INFORMATION"
means any information concerning the business and affairs of Parent, Company or
any of their respective Subsidiaries that is not already generally available to
the public.
(b) TERMINATION. In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly redeliver to the other all
non-public written material
38
provided pursuant to this Agreement and shall not retain any copies, extracts or
other reproductions in whole or in part of such written material. In such event,
all documents, memoranda, notes and other writings prepared by Parent, Company
or their subsidiaries based on the information in such material shall be
destroyed (and Parent and Company shall use their respective reasonable best
efforts to cause their Representatives to similarly destroy their documents,
memoranda and notes), and such destruction (and reasonable best efforts) shall
be certified in writing by an authorized officer supervising such destruction.
5.3 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), in all cases except as may be required by law or the
rules of the AMEX, in which case the parties will make reasonable efforts to
consult with each other prior to the making of such public statement.
5.4 REASONABLE EFFORTS AND FURTHER ASSURANCES.
(a) FURTHER ASSURANCES. Each of the parties to this Agreement shall
use its commercially reasonable efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
Closing under this Agreement; PROVIDED, HOWEVER, that Parent shall not be
obligated to consent to or accept any divestiture or operational limitation in
connection with the Merger or to make any payment or commercial concession to
any third party as a condition to obtaining any required consent or approval of
any third party. Each party hereto, at the reasonable request of another party
hereto, shall 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 this Agreement and the transactions contemplated hereby.
(b) REASONABLE EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable pursuant to all agreements,
contracts, indentures or other instruments to which the parties hereto are a
party, or under any applicable laws and regulations, to consummate and make
effective the transactions contemplated by this Agreement, including using its
reasonable efforts to (i) obtain all necessary or appropriate waivers, consents
and approvals from lenders, landlords, security holders or other parties whose
waiver, consent or approval is required to consummate the Merger, (ii) effect
all necessary registrations, filings and submissions, and (iii) lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible), subject, however, to the requisite
votes of the stockholders of the Parent and Merger Sub and the stockholders of
Company.
(c) LITIGATION. In the event any litigation is commenced by any
person or entity against Company or any of its Subsidiaries relating to the
transactions contemplated by this Agreement, Parent shall have the right, at its
own expense, to participate therein, and
39
Company and its Subsidiaries will not settle any such litigation without the
consent of Parent, which consent will not be unreasonably withheld.
5.5 NOTIFICATION OF CERTAIN MATTERS. Each of Company, Parent and Merger
Sub agrees to give prompt notice to each other of, and to use their respective
reasonable best efforts to prevent or promptly remedy, (i) the occurrence or
failure to occur or the impending or threatened occurrence or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
of the representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.6 EMPLOYMENT AND CONSULTING AGREEMENTS; EMPLOYEES.
(a) EMPLOYMENT AGREEMENTS. Prior to Closing, any and all employees of
Company or any of its Subsidiaries who are parties to agreements that would
provide to them compensation (cash or otherwise) upon a change of control (as
defined therein) of Company, other than the Xxxxxx Employment Agreement and the
Xxxxxxxxxxxxx Employment Agreement (collectively, the "EMPLOYMENT AGREEMENTS"),
shall execute amendments and/or waivers of the compensation provisions
applicable upon such a change of control (as defined therein).
(b) XXXXXX EMPLOYMENT AGREEMENT. Prior to Closing, the Employment
Agreement dated December 14, 1998, by and between Company and Xxxxx X. Xxxxxx
(the "XXXXXX EMPLOYMENT AGREEMENT") shall have been terminated on terms
reasonably satisfactory to Parent and Xx. Xxxxxx without severance, milestone,
bonus or other payments, other than the bonus payment provided for pursuant to
Section 1.6(h).
(c) XXXXXXXXXXXXX EMPLOYMENT AGREEMENT. Prior to Closing, the
Employment Agreement dated June 28, 1999, by and between Company and Xxxxxxxx
Xxxxxxxxxxxxx (the "XXXXXXXXXXXXX EMPLOYMENT AGREEMENT") shall have been
terminated on terms reasonably satisfactory to Parent and Xx. Xxxxxxxxxxxxx
without severance, milestone, bonus or other payments, other than the bonus
payment provided for pursuant to Section 1.6(g).
(d) EMPLOYEES. Prior to Closing, all employees of Company and each of
its Subsidiaries shall be terminated on terms reasonably satisfactory to Parent
without severance, milestone, bonus or other payments, except as provided in
Sections 1.6(g) and 1.6(h).
5.7 NO LIABILITY OF PARENT IF TRANSACTION IS NOT TAX-FREE. Except in
connection with a breach of Sections 3.10 or 5.11, neither Parent nor Merger Sub
shall be liable to any party for any amount in the event that the Merger is not
treated as a tax-free reorganization for Federal income tax purposes.
5.8 COMPANY DISCLOSURE SCHEDULE. Company has made available to Parent a
reasonable time prior to the Closing Date, copies of all items set forth on the
Company Disclosure Schedule and any and all other consents, documents or
agreements to be delivered hereunder which have not previously been delivered to
Parent, which items and any such other
40
consents, documents or agreements shall be in form and substance reasonably
satisfactory to Parent and Company.
5.9 LITIGATION SUPPORT. In the event and for so long as Parent or Merger
Sub actively is contesting or defending against any action, suit, proceeding,
arbitration, hearing, investigation, charge, complaint, claim or demand (other
than by security holders of Company) in connection with (a) any transaction
contemplated under this Agreement, or (b) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the Closing involving
Company or any of its Subsidiaries, Company and each of its Subsidiaries and the
security holders of Company will cooperate with Parent and its counsel in the
contest or defense, use reasonable efforts to make available the personnel of
Company and each of its Subsidiaries and security holders of Company and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of Parent (unless Parent is entitled to indemnification therefor under
Article VIII).
5.10 TRANSITION. Neither Company nor any security holders of Company shall
take any action that is designed or intended to have the effect of discouraging
any lessor, licensor, customer, supplier, joint venture partner, collaborator,
consultant or other business associate of Company and any of its Subsidiaries
from maintaining the same business relationships with Company and any of its
Subsidiaries after the Closing as it maintained with Company and any of its
Subsidiaries prior to the Closing unless such action is taken in accordance with
prudent business practices.
5.11 TAX TREATMENT. Parent, Merger Sub and Company shall each use best
efforts to cause the Merger to qualify, and shall not knowingly take or fail to
take any actions or cause any actions to be taken which could reasonably be
expected to prevent the Merger from qualifying, as a "reorganization" under
Section 368(a) of the Code. Except as otherwise required under applicable law,
Parent shall, and shall cause the Surviving Corporation to report to the extent
required by the Code or the regulations thereunder, the Merger for income tax
purposes as a reorganization within the meaning of Section 368 of the Code. Each
of Parent and Company shall make such representations, warranties and covenants
as shall be reasonably requested in the circumstances by Xxxxxxx, Xxxxxxx &
Xxxxxxxx, LLP and Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP in order for such firms to
render the opinions referred to in Section 6.1(g).
5.12 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) SEC FILING. As promptly as practicable after the execution of
this Agreement, Company and Parent shall prepare and file with the SEC the
Joint Proxy Statement, and Parent shall prepare and file with the SEC the
Registration Statement (as defined in Section 5.15), in which the Joint Proxy
Statement will be included as a prospectus. Parent and Company shall use
their reasonable best efforts to respond to the comments of the SEC in
connection with the Joint Proxy Statement and the Registration Statement, to
furnish all information required to prepare the Joint Proxy Statement and the
Registration Statement and to cause the Registration Statement to become
effective as soon after such filing as practicable. Company will use its
reasonable best efforts to cause the Joint Proxy Statement to be mailed to
Company's stockholders, and Parent will use its reasonable best efforts to
cause the Joint Proxy Statement to
41
be mailed to Parent's stockholders, in each case as promptly as practicable
after the Registration Statement is declared effective under the Act. The
Joint Proxy Statement shall include the recommendation of the Board of
Directors of Company (the "COMPANY BOARD") in favor of this Agreement and the
Merger and of the Parent Board in favor of the issuance of Parent Common
Stock pursuant to the Merger.
(b) REGULATORY FILINGS. Parent and Company shall make all necessary
filings with respect to the Merger under the Act, the Exchange Act, AMEX rules,
applicable state blue sky laws and the rules and regulations thereunder.
(c) COMFORT LETTER. Company will deliver to Parent, before the date
the Joint Proxy Statement is filed with the SEC, a letter of Xxxxxxx X. Xxxxxx
and Company stating their conclusions as to certain information derived from the
financial records of Company and each of its Subsidiaries and contained in the
Joint Proxy Statement (the "COMPANY COMFORT LETTER"). The form and substance of
the Company Comfort Letter shall be reasonably satisfactory to Parent and
customary in scope for comfort letters delivered by independent public
accountants in connection with registration statements on Form S-4 under the
Securities Act and shall be updated on the date the Registration Statement is
declared effective by the SEC and the Closing Date.
5.13 STOCKHOLDERS MEETINGS. Company and Parent each shall call a meeting of
its respective stockholders to be held as promptly as practicable for the
purpose of voting, in the case of Company, upon this Agreement and the Merger
and, in the case of Parent, upon the issuance of shares of Parent Common Stock
pursuant to the Merger (the "PARENT VOTING PROPOSAL"). In accordance with
Section 251(c) of the Delaware Law, Company's obligation to call and hold its
stockholders meeting shall not be dependent on the Company Board's
recommendation. Company and Parent shall coordinate and cooperate with respect
to the timing of such meetings and shall use their reasonable best efforts to
hold such meetings on the same day and as soon as practicable after the date on
which the Registration Statement becomes effective. Each party shall use its
reasonable best efforts to solicit from its stockholders proxies in favor of the
matters set forth above and obtain a sufficient vote in favor of such matters at
its stockholders meeting (or any postponement or adjournment thereof). Parent
shall take such action with respect to Merger Sub, and cause Merger Sub to take
such action, as may be required to consummate the Merger, including without
limitation, voting all shares of Merger Sub in favor of the Merger.
5.14 AFFILIATE AGREEMENTS. Company has set forth on EXHIBIT E attached
hereto, a list of those persons who are "affiliates" of Company within the
meaning of Rule 145 (each person who is an "affiliate" within the meaning of
Rule 145 is referred to as an "AFFILIATE") promulgated under the Act ("RULE
145"). Company shall deliver or cause to be delivered to Parent within 30 days
after the date hereof (and in any case prior to the Effective Time) from each of
its Affiliates, or from any person who becomes an Affiliate after the date of
this Agreement and prior to the Effective Time as soon as practicable after
attaining such status, an executed Affiliate Agreement substantially in the form
attached hereto as EXHIBIT F, by which each Affiliate of Company agrees to
comply with the applicable requirements of Rule 145 and certain other provisions
(an "AFFILIATE AGREEMENT"). Parent shall be entitled to place appropriate
legends on the certificates evidencing any Parent Common Stock to be received by
such Affiliates of Company pursuant to
42
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 Affiliate Agreements, but regardless of the execution thereof by the
Affiliate.
5.15 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS. The
information to be supplied by Company for inclusion in the registration
statement on Form S-4 pursuant to which shares of Parent Common Stock issued in
the Merger will be registered under the Act (the "REGISTRATION STATEMENT") shall
not at the time the Registration Statement is declared effective by the SEC
contain any untrue statement of a material fact or omit to state any material
fact required to be stated in the Registration Statement or necessary in order
to make the statements in the Registration Statement not misleading. The
information supplied by Company for inclusion in the joint proxy
statement/prospectus (the "JOINT PROXY STATEMENT") to be sent to the
stockholders of Parent and Company in connection with the meeting of Company's
stockholders to consider this Agreement and the Merger (the "COMPANY
STOCKHOLDERS' MEETING") and the meeting of Parent's stockholders to consider the
Parent Voting Proposal (the "PARENT STOCKHOLDERS' MEETING") shall not, on the
date the Joint Proxy Statement is first mailed to stockholders of Company or
Parent, at the time of the Company Stockholders' Meeting and at the time of the
Parent Stockholders' Meeting, contain any statement which, in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Joint Proxy Statement 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
Company Stockholders' Meeting or the Parent Stockholders' Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to Company or any of its Affiliates, officers or directors should be
discovered by Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, Company
shall promptly inform Parent. 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 Joint Proxy Statement, Parent
shall promptly inform Company.
5.16 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Surviving
Corporation shall cause to be maintained in effect (i) for a period of six years
after the Effective Time, the provisions regarding elimination of liability of
directors and indemnification of officers, directors and employees contained in
the Certificate of Incorporation and Bylaws of the Surviving Corporation as set
forth in EXHIBIT L attached hereto, and (ii) for a period of six years after the
Effective Time, the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by Company (provided that
the Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured if available on commercially
reasonable terms) with respect to claims arising from facts or events that
occurred on or before the Effective Time (the "TAIL POLICY").
5.17 AMENDMENT TO COMPANY'S CERTIFICATE OF INCORPORATION. Prior to the
Effective Time, Company shall amend, to the reasonable satisfaction of Parent,
its Certificate of Incorporation, as amended, such that the total Liquidation
Amount due to the holders of the
43
Series A Preferred in connection with the consummation of the Merger does not
exceed the Series A Preferred Merger Consideration.
5.18 MCDONALD LICENSE AGREEMENT. Company agrees to use its commercially
reasonable efforts to cause Dr. Xxxxxx XxXxxxxx to postpone his right to
terminate, and extend the exclusivity of the McDonald License Agreement, each to
May 24, 2005.
5.19 ADDRESS CHANGE NOTICES. Company shall notify, prior to the Effective
Time, all other parties to its License Agreements, Material Contracts, Warrants
and Options of its change of address from 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 to 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000.
5.20 AMENDMENT OF THE WARRANTS. Prior to the Effective Time, Company and
the holders of the Warrants shall amend the Warrants to be substantially in the
form set forth in EXHIBIT O attached hereto. Company shall cause all outstanding
Warrants to be returned to Company for cancellation and Company shall issue to
each holder of a Warrant an Amended Warrant exercisable for the same number of
shares of Series A Preferred in exchange for each such returned Warrant.
5.21 AMEX NONCOMPLIANCE NOTICE. If Parent receives an official written
notice from AMEX to the effect that Parent is not in compliance with the
requirements for contniued listing of the Parent Common Stock on AMEX (a
"NONCOMPLIANCE NOTICE"), Parent shall use its reasonable best efforts to remedy
the deficiencies for continued listing of the Parent Common Stock on AMEX as set
forth in the Noncompliance Notice.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE MERGER. The
respective obligations of each party to this Agreement to consummate 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, by
agreement of all the parties hereto:
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use
commercially reasonable efforts to have such injunction or other order lifted.
(b) GOVERNMENTAL APPROVAL. Other than the filing of the Delaware
Certificate of Merger, Parent, Merger Sub and Company shall have obtained from
each Governmental Entity all approvals, waivers and consents, if any, necessary
for the consummation of the Merger
44
and the transactions contemplated hereby, including such approvals, waivers and
consents as may be required under the Act and state securities laws.
(c) ESCROW AGREEMENT. Parent, the Stockholders and the Escrow Agent
shall have executed and delivered an Escrow Agreement substantially in the form
attached hereto as EXHIBIT C (the "ESCROW AGREEMENT"), and the Escrow Agreement
shall be in full force and effect.
(d) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved by the requisite vote of the stockholders of Company as required
by the Delaware Law and the Parent Voting Proposal shall have been approved by
the requisite vote of the stockholders of Parent as required by the Delaware Law
and AMEX.
(e) REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective under the Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(f) AMEX QUOTATION. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for listing on the AMEX, Nasdaq or any other
national securities exchange upon which the Parent Common Stock is listed as of
the Closing Date.
(g) TAX OPINIONS. Parent and Company shall have received written
opinions of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP and Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx
LLP, respectively, in form and substance reasonably satisfactory to them, dated
as of the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and such
opinions shall not have been withdrawn. In rendering such opinions, counsel
shall be entitled to rely upon, among other things, reasonable assumptions as
well as representations of Parent and Company.
(h) AMEX LISTING. The Parent Common Stock shall be listed on AMEX,
Nasdaq or any other national securities exchange and Parent shall not have
received a Noncompliance Notice.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of
Company to consummate 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, by Company:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
that are qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true and correct in all
respects) on and as of the date made and the Effective Time as though such
representations and warranties were made on and as of such time and Parent and
Merger Sub shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by them prior to the Effective Time, and Company shall have
received a certificate of an officer of each of Parent and Merger Sub, in form
and substance reasonably satisfactory to Company, to that effect.
45
(b) CERTIFICATES AND RESOLUTIONS. As of the Effective Time, Company
shall have received from Parent and Merger Sub (i) a certificate of existence
and good standing from the state of incorporation as to the corporate status of
each of Parent and Merger Sub, (ii) a true and complete copy of the resolutions
of the board of directors, certified by an officer of Parent and of Merger Sub,
respectively, adopted on behalf of each of Parent and Merger Sub, respectively,
authorizing the execution, delivery and performance of this Agreement and all
transactions contemplated hereby, and (iii) results of the vote of the
stockholders of Parent approving the Parent Voting Proposal, certified by an
officer of Parent.
(c) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of Parent, it being understood and agreed that a change in
the market price of Parent Common Stock, in and of itself, shall not be deemed
to constitute such a material adverse change.
(d) CONSENTS. All required consents and approvals of third parties to
material contracts with Parent, Merger Sub or any of Parent's subsidiaries shall
have been obtained and be in effect at the Effective Time.
(e) OPINION OF COUNSEL. Company shall have received a legal opinion,
dated as of the Effective Time, from Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel to
Parent and Merger Sub, substantially in the form attached hereto as EXHIBIT G.
(f) BOARD MEMBERS. As of the Effective Time, the Parent Board shall
consist of nine members, three of whom shall be Xx. Xxxx, Mr. Rico and Xx.
Xxxxx.
(g) EMPLOYMENT AND CONSULTING AGREEMENTS.
(i) Parent shall have executed and delivered a consulting
agreement with Xx. Xxxxxxxxxxxxx substantially in the form attached hereto
as EXHIBIT J (the "XXXXXXXXXXXXX CONSULTING AGREEMENT").
(ii) Parent shall have executed and delivered an employment
agreement with Xx. Xxxx substantially in the form attached hereto as
EXHIBIT D (the "BIER EMPLOYMENT AGREEMENT").
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement 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, by Parent and Merger Sub:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Company in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) on and as of the
date made and the Effective Time as though such representations and warranties
were made on and as of such time, without giving effect to any supplement or
amendment to the
46
Company Disclosure Schedule, and Company shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate of
an officer of Company, in a form reasonably satisfactory to Parent and Merger
Sub, to that effect.
(b) CERTIFICATES AND RESOLUTIONS. As of the Effective Time, Parent
and Merger Sub shall have received from Company (i) a certificate of existence
and good standing from the state of incorporation as to the status of Company
and each of its Subsidiaries, (ii) a true and complete copy of the resolutions
of the board of directors, certified by an officer of Company adopted on behalf
of Company, authorizing the execution, delivery and performance of this
Agreement and all transactions contemplated hereby, and (iii) results of the
vote of the stockholders of Company approving this Agreement and the Merger,
certified by an officer of Company.
(c) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations, results
of operations or prospects of Company or any of its Subsidiaries.
(d) RESIGNATION OF DIRECTORS AND OFFICERS. The directors and officers
of Company and each of its Subsidiaries in office immediately prior to the
Effective Time shall have resigned as directors and officers, as applicable, of
Company and each of its Subsidiaries effective as of the Effective Time.
(e) OPINION OF COUNSEL. Parent shall have received legal opinions,
dated as of the Effective Time, from Kramer, Levin, Naftalis & Xxxxxxx LLP,
counsel to Company, and from Lyon & Lyon, LLP, intellectual property counsel to
Company, substantially in the forms attached hereto as EXHIBIT H.
(f) EMPLOYMENT AND CONSULTING AGREEMENTS; EMPLOYEES.
(i) The waivers and/or amendments to the Employment Agreements
described in Section 5.6(a) shall have been executed and delivered to
Parent, and the same shall be in full force and effect; Xx. Xxxxxx and
Company shall have terminated the Xxxxxx Employment Agreement as provided
in Section 5.6(b); Xx. Xxxxxxxxxxxxx and Company shall have terminated the
Xxxxxxxxxxxxx Employment Agreement as provided in Section 5.6(c); and all
employees of Company and each of its Subsidiaries shall have been
terminated as provided in Section 5.6(d).
(ii) Xx. Xxxxxxxxxxxxx shall have executed and delivered the
Xxxxxxxxxxxxx Consulting Agreement.
(iii) Xx. Xxxx shall have executed and delivered the Bier
Employment Agreement.
47
(g) CONSENTS. All required consents and approvals of third parties to
material contracts with Company and each of its Subsidiaries shall have been
obtained and be in effect at the Effective Time.
(h) COMPANY SECURITIES. No securities of Company shall be outstanding
other than Company Stock, the Amended Warrants and the Company Options set forth
in Section 2.23 of the Company Disclosure Schedule; Company shall be under no
obligation to pay any dividends on, or issue any of, its securities; and there
shall be no right to receive any shares of Parent Common Stock issued as Merger
Consideration other than by the exchange of shares of Company Stock for shares
of Parent Common Stock as provided in Section 1.8.
(i) DISSENTER'S RIGHTS. Security holders of Company entitled to
receive in excess of 250,000 shares of Parent Common Stock in the aggregate as
Merger Consideration shall not have exercised their appraisal rights under
Section 262 of the Delaware Law.
(j) FAIRNESS OPINION. The opinion of Xxxxx Fargo Xxx Xxxxxx,
financial consultant to Parent, shall not have been withdrawn and shall be in
full force and effect.
(k) NONCOMPETITION AGREEMENT. Xx. Xxxxxx shall have executed and
delivered to Parent a noncompetition/nonsolicitation agreement substantially in
the form attached hereto as EXHIBIT K and the same shall be in full force and
effect.
(l) AMENDMENT TO COMPANY'S CERTIFICATE OF INCORPORATION. Company
shall have amended, to the reasonable satisfaction of Parent, its Certificate of
Incorporation, as amended, such that the total Liquidation Amount due to the
holders of the Series A Preferred in connection with the consummation of the
Merger does not exceed the Series A Preferred Merger Consideration.
(m) AMENDMENT TO PARENT'S AMENDED AND RESTATED 1995 OMNIBUS PLAN. The
stockholders of Parent shall have approved an amendment to Parent's Amended and
Restated 1995 Omnibus Plan increasing the number of shares authorized for
issuance thereunder to four million five hundred thousand (4,500,000) shares.
(n) AMENDMENT OF WARRANTS. Company and the holders of the Warrants
shall have amended the Warrants to be substantially in the form attached hereto
as EXHIBIT O.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of Parent or Company, this Agreement may be terminated:
(a) by mutual agreement in writing, duly authorized by each of the
Boards of Directors of Parent and Company.
48
(b) By Parent:
(i) by written notice to Company, if Company shall breach in any
material respect any representation, warranty, obligation or agreement
hereunder (except for such representations and warranties that are
qualified by their terms by reference to materiality, which representations
and warranties as so qualified shall have been breached in any respect) and
such breach shall not have been cured within ten (10) business days of
receipt by Company of written notice of such breach (except that such 10
business day period shall not be applicable for a breach which cannot be
cured), PROVIDED that the right to terminate this Agreement by Parent under
this Section 7.1(b)(i) shall not be available to Parent where Parent or
Merger Sub is at that time in breach of this Agreement;
(ii) if the Merger is not completed by December 31, 2001 other
than on account of delay or a breach of the representations and warranties
or a failure to comply with a covenant or agreement contained in this
Agreement on the part of Parent or Merger Sub or a failure to satisfy the
conditions set forth in Sections 6.1 or 6.2 on the part of Parent or Merger
Sub; PROVIDED, HOWEVER, that if Parent has received a Noncompliance Notice,
Parent may not terminate this Agreement pursuant to this Section 7.1(b)(ii)
for a period of 120 days after receipt by Parent of the Noncompliance
Notice (the "AMEX DELISTING CURE PERIOD");
(iii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of Parent, Merger Sub
or any of Parent's five percent (5%) stockholders or any of their
affiliates or associates other than (A) any stockholders of Company or
their affiliates having direct or indirect beneficial ownership of any
securities of Parent, or (B) Xx. Xxxxxxx Xxxxxxxxx or his affiliates,
relatives or any entity in which Xx. Xxxxxxxxx has any direct or indirect
beneficial ownership interest;
(iv) [RESERVED];
(v) if, (A) at the Company Stockholders' Meeting (including any
adjournment or postponement thereof), the requisite vote of the
stockholders of Company in favor of this Agreement and the Merger shall not
have been obtained, or (B) if at the Parent Stockholders' Meeting
(including any adjournment or postponement thereof), the requisite vote of
the stockholders of Parent in favor of the Parent Voting Proposal shall not
have been obtained;
(vi) if the Company Board shall have withdrawn or modified, in a
manner adverse to Parent, its recommendation of this Agreement or the
Merger; or
(vii) if the Company Board shall have recommended or otherwise
endorsed a Competing Proposal to the stockholders of Company.
(c) By Company:
(i) by written notice to Parent, if Parent or Merger Sub shall
breach in any material respect any representation, warranty, obligation or
agreement hereunder
49
(except for such representations and warranties that are qualified by their
terms by reference to materiality, which representations and warranties as
so qualified shall have been breached in any respect) and such breach shall
not have been cured within ten (10) business days following receipt by
Parent of written notice of such breach (except that such 10 business day
period shall not be applicable for a breach which cannot be cured),
PROVIDED that the right to terminate this Agreement by Company under this
Section 7.1(c)(i) shall not be available to Company where Company is at
that time in breach of this Agreement;
(ii) if the Merger is not completed by December 31, 2001, other
than on account of delay or a breach of the representations and warranties
or a failure to comply with a covenant or agreement contained in this
Agreement on the part of Company or a failure to satisfy the conditions set
forth in Sections 6.1 or 6.3 on the part of Company; PROVIDED, HOWEVER,
that if Parent has received a Noncompliance Notice, Company may not
terminate this Agreement pursuant to this Section 7.1(c)(ii) until such
time as the AMEX Delisting Cure Period shall have expired;
(iii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of Company, any of its
Subsidiaries, or any of their five percent (5%) stockholders, or any of
their affiliates or associates;
(iv) [RESERVED];
(v) if, at the Parent Stockholders' Meeting (including any
adjournment or postponement thereof), the requisite vote of the
stockholders of Parent in favor of the Parent Voting Proposal shall not
have been obtained; or
(vi) if the Parent Board shall have withdrawn or modified, in a
manner adverse to Company, its recommendation of the Parent Voting
Proposal.
(d) Any termination of this Agreement pursuant to this Section 7.1
shall be effective immediately upon delivery of written notice of termination by
the terminating party to the other parties hereto.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub, or
Company or their respective officers, directors, shareholders or affiliates;
PROVIDED that the provisions of Section 5.2 (Confidentiality), Section 7.3
(Certain Payments), Section 9.1 (Expenses), Article IX (General Provisions) and
this Section 7.2 shall remain in full force and effect and survive any
termination of this Agreement. Nothing in this Section 7.2 shall relieve any
party from liability for any breach of this Agreement. The rights and remedies
available to each party are expressly intended to be cumulative and may be
exercised singly or concurrently at such party's sole discretion.
7.3 CERTAIN PAYMENTS.
(a) COMPANY PAYMENTS. Company shall pay Parent a termination fee of
$1,000,000, plus all appropriately documented reasonable out-of-pocket costs and
expenses
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incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the reasonable fees, costs and expenses
of its advisors, accountants and legal counsel), upon the earliest to occur of
the following events:
(i) the termination of this Agreement by Parent pursuant to
Section 7.1(b)(i), where prior to such termination a Competing Proposal or
any indication of interest for a Competing Proposal was made or came to the
attention of Company, and within twelve (12) months after the date of such
termination Company consummates, or executes documentation providing for,
such a Competing Proposal; or
(ii) the termination of this Agreement by Parent pursuant to
Sections 7.1(b)(v)(A), 7.1(b)(vi) or 7.1(b)(vii).
(b) PARENT PAYMENTS. Parent shall pay Company a termination fee of
$1,000,000, plus all appropriately documented reasonable out-of-pocket costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the reasonable fees, costs
and expenses of its advisors, accountants and legal counsel), upon the earliest
to occur of the following events:
(i) the termination of this Agreement by Company pursuant to
Section 7.1(c)(i), where prior to such termination a Parent Proposal or any
indication of interest for a Parent Proposal was made or came to the
attention of Parent, and within twelve (12) months after the date of such
termination Parent consummates, or executes documentation providing for,
such a Parent Proposal;
(ii) the termination of this Agreement by Company pursuant to
Section 7.1(c)(vi); or
(iii) the termination of this Agreement by Parent pursuant to
Section 7.1(b)(v)(B) and stockholders representing greater than fifty
percent (50%) of the outstanding stock of Parent eligible to vote on the
Parent Voting Proposal vote against the Parent Voting Proposal, excluding
for the purposes of such calculation the votes of (A) any stockholders of
Company or their affiliates having direct or indirect beneficial ownership
of any securities of Parent, and (B) Xx. Xxxxxxxxx or his affiliates,
relatives or any entity in which Xx. Xxxxxxxxx has any direct or indirect
beneficial ownership interest.
(c) TIMING OF PAYMENTS. The payment obligations set forth in this
Section 7.3 shall be paid in immediately available funds within one (1) business
day after written demand has been made by the other party pursuant to the
notification requirements of Section 9.2.
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ARTICLE VIII
REMEDIES, ESCROW AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements of Parent, Merger Sub and
Company contained in this Agreement shall survive the Closing and continue in
full force and effect until March 31, 2003.
8.2 ESCROW FUND. In accordance with Sections 1.6(a) and 1.8(b) hereof,
Parent shall deliver to Xxxxx Fargo Bank Minnesota, National Association, as
escrow agent (the "ESCROW AGENT"), an aggregate of 1,350,000 shares of the
Merger Consideration payable to the Stockholders (the "ESCROW FUND"). The Escrow
Fund shall be held by the Escrow Agent pursuant to the terms set forth in the
Escrow Agreement. The Escrow Fund shall be available to compensate Parent, the
Surviving Corporation and the other Indemnified Persons (as defined in Section
8.6) pursuant to the indemnification obligations of the Stockholders in
accordance with this Article VIII and the Escrow Agreement.
8.3 LIMITATIONS ON INDEMNIFICATION.
(a) MINIMUM CLAIM. Parent or the Surviving Corporation on the one
hand and Company (prior to the Effective Time) or the Stockholders (subsequent
to the Effective Time) on the other hand shall not be entitled to make a claim
for indemnification pursuant to Sections 8.4 and 8.5, respectively, unless and
until the aggregate amount of Damages (as defined in Section 8.4(a)) incurred by
the party making such claim exceeds $100,000 (the "BASKET"), at which time the
party seeking indemnification may recover the aggregate amount of Damages
beginning with the first dollar thereof irrespective of the Basket; PROVIDED,
HOWEVER, that the Basket shall not apply to Damages arising out of claims
pursuant to Section 8.4(ii) or Damages resulting from, relating to, arising out
of or constituting a breach of any covenant or agreement of Company in Section
9.1.
(b) CAP. Notwithstanding any other provision of this Agreement, the
indemnification obligations of Parent and the Surviving Corporation on the one
hand and Company (prior to the Effective Time) and the Stockholders (subsequent
to the Effective Time) on the other hand pursuant to Sections 8.4 and 8.5,
respectively, will not exceed in the aggregate for such person or persons the
Closing Date Fair Market Value (as defined in Section 8.3(d)) of 1,350,000
shares of Parent Common Stock (the "CAP"); PROVIDED, HOWEVER, that the
indemnification obligations of Company (prior to the Effective Time) and the
Stockholders (subsequent to the Effective Time) pursuant to Section 8.4(ii) will
not exceed in the aggregate $200,000. Notwithstanding the foregoing, (i) all
claims by Indemnified Persons (as defined in Section 8.4) for Damages (as
defined in Section 8.4) pursuant to Section 8.4 subsequent to the Closing shall,
subject to Section 8.3(c), be satisfied only from the Escrow Fund and (ii) all
claims by Indemnified Persons for Damages pursuant to Section 8.5 subsequent to
the Closing shall be limited to the Closing Date Fair Market Value of the
aggregate number of shares of Parent Common Stock in the Escrow Fund on the date
such claim is deemed delivered to Parent or the Surviving Corporation pursuant
to Section 9.2.
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(c) PAYMENT. Subject to the provisions of this Section 8.3, (i)
Company (prior to the Effective Time) or the Stockholders (subsequent to the
Effective Time) shall indemnify Parent, the Surviving Corporation and the other
Indemnified Persons pursuant to Section 8.4 below by payment in, at the option
of Company or the Stockholders, as the case may be, either (A) cash equal to the
amount for which such persons are to be indemnified (with a corresponding
reduction in the number of shares in the Escrow Fund calculated pursuant to
subparagraph (B) below), or (B) shares of Parent Common Stock, properly endorsed
and transferred to such person, free and clear of all liens, claims and
encumbrances, with a value equal to the amount for which such person is to be
indemnified (each share of Parent Common Stock for such purposes shall have a
value equal to the Closing Date Fair Market Value), and (ii) Parent shall
indemnify Company (prior to the Effective Time) or the Stockholders (subsequent
to the Effective Time) pursuant to Section 8.5 below by payment in, at the
option of Parent, either (x) cash equal to the amount for which such person is
to be indemnified, or (y) issuing Parent Common Stock to Company or the
Stockholders, as the case may be, with a Closing Date Fair Market Value equal to
the amount for which Company or the Stockholders, as the case may be, are to be
indemnified.
(d) CLOSING DATE FAIR MARKET VALUE. For purposes of this Agreement,
"CLOSING DATE FAIR MARKET VALUE" shall mean, per share of Parent Common Stock,
(i) prior to the Closing, $1.50 or (ii) subsequent to the Closing, the average
closing price of the Parent Common Stock as reported on the AMEX for the thirty
trading days prior to the Closing Date.
(e) MATERIALITY. In determining the amount of any Damages
attributable to a breach, any materiality standard contained in a
representation, warranty or covenant shall be disregarded.
8.4 INDEMNIFICATION BY THE STOCKHOLDERS. Subject to the terms and
conditions set forth in Section 8.3, Company (prior to the Effective Time) or
the Stockholders (subsequent to the Effective Time), jointly and severally with
respect to the Stockholders, shall indemnify Parent, the Surviving Corporation
and their respective directors, officers, employees, agents or advisors, or any
of their respective successors and assigns, in respect of, and hold each of them
harmless against, any and all demands, claims, debts, actions, assessments,
judgements, settlements, sanctions, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, known or unknown, due or to
become due or otherwise), monetary damages, fines, taxes, fees, penalties,
interest obligations, deficiencies, losses, costs and expenses (including,
without limitation, amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation) ("DAMAGES",
PROVIDED, HOWEVER, that Damages shall not include any consequential, speculative
or punitive damages incurred by an Indemnified Person unless actually paid to a
third party as a result of a third party claim), incurred or suffered by them
(i) resulting from, relating to, arising out of or constituting any breach of
any representation or warranty or failure to perform any covenant or agreement
of Company or the Stockholders contained, or referred to, in the Transaction
Agreements or in any certificate, agreement, letter or document delivered hereby
or thereby, or in connection with any lawsuit or claim brought against Company
or any of its Subsidiaries related to actions taken by Company or any of its
Subsidiaries prior to the Closing (including any Damages suffered through and
after the applicable survival period); or (ii) resulting from, relating to,
arising out of or in connection with the dispute set forth in Section 2.19 of
the Company Disclosure Schedule related to the
53
Exclusive License Agreement dated April 14, 1998 by and among Dr. Xxxx Xxxxxx,
Dr. Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxx and Xxxxxx Xxxxxxxx and RxEyes, Inc.,
including, without limitation, the payment of any penalties pursuant thereto or
the termination thereof and the loss of any license(s) thereunder, in each case
arising directly from such dispute (including any Damages suffered through and
after the applicable survival period); PROVIDED, HOWEVER, that Parent makes a
written claim for indemnification against Company (prior to the Effective Time)
or the Stockholder Representative (as defined in the Escrow Agreement)
(subsequent to the Effective Time) pursuant to this Section 8.4 and Section 9.2
within the survival period set forth in Section 8.1.
8.5 INDEMNIFICATION BY PARENT AND SURVIVING CORPORATION. Subject to the
terms and conditions set forth in Section 8.3, Parent and the Surviving
Corporation, jointly and severally, shall indemnify Company (prior to the
Effective Time) or the Stockholders (subsequent to the Effective Time) and hold
each of them harmless against any and all Damages incurred or suffered by them
resulting from, relating to, arising out of or constituting any breach of any
representation or warranty or any failure to perform any covenant or agreement
of Parent or Merger Sub contained, or referred to, in the Transaction Agreements
or in any certificate, agreement, letter or document delivered hereby or thereby
(including any Damages suffered through and after the applicable survival
period); PROVIDED, HOWEVER, that Company or the Stockholders, as the case may
be, makes a written claim for indemnification against Parent pursuant to this
Section 8.5 and Section 9.2 within the survival period set forth in Section 8.1.
8.6 THIRD PARTY CLAIMS. Any party entitled to make a claim (or any of
their affiliated parties (each an "INDEMNIFIED PERSON")) pursuant to this
Article VIII shall give prompt written notification to the party obligated to
provide such indemnification (the "INDEMNIFYING PERSON") of the commencement
of any action, suit or proceeding relating to a third party claim for which
indemnification pursuant to this Article VIII may be sought; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Person in notifying the
Indemnifying Person shall relieve the Indemnifying Person from any liability
or obligation under this Article VIII unless such notification delay shall
prejudice the Indemnifying Person. Within 30 days after delivery of such
notification, the Indemnifying Person may, upon written notice thereof to the
Indemnified Person, assume control of the defense of such action, suit or
proceeding with counsel reasonably satisfactory to the Indemnified Person
(and the Indemnified Person agrees to execute such documents as are necessary
to permit the Indemnifying Person to control such defense). If the
Indemnifying Person does not so assume control of such defense, the
Indemnified Person shall control such defense. The party not controlling such
defense may participate therein at its own cost and expense; PROVIDED, that
if the Indemnifying Person assumes control of such defense and the
Indemnified Person is advised by counsel in writing that the Indemnifying
Person and the Indemnified Person may have materially conflicting interests
or different defenses available with respect to such action, suit or
proceeding, the reasonable fees and expenses of counsel to the parties shall
be considered "DAMAGES" for purposes of this Agreement. The party controlling
such defense shall keep the other party advised of the status of such action,
suit or proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. The
Indemnifying Person shall not agree to any settlement or the entry of a
judgment in any action, suit or proceeding without the prior written consent
of the Indemnified Person, which consent shall not be unreasonably withheld.
54
ARTICLE IX
GENERAL PROVISIONS
9.1 EXPENSES. Except as provided in Section 7.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees, costs and expenses of its
advisers, accountants and legal counsel) shall be paid by the party incurring
such expense, whether or not the Merger is consummated, PROVIDED, HOWEVER, that
(i) the filing fee for the Joint Proxy Statement and the Registration Statement
shall be shared equally by Parent and Company, (ii) the fees of the Escrow Agent
shall be shared equally by Parent and Company, (iii) the cost of the Tail Policy
shall be shared equally by Parent and Company, (iv) any refund or return of
funds due to the cancellation of directors' and officers' liability insurance
and fiduciary liability insurance maintained by Company shall be applied to the
costs of the Tail Policy, and (v) all fees, costs and expenses, other than those
fees, costs and expenses specified in subsections (i), (ii) and (iii) of this
Section 9.1, incurred on behalf of Company and each of its Subsidiaries in
connection with this Agreement and the transactions contemplated hereby shall be
based on customary hourly rates and shall not exceed $425,000 in the aggregate
(subject to certain limited increases as provided below, the "TRANSACTION FEE
LIMIT"); PROVIDED, HOWEVER, that for any such fees, costs and expenses under
subparagraph (v) above in excess of $425,000 ("EXCESS FEES"), two thirds of such
Excess Fees shall be deemed Damages under Section 8.4 and the Transaction Fee
Limit shall be increased by the value of the remaining one third of the Excess
Fees (the "TRANSACTION FEE FORMULA"). Notwithstanding anything to the contrary
herein, in no event shall the Transaction Fee Limit be increased beyond $475,000
and the Transaction Fee Formula shall not apply to any Excess Fees to the extent
that the Transaction Fee Limit would be increased beyond $475,000.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, the next business day
if delivered by commercial delivery service or by reputable overnight courier,
the third business day if mailed by registered or certified mail (return receipt
requested), or the day of transmission if a business day or, if not, the next
business day thereafter, if sent via facsimile (with confirmation of receipt) to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, Merger Sub or Surviving Corporation, to:
Endorex Corporation
00000 Xxxxxxx Xxxxx, Xxxxx X
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
President and CEO
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxxxxx Xxxx.
Xxxxx 000
00
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to Company, to:
Corporate Technology Development, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Kramer, Levin, Naftalis & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(c) if to the Stockholder Representative, to:
Xxxxx X. Xxxxx
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
With a copy to:
Kramer, Levin, Naftalis & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
9.3 CERTAIN DEFINITIONS; INTERPRETATION. In this Agreement, any reference
to a "MATERIAL ADVERSE EFFECT" with respect to any entity or group of entities
means any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity. In
this Agreement, any reference to "knowledge of Company" or "Company's knowledge"
shall mean the knowledge, after due inquiry, by Company of each of its
Subsidiaries or any of its or their officers, directors or employees. When a
reference is made in this Agreement to a Section, an Article, an Exhibit or a
Schedule, such reference shall be to a Section or Article of this Agreement or
an Exhibit or Schedule 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 "but are not limited to," "but is not limited
to" and "but not limited to," respectively. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such
56
information is to be made available. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
9.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 ENTIRE AGREEMENT; PARTIES IN INTEREST; NONASSIGNABILITY. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits and
Schedules and the Company Disclosure Schedule and the Parent Disclosure Schedule
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,
including, without limitation, the Confidentiality Agreement dated October 18,
2000 by and between Parent and Company and the Letter of Intent dated February
27, 2001 by and between Parent and Company. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void; PROVIDED, HOWEVER, that Parent may assign or
transfer this Agreement to a successor corporation or other successor entity in
the event of a merger, acquisition, consolidation or other transfer related to a
reorganization by Parent. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
9.6 SEVERABILITY.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or obligations
of any party hereto under this Agreement will not be materially and adversely
affected thereby, (i) such provision will be fully severable, (ii) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to such
state's principles of conflicts of law.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation 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.
57
9.9 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.
9.10 NO THIRD-PARTY BENEFICIARY. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors and permitted assigns, and it is not the intention of the parties to
confer upon any other person or entity any rights or remedies; PROVIDED,
HOWEVER, that the provisions of Section 5.16 are intended for the benefit of
Messrs. Kanzer, Stergiopoulos, Bier, Rico and Xxxxx, who were all of the
officers and directors of Company as of the Effective Time.
9.11 ATTORNEYS' FEES. If any action at law or equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs, expenses and disbursements in
addition to any other relief to which that party may be entitled.
9.12 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
[SIGNATURE PAGES TO FOLLOW.]
58
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan
of Merger and Reorganization to be executed and delivered by their respective
officers thereunto duly authorized, as of the date first written above.
PARENT:
ENDOREX CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------------
Title: President and Ceo
---------------------------------
MERGER SUB:
ROADRUNNER ACQUISITION, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
----------------------------------
Title: President
---------------------------------
COMPANY:
CORPORATE TECHNOLOGY DEVELOPMENT, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
----------------------------------
Title: President
---------------------------------
