EXHIBIT 2.2
EXECUTION COPY
ACQUISITION AGREEMENT
dated as of
September 28, 2004
by and between
SOLEXA LIMITED
and
LYNX THERAPEUTICS, INC.
TABLE OF CONTENTS
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ARTICLE I THE OFFER................................................................................................... 2
SECTION 1.1 The Offer........................................................................................ 2
SECTION 1.2 Company Actions With Respect to the Offer........................................................ 6
SECTION 1.3 Boards of Directors.............................................................................. 6
SECTION 1.4 Stock Options and Stock Plans.................................................................... 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................. 8
SECTION 2.1 Information and Executives; Organization and Qualification....................................... 8
SECTION 2.2 Company Financial Statements..................................................................... 8
SECTION 2.3 Events since the Company Balance Sheet Date...................................................... 9
SECTION 2.4 Taxes............................................................................................ 10
SECTION 2.5 Litigation....................................................................................... 11
SECTION 2.6 Property and the Environment..................................................................... 12
SECTION 2.7 Intellectual Property............................................................................ 13
SECTION 2.8 Assets, Debts and Stock.......................................................................... 16
SECTION 2.9 Contracts with Connected Persons................................................................. 16
SECTION 2.10 Employment Arrangements; Employee Benefits....................................................... 17
SECTION 2.11 Statutory and Legal Requirements................................................................. 18
SECTION 2.12 Records and Registers; Memorandum of Association and Articles of Association..................... 19
SECTION 2.13 Insurance........................................................................................ 19
SECTION 2.14 Group Structure.................................................................................. 19
SECTION 2.15 Agreements and Capital Commitments............................................................... 19
SECTION 2.16 Borrowings and Facilities........................................................................ 20
SECTION 2.17 Government Grants................................................................................ 20
SECTION 2.18 Internal Accounting Controls..................................................................... 20
SECTION 2.19 Authority and Enforceability; No Conflicts....................................................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT.................................................................. 21
SECTION 3.1 Subsidiaries..................................................................................... 21
SECTION 3.2 Organization and Qualification................................................................... 21
SECTION 3.3 Authorization; Enforcement....................................................................... 21
SECTION 3.4 No Conflicts..................................................................................... 21
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SECTION 3.5 Capitalization................................................................................... 22
SECTION 3.6 SEC Reports; Financial Statements................................................................ 22
SECTION 3.7 Material Changes................................................................................. 23
SECTION 3.8 Absence of Litigation............................................................................ 23
SECTION 3.9 Compliance....................................................................................... 23
SECTION 3.10 Title to Assets.................................................................................. 23
SECTION 3.11 Form S-3 Eligibility............................................................................. 24
SECTION 3.12 Listing and Maintenance Requirements............................................................. 24
SECTION 3.13 Registration Rights.............................................................................. 24
SECTION 3.14 Disclosure....................................................................................... 24
SECTION 3.15 Intellectual Property............................................................................ 24
SECTION 3.16 Insurance........................................................................................ 26
SECTION 3.17 Regulatory Permits............................................................................... 26
SECTION 3.18 Transactions With Affiliates and Employees....................................................... 26
SECTION 3.19 Internal Accounting Controls..................................................................... 26
SECTION 3.20 Employee Benefit Plans; Employee Benefits........................................................ 26
SECTION 3.21 Taxes............................................................................................ 28
SECTION 3.22 Material Contracts............................................................................... 28
SECTION 3.23 Financial Advisor................................................................................ 30
SECTION 3.24 Opinion of Financial Advisor..................................................................... 30
SECTION 3.25 No Restrictions on the Offer; Takeover Statutes.................................................. 30
ARTICLE IV COVENANTS OF THE COMPANY................................................................................... 30
SECTION 4.1 Conduct of Business.............................................................................. 30
SECTION 4.2 Access to Information............................................................................ 32
SECTION 4.3 Waiver of Change of Control and Acceleration Benefits............................................ 32
SECTION 4.4 No Solicitation.................................................................................. 32
ARTICLE V COVENANTS OF PARENT......................................................................................... 34
SECTION 5.1 Conduct of Business.............................................................................. 34
SECTION 5.2 Access to Information............................................................................ 36
SECTION 5.3 No Solicitation.................................................................................. 36
SECTION 5.4 Listing of Additional Shares..................................................................... 37
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SECTION 5.5 Director and Officer Liability................................................................... 37
SECTION 5.6 Section 16 Matters............................................................................... 38
SECTION 5.7 Compulsory Acquisition........................................................................... 38
SECTION 5.8 Waiver of Change of Control and Acceleration Benefits............................................ 38
ARTICLE VI COVENANTS OF PARENT AND THE COMPANY........................................................................ 38
SECTION 6.1 Reasonable Efforts; Notification................................................................. 38
SECTION 6.2 Public Announcements............................................................................. 39
SECTION 6.3 Modified Agreements.............................................................................. 39
SECTION 6.4 Joint Remuneration Planning Committee............................................................ 39
SECTION 6.5 Certain Tax Matters.............................................................................. 40
ARTICLE VII TERMINATION............................................................................................... 40
SECTION 7.1 Termination...................................................................................... 40
SECTION 7.2 Effect of Termination............................................................................ 42
ARTICLE VIII MISCELLANEOUS............................................................................................ 42
SECTION 8.1 Notices.......................................................................................... 42
SECTION 8.2 Survival of Representations and Warranties....................................................... 43
SECTION 8.3 Amendments; No Waivers........................................................................... 43
SECTION 8.4 Fees and Expenses................................................................................ 43
SECTION 8.5 Successors and Assigns; Parties in Interest...................................................... 43
SECTION 8.6 Governing Law; Enforcement....................................................................... 44
SECTION 8.7 Counterparts; Effectiveness; Interpretation...................................................... 44
SECTION 8.8 Entire Agreement................................................................................. 44
SECTION 8.9 Definitions...................................................................................... 44
ANNEXES
Annex A - Conditions of the Offer
SCHEDULES
Schedule 1 - Company Shareholders and Optionholders Executing a Company Support Agreement
Schedule 2 - Parent Stockholders and Optionholders Executing a Parent Support Agreement
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EXHIBITS
Exhibit A - Form of Company Support Agreement
Exhibit B - Form of Parent Support Agreement
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ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (this "AGREEMENT"), dated as of September 28, 2004,
by and between Solexa Limited, a company registered in England and Wales having
its principal place of business at Chesterford Research Park, Little
Chesterford, Nr Saffron Walden, Essex, Great Britain CB10 1XL (the "COMPANY")
and Lynx Therapeutics, Inc., a Delaware corporation having its principal place
of business at 00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 ("PARENT").
WHEREAS, the Board of Directors of the Company or a duly authorized
sub-committee appointed by the Board of Directors of the Company (the "COMPANY
BOARD") has unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Option Offer (each as defined
below) are in the best interests of the Company, (ii) approved this Agreement
and the transactions contemplated hereby, and (iii) resolved to recommend that
the shareholders of the Company accept the Offer;
WHEREAS, the Board of Directors of Parent (the "PARENT BOARD") has
unanimously resolved (i) that this Agreement and the transactions contemplated
hereby, including the issuance of shares of Parent common stock, par value $0.01
per share ("PARENT COMMON STOCK"), in connection with the Offer and the Option
Offer, are fair to and in the best interest of the stockholders of Parent, (ii)
to approve this Agreement and the transactions contemplated hereby, and (iii) to
recommend that the stockholders of Parent approve the issuance of the shares of
Parent Common Stock in connection with the Offer and the Option Offer and
approve the other matters referred to in Section 1.1(f) of this Agreement;
WHEREAS, in furtherance thereof, it is proposed that Parent shall, as
promptly as practicable following the Effective Date (as defined below),
commence (i) an exchange offer (the "OFFER") to acquire all of the outstanding
`B' preferred shares of (pound)0.0025 each in the capital of the Company (the "B
PREFERRED SHARES"), to acquire all of the outstanding `A' ordinary shares of
(pound)0.0025 each in the capital of the Company (the "A ORDINARY SHARES"), and
to acquire all of the outstanding ordinary shares of (pound)0.0025 each in the
capital of the Company (the "ORDINARY SHARES" and, together with the B Preferred
Shares and the A Ordinary Shares, the "SHARES"), in exchange for shares of
Parent Common Stock, and (ii) the Option Offer (as defined below), each in
accordance with the terms and subject to the conditions provided herein;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
the Company shareholders and optionholders identified on Schedule 1 to this
Agreement are entering into Company Support Agreements in substantially the form
attached hereto as Exhibit A (the "COMPANY SUPPORT AGREEMENTS");
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Company's willingness to enter into this
Agreement, the Parent stockholders and optionholders identified on Schedule 2 to
this Agreement are entering into Parent Support Agreements in substantially the
form attached hereto as Exhibit B (the "PARENT SUPPORT AGREEMENTS");
WHEREAS, Parent and the Company have previously entered into a Loan
Agreement, dated as of August 12, 2004 (the "LOAN AGREEMENT"), which provides
for the terms and conditions on which the Company has made certain loans to, and
would make certain loans to Parent following the date hereof, and further
provides for certain rights and remedies of the parties in the event that this
Agreement shall be terminated prior to the consummation of the Offer;
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WHEREAS, concurrently with the execution of this Agreement, Parent and the
Company have entered into a letter agreement setting forth the parties'
agreement as to the interpretation of certain of the terms of the Loan Agreement
as they relate to the provisions of this Agreement (the "LOAN AGREEMENT SIDE
LETTER");
WHEREAS, the parties intend that the exchange of shares contemplated by
the Offer will qualify as a tax-free rollover of shares under Sections 126-138A
of the United Kingdom Taxation of Chargeable Gains Act of 1992 (the "TCGA") and
as a "reorganization" for United States federal income tax purposes within the
meaning of Section 368(a) of the United States Internal Revenue Code of 1986
(the "CODE"); and
WHEREAS, Parent and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the Option
Offer and also to prescribe various conditions to consummation of the Offer and
the Option Offer.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer.
(a) Provided that (i) this Agreement shall not have been terminated in
accordance with Section 7.1 and (ii) no event set forth in Annex A hereto shall
have occurred and be continuing (unless such event shall have been waived by
Parent or the Company, as applicable), as promptly as practicable following the
effective date of the Registration Statement referred to in Section 1.1(d) below
(the "EFFECTIVE DATE"), Parent shall commence the Offer for any and all of the
Shares at the various Exchange Ratios contemplated by Section 1.1(b) below. The
obligation of Parent to first issue shares of Parent Common Stock in exchange
for Shares pursuant to the Offer (the "FIRST CLOSING") shall be subject only to
(i) the valid acceptances of the Offer (and not, where permitted, withdrawn) by
holders of at least ninety percent (90%) in nominal value of each of the issued
B Preferred Shares, the issued A Ordinary Shares and the issued Ordinary Shares
to which the Offer relates (the "MINIMUM CONDITION") (and the expression "Offer"
shall be construed in accordance with section 428 of the United Kingdom
Companies Act 1985 (the "COMPANIES ACT")), and (ii) the satisfaction or waiver
(in accordance with the terms of this Section 1.1 (a)) of the other conditions
set forth in Annex A. Parent shall not make any changes in the terms and
conditions of the Offer without the prior written approval of the Company. It is
agreed that the conditions set forth in Section 1 of Annex A are for the sole
benefit of Parent and may be waived by Parent (and only by Parent), in whole or
in part at any time and from time to time, in its sole discretion. It is agreed
that the conditions set forth in Section 2 of Annex A are for the sole benefit
of the Company and may be waived by the Company (and only by the Company), in
whole or in part at any time and from time to time, in its sole discretion. To
evidence the satisfaction of the conditions set forth in Section 2 of Annex A,
the Company shall deliver to Parent on the First Closing Date (as defined below)
a certificate, executed by the Chief Executive Officer of the Company,
indicating the Company's concurrence that the conditions set forth in Section 2
of Annex A shall have been satisfied. Parent shall not be permitted to issue
Parent Common Stock in exchange for Shares pursuant to the Offer until after it
has received the certificate described in the preceding sentence from the
Company. The failure by Parent or the Company, as the case may be, at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right that may be asserted
at any time and from time to time.
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(b) The consideration to be offered by Parent to the holders of Ordinary
Shares, A Ordinary Shares and B Preferred Shares in the Offer shall be as
follows:
(i) Each holder of Ordinary Share(s) shall be entitled to receive
0.88637 of a share of Parent Common Stock for each Ordinary Share held (the
"ORDINARY SHARE EXCHANGE RATIO").
(ii) Each holder of A Ordinary Share(s) shall be entitled to receive
2.75326 shares of Parent Common Stock for each A Ordinary Share held (the "A
ORDINARY SHARE EXCHANGE RATIO").
(iii) Each holder of B Preferred Share(s) shall be entitled to
receive 2.61560 shares of Parent Common Stock for each B Preferred Share held
(the "B PREFERRED EXCHANGE RATIO" and, together with the Ordinary Share Exchange
Ratio and the A Ordinary Share Exchange Ratio, the "EXCHANGE RATIOS");
provided, however, that the maximum number of shares of Parent Common Stock to
be issued by Parent (x) pursuant to the Offers and (y) in connection with the
Compulsory Acquisition contemplated by Section 5.7 hereof, to the extent
applicable, and (z) upon exercise (whenever exercised) of the options to acquire
Parent Common Stock received in exchange for Company Options (as defined below)
pursuant to the Option Offer (as defined below), is 29,500,000 (the "TOTAL SHARE
CONSIDERATION"). Section 1.1(b) of the Company Disclosure Letter sets forth the
proposed allocation of the Total Share Consideration among the holders of Shares
and/or Company Options as of the date hereof; provided, however, that the
Company may, prior to the commencement of the Offer by Parent pursuant to
Section 1.1(a) above, provide a written update of such allocation to Parent, and
Parent shall be entitled to rely exclusively on such written update in
allocating the Total Share Consideration among the holders of Shares and/or
Company Options, as appropriate. In the event that the total number of shares of
Parent Common Stock issued, or to be issued, pursuant to the transactions
identified in (x), (y) and (z) of this Section 1.1(b) above following
application of the Exchange Ratios set forth in Section 1.1(b)(i)-(iii) above
shall be less than the Total Share Consideration, then an additional number of
shares of Parent Common Stock shall be issued on a pro rata basis to the holders
of Shares and Company Options so that the total number of shares of Parent
Common Stock issued, or to be issued, pursuant to the transactions identified in
(x), (y) and (z) of this Section 1.1(b) shall be equal to the Total Share
Consideration. Each holder's "pro rata" amount shall be a fraction, the
numerator of which is the number of shares of Parent Common Stock issued, or to
be issued, to such holder of Shares in the Offer or Company Options under the
Option Offer and the denominator of which is the number of shares of Parent
Common Stock issued, or to be issued, to all holders of Shares in the Offer and
all holders of Company Options in the Option Offer.
(c) Subject to the terms and conditions thereof, the Offer shall expire at
midnight, New York City time, on the date that is the later of (i) twenty (20)
Business Days after the date the Offer is commenced and (ii) five (5) Business
Days following the date on which the Parent Stockholder Approvals (as defined in
Section 1.1(f) hereof) shall have been received; provided, however, that (i)
Parent shall (A) from time to time, extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions to the Offer shall not have
been satisfied or waived, until such time as such conditions are satisfied or
waived, but not beyond the Final Date (as defined in Section 7.1(b)(ii)), (B)
extend the Offer for any period required by any rule, regulation, interpretation
or position of the United States Securities and Exchange Commission (the "SEC")
applicable to the Offer, and (C) extend the Offer or the Option Offer for any
period required by the rules of any Company Share Option Scheme. Subject to the
terms and conditions of the Offer and this Agreement, on the First Closing Date
(as defined below) and each Subsequent Closing Date (as defined below) Parent
shall issue shares of Parent Common Stock in exchange for all Shares in respect
of which valid acceptances have been received by such date (and not, where
permitted, withdrawn) pursuant to the Offer or pursuant to the compulsory
acquisition procedures set forth in Section 5.7. The "FIRST CLOSING DATE" shall
be the second Business Day following
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satisfaction of the Minimum Condition and the satisfaction or waiver of the
conditions set forth in Annex A. Should less than all of the Shares (including
for purposes of this Section 1.1(c) Ordinary Shares issued or to be issued by
the Company upon exercise of Company Options pursuant to the Option Offer), be
exchanged for Parent Common Stock on the First Closing Date, Parent shall, at
one or more subsequent closings (the date of each subsequent closing being a
"SUBSEQUENT CLOSING DATE") accept for exchange, and issue shares of Parent
Common Stock for, all Shares in respect of which valid acceptances have been
received (and not, where permitted, withdrawn) on or before such Subsequent
Closing Date. No fraction of a share of Parent Common Stock will be issued upon
consummation of the Offer, but in lieu thereof each accepting shareholder or
optionholder, in the case of optionholders exercising Company Options pursuant
to the Option Offer as set forth in Section 1.4 below, and who would otherwise
be entitled to receive a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock that otherwise would be
received by such holder) in the Offer or Option Offer, as appropriate, shall
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product obtained by multiplying such fraction by
the closing price of one (1) share of Parent Common Stock, as reported on the
Nasdaq SmallCap Market ("NASDAQ"), for the last trading day immediately prior to
the First Closing Date. A "BUSINESS DAY" means any day of the year on which
banking institutions in San Francisco and London are open to the public for
conducting business and are not required or authorized to close.
(d) Parent shall use its reasonable best efforts to, within twenty (20)
Business Days of the date of this Agreement, prepare and file with the SEC a
registration statement on Form S-4 to register the offer and sale of Parent
Common Stock pursuant to the Offer (the "REGISTRATION STATEMENT"). The Company
shall cooperate in good faith with, and provide reasonable assistance to, Parent
in the preparation of the Registration Statement. The Registration Statement
will include (i) a prospectus with respect to the Parent Common Stock to be
issued in the Offer and (ii) proxy materials which shall constitute the proxy
statement for the Parent Stockholders Meeting (as defined in Section 1.1(f))
(such proxy statement/prospectus, and any amendments or supplements thereto, the
"PROXY STATEMENT/PROSPECTUS"). On the date the Offer is commenced, Parent shall
cause to be disseminated to holders of Shares the Proxy Statement/Prospectus and
any other documents and Offer documentation required in connection with the
Offer pursuant to all relevant United Kingdom regulatory requirements, including
those of the United Kingdom Financial Services Authority (the "FSA") (together,
the "OFFER DOCUMENTS"). Parent agrees that it shall cause the Offer Documents to
comply in all material respects with all applicable United States and United
Kingdom federal, state, local or foreign statutes, laws and regulations ("LAW").
Parent further agrees that the Offer Documents, on the date first published,
sent or given to the Company's shareholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is made by Parent with respect to information
supplied by the Company or any of its shareholders in writing specifically for
inclusion or incorporation by reference in the Offer Documents. The Company
agrees that the information provided by the Company in writing specifically for
inclusion or incorporation by reference in the Offer Documents shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of Parent and the Company agrees promptly to correct any
information provided by it for use in the Registration Statement or the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect, and Parent further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be disseminated to the
Company's shareholders, in each case as and to the extent required by applicable
Law. The Company and its counsel shall be given reasonable opportunity to review
and comment on the Registration Statement and the Offer Documents prior to the
filing thereof with the SEC (but except as set forth above, shall not accept
responsibility or liability for such filings). Parent agrees to provide in
writing to the Company and its counsel with any comments Parent or its counsel
may receive
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from the SEC or its staff with respect to the Offer Documents promptly after
receipt of such comments and shall provide the Company and its counsel with a
reasonable opportunity to participate in the response of Parent to such
comments. Parent shall provide the Company with copies of any written responses
to the SEC or its staff and shall notify the Company with respect to any oral
responses to the SEC or its staff. Parent shall use all reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after its filing and to maintain such effectiveness
for so long as shall be required for the issuance of Parent Common Stock
pursuant to the Offer. Following the Effective Date, Parent shall file the final
prospectus included therein under Rule 424(b) promulgated pursuant to the
Securities Act.
(e) Parent hereby approves of and consents to the transactions
contemplated by this Agreement, including the Offer and the Option Offer, and
represents that the Parent Board, at a meeting duly called and held on September
28, 2004, subject to the terms and conditions set forth herein, has unanimously:
(i) determined that this Agreement and the transactions contemplated hereby,
including the issuance of shares of Parent Common Stock in connection with the
Offer and the Option Offer, are fair to and in the best interest of the
stockholders of Parent, (ii) approved this Agreement and the transactions
contemplated hereby, and (iii) resolved to recommend that the stockholders of
Parent approve the issuance of the shares of Parent Common Stock in connection
with the Offer and approve the other matters referred to in Section 1.1(f)
hereof.
(f) Promptly after the date hereof, Parent shall take all action necessary
in accordance with applicable Law and its certificate of incorporation and
bylaws to call, give notice of, convene and hold a meeting of its stockholders
(the "PARENT STOCKHOLDERS MEETING") to be held as promptly as practicable, and
in any event within 45 days after the Effective Date, for the purpose of (i)
approving the issuance of shares of Parent Common Stock in connection with the
Offer, (ii) approving the change-of-control of Parent in connection with the
transactions contemplated by this Agreement, (iii) approving an amendment to
Parent's 1992 Stock Option Plan to increase the number of shares reserved for
issuance thereunder by 2,000,000 shares; and (iv) approving each of the other
proposals that Parent and the Company shall deem reasonably necessary for the
purposes of effecting the transactions contemplated hereby (clauses (i), (ii)
and (iii) above being referred to together herein as the "PARENT STOCKHOLDER
APPROVALS"). Parent will use its reasonable best efforts to solicit from its
stockholders proxies in favor of the Parent Stockholder Approvals and will take
all other action necessary to secure the vote or consent of its stockholders
required by the rules of Nasdaq and applicable Law. To facilitate the foregoing,
Parent agrees that promptly following the date of this Agreement it shall retain
a nationally recognized proxy solicitor to assist Parent in its stockholder
solicitation efforts and Parent shall make arrangements with such solicitor such
that the solicitor shall give to Parent and the Company periodic updates (at
least once every other week) regarding the status of the solicitation efforts.
Notwithstanding anything to the contrary contained in this Agreement, Parent may
adjourn or postpone the Parent Stockholders Meeting to the extent necessary to
ensure that any necessary supplement or amendment to the Proxy
Statement/Prospectus is provided to Parent's stockholders in advance of a vote
on the Parent Stockholder Approvals or, if as of the time for which the Parent
Stockholders Meeting is originally scheduled (as set forth in the Proxy
Statement/Prospectus) there are insufficient shares of Parent Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Parent Stockholders Meeting. Parent shall ensure
that the Parent Stockholders Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by Parent in connection with the
Parent Stockholders Meeting are solicited, in compliance with applicable Law,
its certificate of incorporation and bylaws and the rules of Nasdaq.
(g) As soon as reasonably practicable following the date of this Agreement
and if required by any applicable law, Parent shall engage a person authorized
by the Financial Services Authority for the purposes of approving the Offer
Documents and any documents to be delivered to the holders of
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Company Options pursuant to the Option Offer, each of which constitutes
"financial promotion" under Section 21 of the Financial Services and Markets Xxx
0000.
(h) Parent agrees to use its commercially reasonable efforts to: (i)
within 30 days of the First Closing Date, file a post-effective amendment to the
Registration Statement on Form S-3 registering the resale by those Company
shareholders who; (A) have executed Company Support Agreements, and (B) may be
deemed to be an "affiliate" of the Company, as the term "affiliate" is defined
for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations,
of the Parent Common Stock issuable to such shareholders in the Offer, and (ii)
cause such post-effective amendment on Form S-3 to be declared effective under
the Securities Act as promptly as practicable after its filing, and in any event
within one hundred eighty (180) days following the First Closing Date. The
various terms and procedures associated with resale under such registration
statement are set forth in the Company Support Agreements between Parent and
certain Company shareholders.
SECTION 1.2 Company Actions With Respect to the Offer.
(a) The Company hereby approves of and consents to the transactions
contemplated by this Agreement, including the terms of the Offer and the Option
Offer set out in this Agreement, and represents that the Company Board or a duly
authorized sub-committee appointed by the Company Board, at a meeting duly
called and held on September 23, 2004, subject to the terms and conditions set
forth herein, has unanimously: (i) determined that this Agreement and the
transactions contemplated hereby, including the Offer, are in the best interests
of the Company; (ii) approved this Agreement and the transactions contemplated
hereby; and (iii) resolved to recommend that the shareholders of the Company
accept the Offer.
(b) In connection with the Offer, the Company shall, promptly following a
request by Parent, furnish Parent with such information, including updated lists
of the shareholders and optionholders of the Company and updated lists of Shares
and options held by such shareholders and optionholders, and such assistance as
Parent or its agents may reasonably request in communicating (i) the Offer to
the record holders of the Shares and (ii) the Option Offer to the holders of
Company Options. Subject to any applicable Laws, and except for such steps as
are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Offer and the Option Offer, Parent and its agents
shall hold in confidence the information contained in any such listings and
files, will use such information only in connection with the Offer and the
Option Offer and, if this Agreement shall be terminated prior to the
consummation of the Offer and the Option Offer, will deliver, and will use its
reasonable best efforts to cause its agents to deliver, to the Company all
copies and any extracts or summaries from such information then in their
possession or control.
(c) Solely in connection with the execution by certain of the shareholders
of the Company of the Company Support Agreements and in connection with the
exchange of Shares pursuant to the Offer, the Company hereby waives any and all
rights of first refusal it may have with respect to Shares owned by, or issuable
to, any person, other than rights to repurchase unvested shares, if any, that
may be held by persons pursuant to the grant of restricted stock purchase rights
or following exercise of employee stock options.
SECTION 1.3 Boards of Directors.
(a) The Parent Board will take all actions necessary such that, on the
First Closing Date, the Parent Board shall consist of Xxxxx X. Xxxxxx, Xxxxxxx
Xxxxx-Xxxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxx Xxxxxx and Xxxx Xxxx. In
addition, on the First Closing Date, one or more other directors who shall be
mutually acceptable to the Parent Board and the Company Board shall be appointed
to the Parent
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Board. The parties shall ensure that the composition of the Parent Board upon
such appointments shall comply with the rules and regulations of Nasdaq and the
SEC. Xxxx Xxxx shall be appointed as Chief Executive Officer of Parent,
effective on the First Closing Date and contingent upon the occurrence of the
First Closing Date.
(b) Parent's obligation to reconstitute the Parent Board shall be subject
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
accordingly Parent shall promptly take all action required pursuant to such
Section and Rule in order to fulfill its obligations under this Section 1.3 and
shall include in the Proxy Statement/Prospectus such information with respect to
the Company and its officers and directors as is required under such Section and
Rule in order to fulfill its obligations under this Section 1.3. The Company
shall promptly supply to Parent in writing and be solely responsible for any
information with respect to itself and its officers, directors and affiliates
required by such Section and Rule.
(c) The Company Board will take all actions necessary such that, on the
First Closing Date, the Company Board shall consist of one or more of the
following individuals who shall be mutually acceptable to the Parent Board and
the Company Board: Xxxx Xxxx, Dr. Xxxx Xxxxx, Xx. Xxxxxxx Xxxxxxxxxxxxxxx and
Dr. Xxxxx Xxxxx.
SECTION 1.4 Stock Options and Stock Plans.
(a) Provided that (i) this Agreement shall not have been terminated in
accordance with Section 7.1 and (ii) none of the events set forth in Annex A
hereto that would entitle Parent to fail to consummate the Offer shall have
occurred and be continuing (and shall not have been waived by Parent or the
Company, as applicable), either concurrently with the commencement of the Offer
or as soon thereafter as reasonably practicable but in no event later than four
weeks following the commencement of the Offer, Parent shall commence an exchange
offer (the "OPTION OFFER") for each outstanding option to acquire Ordinary
Shares (each, a "COMPANY OPTION" and together, the "COMPANY OPTIONS") under the
Solexa Share Option Plan for Consultants (the "CONSULTANT SHARE OPTION SCHEME"),
the Solexa Unapproved Company Share Option Plan (the "UNAPPROVED SHARE OPTION
SCHEME") and the Solexa Limited Enterprise Management Incentive Plan (the
"MANAGEMENT SHARE OPTION SCHEME" and, together with the Consultant Share Option
Scheme and the Unapproved Share Option Scheme, the "COMPANY SHARE OPTION
SCHEMES") on the terms contemplated by Section 1.4(b) below.
(b) Under the Option Offer, each outstanding Company Option under the
Company Share Option Schemes, to the extent vested or, in the event that the
Company Acquisition procedure is invoked, whether vested or unvested, shall, (i)
at the election of the holder of each Company Option either, (A) be exercised in
accordance with rules of the relevant Company Share Option Scheme and such
Ordinary Shares received upon the exercise be exchanged for shares of Parent
Common Stock on the same terms as those offered under the Offer (the "OPTION
EXERCISE"); or (B) become an option to acquire, on the same terms and conditions
as were applicable under the relevant Company Share Option Scheme immediately
prior to the First Closing Date, including the same vesting schedule, a number
of shares of Parent Common Stock equal to the number of Ordinary Shares issuable
upon the exercise of each such Company Option prior to the First Closing Date
multiplied by the Ordinary Share Exchange Ratio ("OPTION ROLL OVER"); or (ii) in
the event that neither the Option Exercise nor the Option Roll Over are chosen,
lapse. Upon an Option Roll Over, the exercise price for each such share of
Parent Common Stock shall (i) be converted into United States dollars based on
the Exchange Rate (as defined below) and, (ii) shall equal the per share
exercise price of the applicable Company Option (as converted to United States
dollars) divided by the Ordinary Share Exchange Ratio. The number of shares of
Parent Common Stock issuable upon the exercise of any Company Option after the
First Closing Date shall be rounded down to the nearest whole share. For
purposes of this Agreement, the term "EXCHANGE RATE" shall be deemed to refer
7
to the British pounds to United States dollars currency exchange rate quoted in
the Wall Street Journal, West Coast Edition, on the Business Day immediately
prior to the relevant date of exercise. Any election by a holder of Company
Options pursuant to the Option Offer will be conditional upon the exchange by
Parent of Shares pursuant to the Offer on the First Closing Date.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Company Options converted in accordance with this Section 1.4.
As promptly as practicable after the First Closing Date, Parent shall file a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the Parent Common Stock subject to such options
and shall use its commercially reasonable efforts to maintain the effectiveness
of such registration statement or registration statements for so long as such
options remain outstanding.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, except as set forth in the
disclosure letter supplied by the Company to Parent dated as of the date hereof
(the "COMPANY DISCLOSURE LETTER"), as follows:
SECTION 2.1 Information and Executives; Organization and Qualification.
(a) The registered owners of the B Preferred Shares, A Ordinary Shares and
Ordinary Shares, and the number of Shares held by such owners, are set forth on
Schedule 2.1 of the Company Disclosure Letter and all of such Shares are fully
paid and comprise the entire issued share capital of the Company. None of the
share capital of the Company (whether issued or unissued) is under any option or
other right to acquire by the Company or subject to any mortgage, charge (fixed
or floating), pledge, lien, security, interest or other third party right
(including rights of pre-emption) created by the Company and no dividends or
other rights or benefits have been declared, made or paid or agreed to be
declared, made or paid thereon.
(b) The Company is an entity duly organized and validly existing under the
laws of the jurisdiction of its incorporation or organization, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. No receiver has been appointed in
respect of the Company or in respect of any of its assets nor has any
administration order been made nor any notice issued for convening a meeting at
which a resolution is to be proposed for the winding up of the Company, and nor
has any such resolution been passed.
SECTION 2.2 Company Financial Statements.
(a) The Company has made available to Parent a copy of the Company's
audited balance sheet as of December 31, 2003 and the related statements of
income for the fiscal year then ended, accompanied by the report of the
Company's independent public accountants and the directors' report(s) thereon
(the "COMPANY FINANCIAL STATEMENTS"). The Company Financial Statements have been
prepared in accordance with accounting principles, standards and practices which
are generally accepted in the United Kingdom ("UK GAAP") and on the same basis
and in accordance with the same accounting policies as the corresponding
accounts for the preceding financial year, comply with the requirements of the
Companies Xxx 0000 and give a true and fair view of the state of affairs of the
Company on the date of such financial statements and of the profits and losses
for the period concerned. The Company's audited
8
balance sheet as of December 31, 2003 is referred to in this Agreement as the
"COMPANY BALANCE SHEET."
(b) The Company Balance Sheet makes adequate provision for or, in the case
of actual liabilities, properly discloses, notes or takes into account as at the
date of the Company Balance Sheet (the "COMPANY BALANCE SHEET DATE"): (i) all
liabilities whether actual contingent or disputed; (ii) all capital commitments
whether actual or contingent; (iii) all bad and doubtful debts; and (iv) all
accrued Taxes (as defined in Section 2.4 below).
(c) The Company Balance Sheet adequately provides or reserves for all
Taxes for which the Company was liable at the Company Balance Sheet Date.
(d) The profits (or losses) shown in the Company Balance Sheet have not to
a material extent been affected (except as disclosed therein) by any
extraordinary or exceptional event or circumstance or by any other factor
rendering such profits unusually high or low.
(e) The management accounts for July 2004 ("MANAGEMENT ACCOUNTS") have
been prepared in accordance with accounting policies on a basis consistent with
the management accounts prepared in the preceding twelve months. To the
Knowledge (as defined below) of the Company, the Management Accounts have been
prepared in accordance with UK GAAP; provided that the Management Accounts do
not contain all of the footnote disclosure that would otherwise be required by
UK GAAP and such Management Accounts are subject to normal year-end adjustments
which are not anticipated to be material.
(f) The Management Accounts reflect the financial affairs of the Company
(at the date to which they have been prepared), reflect the Company's results
for the period covered thereby and are not inaccurate or misleading in any
material respect.
SECTION 2.3 Events since the Company Balance Sheet Date. Since the Company
Balance Sheet Date:
(a) the business of the Company has been carried on in the ordinary course
and so as to maintain the same as a going concern;
(b) the Company has not acquired or disposed of or agreed to acquire or
dispose of any business or any material asset (other than trading stock in the
ordinary course of the business carried on by it) or assumed or acquired any
material liability (including a contingent liability);
(c) no dividend or other distribution (as defined by the Income and
Corporation Taxes Act of 1988 ("ICTA")) has been declared, made or paid to the
Company's members nor has it repaid any loan capital or other debenture;
(d) no change has been made (or agreed to be made) in the emoluments or
other terms of employment of any of the Company's employees who are in receipt
of remuneration in excess of (pound)50,000 per annum or of any of the directors
of the Company nor has the Company paid any bonus or special remuneration to any
such employee or any of its directors;
(e) the Company has not borrowed monies (except in the ordinary course of
the business carried on by it or from its bankers under agreed loan facilities);
9
(f) to the Company's Knowledge, there has not been any deterioration in
the financial position or prospects of the business of the Company (whether in
consequence of normal trading or otherwise);
(g) no part of the business of the Company has been effected to a material
extent by the loss of any important customer, or of any source of supply or by
the cancellation or loss of any order or contract or by any other abnormal
factor or event nor, to the Company's Knowledge, are there any circumstances
likely to lead thereto;
(h) no employee has been dismissed or made redundant nor has the Company
taken or omitted to take any action which would entitle any employee to claim
that he has been constructively dismissed; and
(i) there are no liabilities (including contingent liabilities)
outstanding on the part of the Company other than those liabilities disclosed in
the Company Balance Sheet or incurred in the ordinary and proper course of
business since the Company Balance Sheet Date which are similarly disclosed in
the books and records of the Company.
For purposes of this Agreement, "KNOWLEDGE" shall mean, with respect to
Parent or the Company, as the case may be, with respect to any matter in
question, the actual knowledge of the executive officers and members of the
Parent Board or the Company Board, as the case may be, after inquiry of his or
her direct reports.
SECTION 2.4 Taxes.
(a) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, the Company has duly made all Tax Returns and
given or delivered all notices, accounts and information which ought to have
been made to and is not involved in any dispute with the Inland Revenue or other
authority concerning any matter likely to affect in any way the liability
(whether accrued, contingent or future) of it to Taxes of any nature whatsoever
or other sums imposed, charged, assessed, levied or payable under the provisions
of the taxation statutes and the Company is not aware of any matter which may
lead to such dispute.
(b) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, the Company has duly paid or fully provided for
all Taxes for which it is liable and there are no circumstances in which
interest or penalties in respect of Tax not duly paid could be charged against
it in respect of any period prior to the Company Balance Sheet Date.
(c) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, no liability of the Company for Taxes has arisen
or will arise prior to the First Closing Date save for corporation Tax payable
in respect of normal trading profits earned by it or income Tax deducted under
PAYE regulations or national insurance contributions or Value Added Tax or
sickness pay for which it is accountable to the Inland Revenue, Customs and
Excise or other relevant authority and which has where appropriate been deducted
or charged and where due paid to the Inland Revenue or such other relevant
authority.
(d) The Company has not entered into or been a party to any schemes or
arrangements designed partly or wholly for the purpose of it or (so far as each
of the Company is aware) any other person avoiding the payment or levy of Taxes.
(e) All documents in the possession of the Company and to which the
Company is a party or to the production of which it is entitled and which
attract stamp or transfer duty in the United Kingdom or elsewhere have been
properly stamped.
10
(f) The Company is not involved in and has not in the last six years been
involved in any dispute with or investigation by the Inland Revenue or other
Taxing Authority concerning any matter likely to affect in any way the liability
(whether accrued, contingent or future) of it to Taxes of any nature whatsoever
or other sums imposed, charges, assessed, levied or payable under the provisions
of the tax statutes and the Company and, to the Knowledge of the Company, there
is no matter that exists would lead to such a dispute or investigation.
(g) The Company is, and has been since incorporation, resident for tax
purposes only in the United Kingdom. The Company is duly registered in the
United Kingdom for the purposes of value added tax.
(h) As used in this Agreement, (i) the term "TAX" or "TAXES" shall mean,
with respect to any person, (a) all taxes, domestic or foreign, including
without limitation any income (net, gross or other, including recapture of any
tax items such as investment tax credits), alternative or add-on minimum tax,
gross income, gross receipts, gains, sales, use, leasing, lease, user, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding on amounts paid to or by
such Person, payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, premium, environmental or windfall profit tax,
custom, duty, value added or other tax (but excluding stamp duty), or other like
assessment or charge of any kind whatsoever, together with any interest, levies,
assessments, charges, penalties, additions to tax or additional amounts imposed
by any Taxing Authority, (b) any joint or several liability of such person with
any other person for the payment of any amounts of the type described in (a) of
this definition, including without limitation any liability under U.S. Treasury
Regulations Section 1.1502-6 promulgated under the Code and any similar
provisions of applicable U.S. state Tax Law, and (c) any liability of such
person for the payment of any amounts of the type described in (a) as a result
of any express or implied obligation to indemnify any other person; (ii) the
term "TAX RETURN(S)" shall mean all returns, consolidated or otherwise, report
or statement (including without limitation informational returns), required to
be filed with any Taxing Authority; and (iii) the term "TAXING AUTHORITY" shall
mean any authority of competent jurisdiction responsible for the imposition of
any Tax including, without limitation, the United States Internal Revenue
Service, the Inland Revenue, HM Customs and Excise and any other governmental,
state, federal or other fiscal, revenue, customs or excise authority,
department, agency, body or office whether in the United Kingdom or elsewhere in
the world. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" with
respect to Parent or the Company, as the case may be, means any change, effect,
event, occurrence, state of facts or development (i) that is, or is reasonably
likely to be, materially adverse to the value, condition (financial or
otherwise), business or results of operations of the Company or Parent (and in
the case of Parent, taken together with the Subsidiaries of Parent), as the case
may be, or (ii) that will, or is reasonably likely to, impair the ability of any
party hereto to perform its obligations under this Agreement or prevent or
materially delay consummation of any of the transactions contemplated by this
Agreement; provided, however, that in the case of clause (i), no adverse change,
effect, event, occurrence, state of facts or development attributable to
conditions affecting the United States or the United Kingdom economy as a whole
that is not unique to Parent or the Company, as the case may be, and that does
not disproportionately affect Parent or the Company, as the case may be, shall
be deemed in itself to constitute, or shall be taken into account in
determining, whether there has been or will be a Material Adverse Effect.
SECTION 2.5 Litigation.
(a) Neither the Company nor, to the Company's Knowledge, any person for
whose acts and defaults it may be vicariously liable, is at present engaged
whether as claimant, defendant or otherwise in any legal action, proceeding,
mediation or arbitration (or any similar proceedings) which is either in
progress or, to the Company's Knowledge, is threatened or is pending or is being
prosecuted for any
11
criminal offence and no governmental or official investigation or inquiry
concerning the Company is in progress or, to the Company's Knowledge, pending
that could, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(b) There are no circumstances known to the Company likely to lead to any
claim or legal action, proceeding or arbitration (other than as aforesaid)
prosecution, investigation or enquiry described in Section 2.5(a) above.
SECTION 2.6 Property and the Environment.
(a) The Company has a good and marketable title to and is legal and
beneficial owner of the property set forth in Schedule 2.6(a) (the "COMPANY
PROPERTY"). With the exception of the Company Property, the Company does not
own, use or occupy any other land or building whether under a license or
otherwise.
(b) The Company Property is free from all material pledges, claims, liens,
charges, encumbrances, leases, tenancies, options, licenses, mortgages and
security interests of any kind or nature whatsoever, other than liens for Taxes
not yet due and payable and restrictions imposed by applicable securities laws
(collectively, "ENCUMBRANCES") and any agreement to create any of them.
(c) The Company has received no indication that the Company Property is
not in a good and substantial state of repair. The Company is not aware of any
structural problems in respect thereof and no deleterious substances not
approved by any relevant Code of Practice have been used in the construction of
the Company Property.
(d) All covenants, obligations (including without limitation statutory
obligations), restrictions and conditions affecting any of the Company Property
or the Company as owner or lessee thereof have been observed and performed and
all outgoings (including rates) have been duly paid and the Company Property is
insured to its full reinstatement value.
(e) There are no covenants, obligations, restrictions, conditions,
easements or encumbrances or statutory consents or authorizations which are of
an unusual or onerous nature or which would affect the continued use of any of
the Company Property for the purposes of the Company's business as currently
conducted or the value of the Company Property.
(f) There are no compulsory purchase orders or resolutions affecting the
Company Property or, to the Company's Knowledge, any proposal for such an order
or resolution.
(g) All deeds and documents necessary to prove title to the Company
Property are in the possession of the Company and have been or will be duly
stamped.
(h) There is no actual or contingent liability on the part of the Company
in relation to any real property other than the Company Property, including any
actual or contingent liability as previous lessee or underlessee or guarantor or
surety or covenantor in relation to any lease or underlease.
(i) The Company has obtained and is and has been in compliance with the
terms and conditions of all consents required under Environmental Laws required
in respect of the Company's activities and, to the Company's Knowledge, is and
has been in compliance with and has no material actual or contingent liability
under Environmental Law and there are no facts or circumstances which so far as
the Company is aware are likely to lead to the revocation, suspension or
variation of any consent required under
12
Environmental Laws, except in each case as could not, individually or in the
aggregate, have or result in a Material Adverse Effect on the Company.
(j) No conditions exist in respect of or connected with the Company
Property in respect of which the Company is or is likely to be responsible under
Environmental Law for all or any part of the costs or expenses associated with
investigation, treatment, remediation or other works in respect of any Hazardous
Substance and no conditions exist in respect of or in connection with any
properties previously owned or occupied by the Company whereby the Company is
likely to be responsible under Environmental law for all or any part of such
costs or expenses.
(k) Since the Company's occupation of the Company Property, there are and
have been no Hazardous Substances beyond an allowable or permissible quota or
limit prescribed or specified under any Environmental Law disposed of, spilled
or discharged by the Company in or under the Company Property nor in water or
groundwater on or under the Company Property and the Company is not aware of any
Hazardous Substances which are or have been present in water or groundwater on
or under the Company Property.
(l) The Company has received no indication of any actual, pending or
threatened actions against it by regulatory authorities or third parties in
respect of any alleged non-compliance with or liability under Environmental Law.
(m) As used herein, the term "ENVIRONMENTAL LAW" means any law,
regulation, treaty, directive, decision, code, notice or judgment relating to:
(i) the protection, investigation or restoration of the environment, health and
safety, or natural resources, (ii) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance, or (iii) noise, odor,
wetlands, pollution or contamination to persons or property. As used herein, the
term "HAZARDOUS SUBSTANCE" means any substance that is: (i) listed, classified
or regulated pursuant to any Environmental Law; (ii) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (iii) any other
substance which may be the subject of regulatory action by any Government
Authority pursuant to any Environmental Law.
SECTION 2.7 Intellectual Property.
(a) Section 2.7(a) of the Company Disclosure Letter lists (i) all patents
and patent applications, all applications for trademarks, trade names and
service marks, and all registered trademarks, trade names, service marks, and
copyrights that are owned or purported to be owned by the Company, and such list
specifies, as applicable, the jurisdictions by or in which each such patent,
trademark, trade name, service xxxx or copyright has been issued or registered
or in which any application for such issuance and registration has been filed,
(ii) all material licenses, sub-licenses and other agreements as to which the
Company is a party and pursuant to which any person is authorized to use any
Company Intellectual Property (as defined below) ("COMPANY LICENSES"), and (iii)
all material licenses, sub-licenses and other agreements to which the Company is
a party and pursuant to which the Company is authorized to use any third-party
Intellectual Property that is included in the Company Intellectual Property
(third-party Intellectual Property included in the Company Intellectual Property
being referred to in this Agreement as "COMPANY THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS"). All agreements described in Section 2.7 of the Company
Disclosure Letter as they relate to Sections 2.7(a)(ii) and (iii) are valid,
enforceable and legally binding, subject to the effect or availability of rules
of law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity), and to the Company's Knowledge, neither the Company nor any
third party is in material breach of any such agreement described in Section 2.7
of the Company Disclosure Letter. "INTELLECTUAL PROPERTY" means all United
States, state and foreign intellectual property, including, but not
13
limited to all (1) patents, inventions, discoveries, processes, design rights
and unregistered designs; copyrights and works of authorship in any media;
trademarks, service marks, domain names, trade names, trade dress and other
source indicators; trade secrets, ideas, algorithms, samples, media and/or cell
lines, formulae, processes, data, database rights (and rights in databases),
computer software applications (in both source code and object code form) and
other confidential or proprietary information; (2) registrations, applications
and recordings related thereto; (3) rights to obtain renewals, extensions,
continuations, continuations-in-part, supplementary protection certificates or
similar legal protections related thereto; and (4) rights to bring an action at
law or in equity for the infringement or other impairment thereof. "COMPANY
INTELLECTUAL PROPERTY" means all the Intellectual Property which is used by the
Company in its business including all Intellectual Property in the products and
services supplied and/or developed by the Company and any licenses to the
Company of Company Third-Party Intellectual Property Rights.
(b) The Company is the sole legal and beneficial owner of, or is licensed
to use, the Company Intellectual Property.
(c) All Company Intellectual Property owned by the Company is unencumbered
and subsisting and, to the Company's Knowledge, is valid and enforceable, and
nothing has been done or so far as the Company is aware omitted to be done which
may cause any of it to cease to be so.
(d) The Company has (i) made all applications for registration for such
Company Intellectual Property owned by the Company, all of the Company's rights
in the Company Third-Party Intellectual Property Rights and that the Company
considered prudent to be registered in any jurisdiction in which the Company
conducts its business; and (ii) taken such other steps as the Company considered
prudent for the protection of the Company Intellectual Property owned by the
Company and all of the Company's rights in the Company Third-Party Intellectual
Property Rights, including without limitation carrying out all relevant searches
in all jurisdictions where the Company conducts its business before registering
or using the Company Intellectual Property and repeating such searches on a
regular basis.
(e) Such renewal and extension fees in respect of any registered Company
Intellectual Property owned by the Company as the Company considered prudent to
be maintained have been duly paid, and all other steps as the Company considered
prudent to be taken for the maintenance and protection of any registered Company
Intellectual Property owned by the Company have been taken, in any jurisdiction
in which they are registered.
(f) So far as the Company is aware all documents and materials (i)
material to the right, title and interest of the Company to the Company
Intellectual Property, including without limitation any licenses of the Company
Third-Party Intellectual Property Rights; and (ii) necessary for the prosecution
or maintenance (as applicable) of all registrations and applications for
registrations in relation to the Company Intellectual Property owned by the
Company form part of the records or materials in the possession or ownership of
the Company.
(g) None of the Company Intellectual Property is subject, in whole or in
part, to any charge or license other than as set out in the Company Licenses and
Company Third-Party Intellectual Property Rights. None of the Company
Intellectual Property (excluding for the purposes of this warranty Company
Third-Party Intellectual Property Rights) is subject, in whole or in part, to
any charge other than as set out in the Company Licenses. None of the Company
Intellectual Property (excluding for the purposes of this warranty Company
Third-Party Intellectual Property Rights) is subject to any license (or other
agreement) on terms that provide any third party to use such Company
Intellectual Property, in whole or in part, on an exclusive or royalty-free
basis.
14
(h) The Company has not (i) authorized or otherwise expressly or impliedly
permitted any use whatsoever of the Company Intellectual Property owned by the
Company; or (ii) granted to any third party any right or interest in respect of
such Company Intellectual Property, other than under a Company License.
(i) To the Company's Knowledge, all Company Intellectual Property,
including without limitation all Company Third-Party Intellectual Property
Rights, will be available for use by the Company on substantially identical
terms and conditions immediately following the First Closing Date.
(j) The Company Intellectual Property comprises all the Intellectual
Property reasonably necessary to carry on the business as conducted by the
Company as at the date of this Agreement.
(k) No activities, documents, materials (whether in tangible or intangible
form), software, the Company websites, products, services or processes of the
Company (or any licensee under any Company Third-Party Intellectual Property
Rights in relation to the Company Intellectual Property) involve or have
involved the unlicensed use of a third party's confidential information or give
or have given rise to liability to pay compensation or, to the Company's
Knowledge, infringe or have infringed, any Intellectual Property of a third
party.
(l) No third party or competent authority has made any claim, challenge or
opposition, to the Company against the Company in relation to the Company
Intellectual Property, and. to the Company's Knowledge, no third party has made
or is making any unauthorized use of, or has infringed or is infringing, any
Company Intellectual Property.
(m) To the Company's Knowledge, no third party has registered or applied
to register in any country any Intellectual Property made, or claimed to be
owned, by the Company.
(n) No Company License or license comprising Company Third-Party
Intellectual Property Rights, or other agreement in relation to the Company
Intellectual Property, has been the subject of any material breach by the
Company and the Company has not formally waived any material breach of any other
party, and no notice or knowledge of breach of or termination of any license
comprising Company Third-Party Intellectual Property Rights has been received by
the Company.
(o) The Company is not subject to any order or injunction or other
restrictive measure or undertaking imposed by any court or other body of
competent jurisdiction in relation to the Company Intellectual Property
(including, without limitation, any prohibition or restriction on use).
(p) The Company has at all times taken all such steps as it considered
prudent to keep confidential all know-how used in the business and the Company
has not disclosed (except in the ordinary course of business and in the case of
a material disclosure, subject to a binding confidentiality obligation) any of
its know-how other than to its employees and professional advisors.
(q) The Company is entitled to use all know-how in its possession and, to
the Company's Knowledge, there are no restrictions on the use of that know-how.
(r) No claims, disputes or proceedings in respect of Company Intellectual
Property have been settled by the Company in the three years immediately
preceding the date hereof.
(s) There are and have been no claims, formal disputes or proceedings
which have a material adverse effect on (i) the Company Intellectual Property
owned by the Company or its ownership of the Company Intellectual Property owned
by the Company; (ii) the Company's use of the Company Third-
15
Party Intellectual Property Rights; or (iii) the right of the Company (and any
licensee of the Company) to use anywhere in the world any of the Company
Intellectual Property.
(t) No party (whether individual, partnership, or company) retained,
commissioned, employed or otherwise engaged by the Company from time to time and
who, in the course of such engagement created, discovered or developed work in
which Company Intellectual Property subsists has made any claim to the Company,
in the three years immediately preceding the date of this Agreement, relating to
(i) any right, title or interest in such Intellectual Property; or (ii) any
compensation or remuneration in relation to such Intellectual Property whether
under section 40 of the United Kingdom Patents Xxx 0000 or equivalent
legislation in the world or otherwise.
(u) In respect of any personal data processed by the Company, the Company
(i) has made all necessary registrations and notifications of its particulars in
accordance with the Data Protection Legislation and has listed all notifications
and registrations in Section 2.7(u) of the Company Disclosure Letter; (ii) are
aware all details supplied to the Information Commissioner in relation to each
application for registration or notification are accurate and complete; (iii)
comply and will continue to comply with the Data Protection Legislation
(including but not limited to the Data Protection Principles) and any guidance
notes or guidelines issued by the Information Commissioner; (iv) will co-operate
fully in complying with any subject access requests made pursuant to the Data
Protection Legislation; and (v) no notice of any kind has been served on the
Company under any provision under any part of the Data Protection Legislation or
any analogous legislation in any part of the world.
(v) To the Company's Knowledge, the contents of the Company websites
comply with all laws and regulations and codes of practice in any applicable
jurisdiction and the website does not contain any hypertext links to other
websites.
SECTION 2.8 Assets, Debts and Stock.
(a) None of the book debts included in the Company Financial Statements or
which have subsequently arisen have been outstanding for more than two months
from their due dates for payment and all such debts have realised or will
realise in the normal course of collection their full value save as provided in
the Company Financial Statements or in the books of the Company.
(b) The Company has not granted any security over any part of its
undertaking or assets.
(c) All assets used by and all debts due to the Company or which have
otherwise been represented as being its property or due to it or used or held
for the purposes of its business are its absolute property to which the Company
has good and marketable title and none is the subject of any encumbrance (save
in respect of liens arising in the normal course of trading) or the subject of
any factoring arrangement, hire-purchase, retention of title, conditional sale
or credit sale agreement.
(d) Each asset needed for the proper conduct of the business of the
Company is in good repair and working order (fair wear and tear excepted).
SECTION 2.9 Contracts with Connected Persons.
(a) There are no loans made by the Company to any of its directors or
shareholders and/or any person connected with any of them and no debts or
liabilities owing by the Company to any of its directors or shareholders and/or
any person connected with them as aforesaid.
16
(b) There are no existing contracts or arrangements to which the Company
is a party and in which any of its directors or shareholders and/or any person
connected with any of them is interested.
SECTION 2.10 Employment Arrangements; Employee Benefits.
(a) Full details of all contracts of service or for services and other
arrangements (including, without limitation, details of notice periods and all
remuneration) of all officers, employees and consultants of the Company are set
out in Section 2.10(a) of the Company Disclosure Letter.
(b) There are no agreements or other arrangements (binding or otherwise)
or outstanding or anticipated claims or disputes between the Company and any
trade union or other body representing all or any of the employees of the
Company.
(c) The Company does not owe any amount to, nor does it have any
outstanding obligations in respect of, any of its present or former directors,
employees or shareholders other than remuneration accrued during the month in
which this Agreement has been entered into.
(d) No gratuitous payment has been made or promised in connection with the
actual or proposed termination or suspension of employment or variation of any
contract of employment of any present or former director or employee of the
Company.
(e) There are no agreements or arrangements (whether legally enforceable
or not) for the payment of any pensions, allowances, lump sums or other like
benefits on redundancy, retirement or on death or during periods of sickness or
disablement for the benefit of any director or former director or employee or
former employee of the Company or for the benefit of the dependants of any such
person.
(f) There have been no "relevant transfers" to the Company pursuant to the
Transfer of Undertakings (Protection of Employment) Regulations 1981.
(g) All officers, employees and consultants of the Company have assigned
past and have agreed to assign future Intellectual Property and know-how
relating to the business of the Company to the Company pursuant to agreements in
the form previously delivered to Parent.
(h) The Company has complied in all respects with its obligations in
respect of the group personal pension scheme provided by Scottish Amicable
(the"GPP SCHEME") to the employees and directors of the Company. The Company's
sole obligations in connection with the GPP Scheme are limited to providing
access to the employees and directors of the Company to the GPP Scheme, paying
employer's contributions to the GPP Scheme and deducting contributions of the
members of the GPP Scheme.
(i) The Company has complied in all material respects with its obligations
(including its obligations as trustee and administrator) in respect of the group
life assurance scheme (the "LIFE ASSURANCE SCHEME").
(j) The Life Assurance Scheme only provides lump sum benefits on the death
of employees and directors while in service. All benefits which may become
payable to or in respect of employees or directors under the Life Assurance
Scheme are fully insured and all related insurance premiums have been paid at
the insurance company's normal rates..
(k) The Company does not sponsor, participate in, or contribute and has
not since its incorporation sponsored, participated in or contributed to any
defined benefit scheme.
17
(l) To the Company's Knowledge, the GPP Scheme is approved under Chapter
IV, Part XIV of the Income and Corporation Taxes Xxx 0000, and the Life
Assurance Scheme is approved under Chapter I, Part XIV of the Income and
Corporation Taxes Xxx 0000, and there is no matter which might give the Inland
Revenue reason to withdraw such approval in respect of other arrangements.
(m) The Company has complied with its duty to facilitate access to a
stakeholder pension scheme under Section 3 of the Welfare Reform and Pensions
Xxx 0000.
(n) No claim concerning the GPP Scheme or the Life Assurance Scheme
(including, without limitation, contact with the Occupational Pensions
Regulatory Authority, the Pensions Advisory Service or the Pensions Ombudsman or
an application under any internal dispute resolution procedure) has been made by
or in respect of any employee or director, and none is pending or threatened.
The Company is not aware of any matter which might give rise to such a claim.
(o) All officers, employees and consultants of the Company have entered
into non-disclosure agreements and all officers and employees have executed
restrictive covenants preventing competition with the Company in the form
previously delivered to Parent.
(p) Section 2.10(p) of the Company Disclosure Letter sets forth, as of the
date hereof, the total outstanding Company Options and (i) the name of the
holder of each Company Option, (ii) the exercise price per share of such Company
Option, (iii) the number of shares covered by such Company Option, (iv) the
vesting schedule for such Company Option, (v) the term of each option and (vi)
whether the exerciseability of such Company Option shall be accelerated in any
manner by any of the transactions contemplated by this Agreement or upon any
other event or condition and the extent of acceleration, if any; provided,
however, that the Company may, prior to commencement of the Option Offer by
Parent pursuant to Section 1.4(a), provide a written update of Schedule 2.10(p)
to Parent. All outstanding Company Options have been duly authorized by the
Company Board or a committee thereof, are validly issued, and were issued in
compliance with all applicable securities Laws. Except as set forth on Section
2.10(p) of the Company Disclosure Letter, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares in the capital of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares in the capital of the Company, or securities or rights
convertible or exchangeable into shares in the capital of the Company.
(q) The Company has not taken any action that would result in the
accelerated vesting, exercisability or payment of any Company Options as a
consequence of the execution of, or consummation of, the transactions
contemplated by, this Agreement.
SECTION 2.11 Statutory and Legal Requirements.
(a) All statutory, municipal, governmental, court and other requirements
applicable to the carrying on of the business of the Company, the formation,
continuance in existence, creation and issue of securities, management, property
or operation of the Company have been complied with, and all permits,
authorities, licenses and consents have been obtained and all conditions
applicable thereto complied with and so far as the Company is aware there are no
circumstances which might lead to the suspension, alteration or cancellation of
any such permits, authorities, licenses or consents except where the failure to
obtain or maintain such permits, authorities, licenses or consents could not,
individually or in the aggregate, be expected to have a Material Adverse Effect
on the Company, nor is there any agreement which materially restricts the fields
within which the Company may carry on its business.
18
(b) The Company has not committed and is not liable for any criminal,
illegal, unlawful, ultra xxxxx or unauthorized act or breach of covenant,
contract or statutory duty and so far as each of the Company is aware no officer
or senior manager of the Company has committed any crime other than minor
traffic offences.
(c) No person, not being a director of the Company, has any actual or
ostensible authority, whether under a power of attorney, agency agreement or
otherwise, to commit the Company to any obligation other than an obligation of a
nature which it is usual for it to incur in the ordinary course of its business.
SECTION 2.12 Records and Registers; Memorandum of Association and Articles
of Association.
(a) The records (including computer records), statutory books, registers,
minute books and books of account of the Company are duly entered up and
maintained in accordance with all legal requirements applicable thereto and
contain true, full and accurate records of all matters required to be dealt with
therein and all such books and all records and documents (including documents of
title) which are its property are in its possession or under its control and all
accounts, documents and returns required to be delivered or made to the
Registrar of Companies have been duly and correctly delivered or made and there
has been no notice of any proceedings to rectify the register of members of the
Company and there are no circumstances which might lead to any application for
rectification of the register of members.
(b) The Company has delivered or otherwise made available to Parent a true
and correct copy of the Memorandum of Association, Articles of Association and
other charter documents of the Company, each as amended to date and as currently
in full force and effect. The Company is not in violation of any of the
provisions of its Memorandum of Association, Articles of Association or other
charter documents.
SECTION 2.13 Insurance. Section 2.13 of the Company Disclosure Letter
contains full and accurate details of all insurance policies held by the
Company. In respect of such insurances, (a) all premiums have been duly paid to
date, (b) all the policies are in full force and effect and, so far as the
Company is aware, are not voidable on account of any act, omission or
non-disclosure on the part of the insured party nor could they be declared null
and void or as a consequence of which any claim might be rejected and (c) so far
as the Company is aware there are no circumstances which would or might give
rise to any claim and no insurance claim is outstanding.
SECTION 2.14 Group Structure. The Company does not have any Subsidiaries
nor has it at any time been the holding company of any company or a member of or
the beneficial owner of any shares, securities or other interest in any company
or other person. For purposes of this Agreement, "SUBSIDIARY" shall mean any
corporation, partnership, limited liability company, joint venture or other
legal entity of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation , partnership, limited liability company,
joint venture or other legal entity.
SECTION 2.15 Agreements and Capital Commitments.
(a) The Company (i) has no material capital commitments; (ii) is not a
party to any contract, arrangement or commitment (whether in respect of capital
expenditure or otherwise) which is of an unusual, onerous or long-term nature or
which involves or could involve a material obligation or liability; (iii) has
not become bound and no person has become entitled (or with the giving of notice
and/or the issue of a certificate and/or the passage of time or otherwise may
become entitled) to require it to repay any loan capital or other debenture,
redeemable preference share capital, borrowed money or grant made
19
to it by any governmental or other authority or person prior to the stipulated
due date; (iv) is not a party to any agreement which is or may become terminable
as a result of the entry into or completion of this Agreement; (v) is not bound
by any guarantee or contract of indemnity or suretyship under which any
liability or contingent liability is outstanding; (vi) has not entered into any
agreement which requires or may require, or confers any right to require, the
sale (whether for cash or otherwise) or the transfer by it of any asset; (vii)
is not a party to any joint venture, consortium, partnership, unincorporated
association or profit sharing arrangement or agreement; (viii) is not a party to
or enjoys the benefit of any agreement requiring registration or notification
under or by virtue of any statute; or (ix) is not in default of any agreement or
arrangement to which it is a party (each of (i) through (ix) above being
referred to as a "COMPANY MATERIAL CONTRACT").
(b) The Company has not been and is not a party to any contract or
arrangements binding upon it for the purchase or sale of property or the supply
of goods or services at a price different to that reasonably obtainable on an
arm's length basis.
SECTION 2.16 Borrowings and Facilities. Full details of all limits on the
Company's bank overdraft facilities and all borrowings of the Company are set
out in Section 2.16 of the Company Disclosure Letter and the Company is not in
breach of any of their terms and none of such facilities or terms of borrowing
will be terminated as a result of the entry into of this Agreement.
SECTION 2.17 Government Grants. The Company has applied for, or received,
the grants or investments or subsidies or financial assistance from government
departments or agencies or local or other government authorities as set forth on
Section 2.17 of the Company Disclosure Letter ("GOVERNMENTAL GRANTS"). The
Company has not done, or omitted to do, any act or thing which could result in
all or any part of any such Governmental Grant or other similar payment being
made of withheld in whole or in part and, to the Knowledge of the Company, no
such circumstances exist which could give rise to any such payment being
withheld.
SECTION 2.18 Internal Accounting Controls. The Company has not been
informed by its auditors in relation to the audit of the Company Financial
Statements that any measures should be implemented to change the accounting
systems of the Company.
SECTION 2.19 Authority and Enforceability; No Conflicts.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by Parent, constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
(b) The execution and delivery of this Agreement by the Company does not,
and the consummation by the Company of the transactions contemplated hereby will
not, conflict with, or result in a violation of, any provision of the Memorandum
of Association or Articles of Association of the Company, as amended to date and
as currently in full force and effect. The execution and delivery of this
Agreement by the Company does not, and the consummation by the Company of the
transactions contemplated hereby will not, give rise to any liability on the
part of the Company to make a payment to any person, or conflict with, or result
in a violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under, any mortgage, indenture, lease,
contract or other agreement or instrument, permit,
20
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its properties
or assets, except to the extent that such liability, conflict, violation,
default, right of termination, cancellation, acceleration or loss of benefit
could not reasonably be expected to have a Material Adverse Effect on the
Company. Section 2.19 of the Company Disclosure Letter lists all consents,
waivers and approvals under the Company's Articles of Association or the Company
Material Contracts or any other agreements, contracts, licenses, leases or other
obligations of the Company in effect as of the date of this Agreement required
to be obtained in connection with the consummation of the transactions
contemplated hereby, except to the extent that the failure to obtain such
consents, waivers and approvals could not reasonably be expected to have a
Material Adverse Effect on the Company. To the Knowledge of the Company, there
are no circumstances which may give rise to any material alteration in the terms
and conditions of any material facility or borrowings of the Company which might
affect or prejudice their continuation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, except as set forth in the
disclosure letter supplied by the Purchase to the Company dated as of the date
hereof (the "PARENT DISCLOSURE SCHEDULE"):
SECTION 3.1 Subsidiaries. Parent has no direct or indirect Subsidiaries
other than those listed in Section 3.1(a) of the Parent Disclosure Schedule.
Parent owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Encumbrance, and all
the issued and outstanding shares of capital stock or comparable equity
interests of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
SECTION 3.2 Organization and Qualification. Each of Parent and each
Subsidiary of Parent is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither Parent nor any Subsidiary of Parent is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of Parent and each Subsidiary of
Parent is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, be expected to have a Material
Adverse Effect on Parent.
SECTION 3.3 Authorization; Enforcement. Parent has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement by Parent
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of Parent and no
further consent or action is required by Parent, the Parent Board or its
stockholders. This Agreement has been (or upon delivery will be) duly executed
by Parent and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of Parent enforceable against
Parent in accordance with its terms.
SECTION 3.4 No Conflicts. The execution, delivery and performance of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of Parent's or any of Parent's Subsidiaries' certificate or
articles of incorporation, bylaws or other organizational or charter documents,
(ii) give rise to any liability on the part of Parent or any Subsidiary to make
any payment to any person, conflict with, or constitute a
21
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing any Parent
or Subsidiary debt or otherwise) or other understanding to which Parent or any
Subsidiary is a party or by which any property or asset of Parent or any
Subsidiary is bound or affected, except to the extent that such liability,
conflict, default or termination right could not reasonably be expected to have
a Material Adverse Effect on Parent, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which Parent or any Subsidiary of Parent
is subject (including federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which Parent or its
securities are subject), or by which any property or asset of Parent or a
Subsidiary of Parent is bound or affected.
SECTION 3.5 Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options, warrants and other
securities of Parent (whether or not presently convertible into or exercisable
or exchangeable for shares of capital stock of Parent) is set forth in Section
3.5 of the Parent Disclosure Schedule. All outstanding shares of capital stock
are duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance with all applicable securities laws. Except as set forth on
Section 3.5 of the Parent Disclosure Schedule, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares of Parent Common Stock, or contracts, commitments,
understandings or arrangements by which Parent or any Subsidiary of Parent is or
may become bound to issue additional shares of Parent Common Stock, or
securities or rights convertible or exchangeable into shares of Parent Common
Stock. There are no anti-dilution or price adjustment provisions contained in
any security issued by Parent (or in any agreement providing rights to security
holders) and the consummation of the transaction contemplated by this Agreement
will not obligate Parent to issue shares of Parent Common Stock or other
securities to any person and will not result in a right of any holder of Parent
securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the Knowledge of Parent, except as specifically disclosed in
Section 3.5 of the Parent Disclosure Schedule, no person or group of related
persons beneficially owns (as determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934 (the "EXCHANGE ACT")), or has the right to
acquire, by agreement with or by obligation binding upon Parent, beneficial
ownership of in excess of 5% of the outstanding Parent Common Stock, ignoring
for such purposes any limitation on the number of shares of Parent Common Stock
that may be owned at any single time.
SECTION 3.6 SEC Reports; Financial Statements. Parent has filed all
reports required to be filed by it under the Securities Act of 1933( the
"SECURITIES ACT") and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as Parent was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC REPORTS" and,
together with this Agreement and the Parent Disclosure Schedule, the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. Parent has made available to the Company copies of all SEC Reports
filed within the ten (10) days preceding the date hereof. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of SEC
promulgated thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
financial statements of Parent included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally
22
accepted accounting principles applied on a consistent basis during the periods
involved ("US GAAP"), except as may be otherwise specified in such financial
statements or the notes thereto or in the case of unaudited financial
statements, as permitted by Form 10-Q of SEC, and fairly present in all material
respects the financial position of Parent and its consolidated subsidiaries as
of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. All material agreements, as such
contracts are defined in Section 601(a)(10) of Regulation S-K under the
Securities Act, to which Parent or any Subsidiary is a party or to which the
property or assets of Parent or any Subsidiary of Parent are subject are
included as part of or specifically identified in the SEC Reports.
SECTION 3.7 Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could result
in a Material Adverse Effect on Parent, (ii) Parent has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in Parent's financial
statements pursuant to US GAAP or required to be disclosed in filings made with
the SEC, (iii) Parent has not altered its method of accounting or the identity
of its auditors, (iv) Parent has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) Parent has not issued any equity securities to any officer,
director or affiliate, except pursuant to existing options to purchase Parent
Common Stock ("PARENT OPTIONS") and the stock purchase plan.
SECTION 3.8 Absence of Litigation. Except as set forth in Section 3.8 of
the Parent Disclosure Schedule, there is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of
Parent, overtly threatened against or affecting Parent or any of its
Subsidiaries that could, individually or in the aggregate, have a Material
Adverse Effect on Parent. Section 3.8 of the Parent Disclosure letter contains a
complete list and summary description of any pending or, to the knowledge of
Parent, threatened proceeding against or affecting Parent or any of its
Subsidiaries that could individually or in the aggregate, have a Material
Adverse Effect on Parent.
SECTION 3.9 Compliance. Neither Parent nor any Subsidiary of Parent (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
Parent or any Subsidiary of Parent under), nor has Parent or any Subsidiary of
Parent received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or result in a
Material Adverse Effect on Parent.
SECTION 3.10 Title to Assets. Parent and its Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of Parent and its Subsidiaries and good and marketable
title in all personal property owned by them that is material to the business of
Parent and its Subsidiaries, in each case free and clear of all Encumbrances,
except for Encumbrances as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by Parent and its Subsidiaries. Any real property and facilities
held
23
under lease by Parent and its Subsidiaries are held by them under valid,
subsisting and enforceable leases of which Parent and its Subsidiaries are in
compliance.
SECTION 3.11 Form S-3 Eligibility. Parent is eligible to register shares
of Parent Common Stock for resale by the shareholders of the Company using Form
S-3 promulgated under the Securities Act who may be deemed to be affiliates of
the Company (for purposes of paragraphs (c) and (d) of Rule 145 of the General
Rules and Regulations under the Securities Act.
SECTION 3.12 Listing and Maintenance Requirements. Except as described in
Parent's amended Annual Report for the year ended December 31, 2003 filed on
Form 10-K/A with SEC on June 30, 2004, as amended (the "ANNUAL REPORT"), Parent
has not, in the two years preceding the date hereof, received notice (written or
oral) from any trading market on which the Parent Common Stock is or has been
listed or quoted to the effect that Parent is not in compliance with the listing
or maintenance requirements of such trading market.
SECTION 3.13 Registration Rights. Except as described in Section 3.13 of
the Parent Disclosure Schedule, Parent has not granted or agreed to grant to any
person any rights (including "piggy-back" registration rights) to have any
securities of Parent registered with SEC or any other governmental authority
that have not been satisfied.
SECTION 3.14 Disclosure. All disclosure provided to the Company regarding
Parent, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of Parent are true and
correct and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading. No
event or circumstance has occurred or information exists with respect to Parent
or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by Parent but which has
not been so publicly announced or disclosed, except, until such time as the
press release is issued as contemplated by Section 6.2, the execution of this
Agreement and the other agreements referred to herein and executed concurrently
herewith.
SECTION 3.15 Intellectual Property.
(a) Section 3.15 of the Parent Disclosure Schedule lists (i) all patents
and patent applications, all applications for trademarks, trade names and
service marks, and all registered trademarks, trade names, service marks, and
copyrights that are owned or purported to be owned by Parent or any Subsidiary
of Parent, and such list specifies, as applicable, the jurisdictions by or in
which each such patent, trademark, trade name, service xxxx or copyright has
been issued or registered or in which any application for such issuance and
registration has been filed, (ii) all material licenses, sub-licenses and other
agreements as to which Parent or any Subsidiary of Parent is a party and
pursuant to which any person is authorized to use any Parent Intellectual
Property (as defined below), and (iii) all material licenses, sub-licenses and
other agreements to which Parent or any Subsidiary of Parent is a party and
pursuant to which Parent or any Subsidiary of Parent is authorized to use any
third-party Intellectual Property that is included in the Parent Intellectual
Property (third-party Intellectual Property included in the Parent Intellectual
Property being referred to in this Agreement as "PARENT THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS"). All agreements described in Section 3.15 of the Parent
Disclosure Schedule as they relate to Sections 3.15(a)(ii) and (iii) are valid,
enforceable and legally binding, subject to the effect or availability of rules
of law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity), and to Parent's Knowledge, neither the Parent nor any
Subsidiary of Parent and no third party is in material breach of any such
agreement described in Section 3.15 of the Parent Disclosure Schedule. "PARENT
INTELLECTUAL PROPERTY" means the Intellectual
24
Property that is material to the business of Parent or any Subsidiary of Parent
as currently conducted by Parent or any Subsidiary of Parent.
(b) Parent and each of its Subsidiaries own all right, title and interest
in and to (free and clear of any Encumbrances), or are licensed to use, or
otherwise possess legally enforceable rights in the Parent Intellectual
Property, subject only to the license agreements to which Parent is a party and
pursuant to which Parent licenses others to use any such Parent Intellectual
Property as set forth in Section 3.15 of the Parent Disclosure Schedule.
(c) To the Knowledge of Parent, there is no unauthorized use, disclosure,
infringement or misappropriation of any Parent Intellectual Property rights by
any third party, including any employee or former employee of Parent or any
Subsidiary of Parent. Neither Parent nor any Subsidiary of Parent has entered
into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
contained in purchase orders or agreements for the sale, license or distribution
of any Parent Intellectual Property or products containing Parent Intellectual
Property arising in the ordinary course of business.
(d) The execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby will not cause
Parent or any Subsidiary of Parent to breach any material license, sub-license
or other agreement relating to the Parent Intellectual Property, and will not
entitle any other party to any such license, sub-license or agreement to
terminate or modify such license, sub-license or agreement.
(e) All issued patents and registered trademarks, service marks and
copyrights held by Parent or any Subsidiary of Parent are valid and subsisting
and there is no assertion or pending claim challenging the validity or
effectiveness of any Parent Intellectual Property, and to the Knowledge of
Parent, no such challenge is being threatened. Neither Parent nor any of its
Subsidiaries is a party to any suit, action or proceeding that involves a claim
against Parent or any of its Subsidiaries of infringement or violation of any
Intellectual Property of any third party, nor, to the Knowledge of Parent, is
any such suit, action or proceeding being threatened against Parent or any of
its Subsidiaries. The conduct of the business of Parent and each Subsidiary of
Parent as currently conducted does not conflict with or infringe, and no one has
asserted to Parent that such conduct of the business conflicts with or infringes
any Intellectual Property rights of any third party. To the Knowledge of Parent,
there are no facts or alleged facts which would reasonably serve as a basis for
any claim that Parent or any Subsidiary of Parent does not have the right to use
and to transfer the right to use, free of any rights or claims of others, all
Parent Intellectual Property rights in the development, manufacture, sale,
licensing or use of any material products of Parent or any Subsidiary of Parent
as presently being developed, manufactured, sold, licensed or used in the
business of Parent as currently conducted. Neither Parent nor any Subsidiary of
Parent nor any licensor of Parent or any Subsidiary of Parent is bringing any
action, suit or proceeding for infringement of Parent Intellectual Property or
breach of any license or agreement involving Parent Intellectual Property
against any third party. There are no pending or, to the Knowledge of Parent,
threatened interference, re-examinations, oppositions or nullities involving any
patents, patent rights or applications therefore included in the Parent
Intellectual Property, except such as may have been commenced by Parent or any
Subsidiary of Parent as disclosed in Section 3.15 of the Parent Disclosure
Schedule.
(f) Parent has taken all commercially reasonable steps to protect and
preserve the confidentiality of all trade secrets and has taken all measures it
deems reasonable and appropriate to protect and preserve the confidentiality of
all other Parent Intellectual Property not otherwise protected by patents,
patent applications or copyright ("PARENT CONFIDENTIAL INFORMATION"). Each of
Parent and its Subsidiaries has a policy requiring each employee to execute an
employment and confidentiality agreement substantially in Parent's standard
form. Each current or former employee of Parent or any of its Subsidiaries has
25
signed an employment and confidentiality agreement with Parent or its
Subsidiaries. Parent has delivered or made available to the Company the standard
form of employment and confidentiality agreement used by Parent and its
Subsidiaries and any employment and confidentiality agreement entered into by
Parent or any of its Subsidiaries that differs from the standard form of such
agreement in any material respect No current or former employee of Parent or any
Subsidiary of Parent has any right, claim or interest in or with respect to any
Parent Intellectual Property.
SECTION 3.16 Insurance. Parent and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which
Parent and the Subsidiaries of Parent are engaged. Neither Parent nor any
Subsidiary of Parent has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business.
SECTION 3.17 Regulatory Permits. Parent and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect on Parent ("MATERIAL PERMITS"), and neither
Parent nor any Subsidiary of Parent has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
SECTION 3.18 Transactions With Affiliates and Employees. Except as set
forth in the Annual Report, none of the officers or directors of Parent and, to
the Knowledge of Parent, none of the employees of Parent is presently a party to
any transaction with Parent or any Subsidiary of Parent (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the Knowledge
of Parent, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
SECTION 3.19 Internal Accounting Controls. Parent and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
SECTION 3.20 Employee Benefit Plans; Employee Benefits.
(a) Section 3.20 of the Parent Disclosure Schedule contains a true and
complete list of each (i) deferred compensation and each incentive compensation
plan, equity compensation plan, "welfare" plan, fund or program (within the
meaning of section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or any similar welfare benefit plan under the laws of any
foreign jurisdiction, whether or not excluded from coverage under specific
titled or subtitles of ERISA; (ii) "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA) or any similar pension benefit plan under the
laws of any foreign jurisdiction, whether or not excluded from coverage under
specific titles or subtitles of ERISA; (iii) employment, consulting, termination
or severance agreement;
26
and (iv) other employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or contributed to or required to be
contributed to by Parent or by any trade or business, whether or not
incorporated (an "PARENT ERISA AFFILIATE"), that together with Parent would be
deemed a "single employer" within the meaning of section 4001(b) of ERISA or
Section 414(b), (c), (m) or (o) of the Code, or to which Parent or an Parent
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of Parent or any Subsidiary of Parent (the "PARENT
PLANS").
(b) With respect to each Parent Plan, Parent has heretofore delivered or
made available to the Company true and complete copies of the Parent Plan and
any amendments thereto, any related trust or other funding vehicle, any reports
or summaries required under ERISA or the Code or any related contracts,
including service provider agreements, insurance contract, minimum premium
contracts, stop-loss agreements, subscription and participation agreements and
recordkeeping agreements and the most recent determination letter received from
the Internal Revenue Service with respect to each Parent Plan intended to
qualify under Section 401 of the Code.
(c) Each Parent Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but not
limited to ERISA and the Code and each Parent Plan intended to be "qualified"
within the meaning of section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under section 501(a) of the Code.
(d) No liability under Title IV or section 302 of ERISA has been incurred
by Parent or any Parent ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to Parent or any Parent ERISA
Affiliate of incurring any such liability, other than liability for premiums due
the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(e) There are no pending, threatened or anticipated claims by or on behalf
of any Parent Plan, by any employee or beneficiary covered under any such Parent
Plan, or otherwise involving any such Parent Plan (other than routine claims for
benefits).
(f) Parent does not have any plan or commitment to create any plan, fund
or program (within the meaning of Section 3(1) of ERISA) or to modify or change
any existing Parent Plan and there has been no amendment to, written
interpretation or announcement (whether or not written) by Parent relating to,
or change in participation or coverage under, any Parent Plan which would
materially increase the expense of maintaining such parent Plan above the level
of expense incurred with respect to that Parent Plan for the most recent fiscal
year.
(g) With respect to each Parent Plan constituting a group health plan
within the meaning of Section 4980B(g)(2) of the Code, the provisions of section
4980B of the Code and Sections 601-609 of ERISA have been complied with in all
material respects.
(h) As of the date of this Agreement, there are outstanding 550,405 Parent
Options. Section 3.20(h) of the Parent Disclosure Schedule set forth, as of the
date of this Agreement (i) the name of the holder of each Parent Option, (ii)
the exercise price per share of such Parent Option, (iii) the number of shares
covered by such Parent Option, (iv) the vesting schedule for such Parent Option,
(v) the term of each option and (vi) whether the exercisability of such Parent
Option shall be accelerated in any manner by any of the transactions
contemplated by this Agreement or upon any other event or condition and the
extent of such acceleration, if any. On the First Closing Date, the Company
shall deliver to Parent an updated Section 3.20(h) of the Parent Disclosure
Schedule setting forth the information referred to in the preceding sentence
updated to a date as close to the First Closing Date as is reasonably
practicable. All
27
outstanding Parent Options have been duly authorized by the Parent Board or a
committee thereof, are validly issued, and were issued in compliance with all
applicable securities Laws.
(i) Parent has not taken any action that would result in the accelerated
vesting, exercisability or payment of any Parent Options as a consequence of the
execution of, or consummation of, the transactions contemplated by this
Agreement.
SECTION 3.21 Taxes. Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Parent, (i) all Parent Tax Returns required to
be filed with any Taxing Authority by, or with respect to, Parent and its
Subsidiaries have been filed in accordance with all applicable Laws; (ii) Parent
and its Subsidiaries have timely paid all Taxes shown to be due on such Tax
Returns, (iii) as of the date or time of filing, the Parent Tax Returns filed
were true, correct and complete in all material respects; (iv) Parent and its
Subsidiaries have made an adequate provision (determined in accordance with US
GAAP) for any and all unpaid Taxes for periods through the date of Parent's
unaudited balance sheet as of June 30, 2004 (the "PARENT BALANCE SHEET"),
whether or not required to be shown on a Tax Return, and for all Taxes payable
by Parent and its Subsidiaries for which no Parent Tax Return has yet been
filed, and no Taxes have been incurred by the Company since the date of the
Company Balance Sheet other than in the ordinary course of Parent's business;
(v) there is not now, nor has there been in the past six years, any action,
suit, proceeding, audit or claim now proposed or pending against or with respect
to Parent or any of its Subsidiaries in respect of any Tax (other than Taxes
which are being contested in good faith and for which adequate reserves
(determined in accordance with US GAAP) are reflected on the Parent Balance
Sheet) and Parent is not aware of any matter which could lead to such a
proceeding; (vi) no waiver or extension of any statute of limitations is in
effect with respect to any Tax Return of Parent or any of its Subsidiaries; and
(vii) to the Knowledge of Parent, neither Parent nor any of its Subsidiaries is
liable for any Tax imposed on any entity other than Parent or such Subsidiaries;
(viii) Parent has withheld and paid over all Taxes required to have been
withheld and paid over, and complied in all material respects with all
information reporting and backup withholding in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other third party;
(ix) there are no Encumbrances on any of the assets of Parent or any of its
Subsidiaries with respect to Taxes; (x) neither Parent nor any of its
Subsidiaries have any liability for unpaid Taxes pursuant to Section 1.1502-6 of
the Treasury Regulations promulgated under the Code or comparable provisions of
state, local or foreign Tax law (other than Taxes of the affiliated group of
which Parent is the ultimate parent corporation); (xi) neither Parent nor any of
its Subsidiaries has been a distributing corporation or a controlled corporation
in a transaction described in Section 355 of the Code; (xii) neither Parent nor
any of its Subsidiaries is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code; and (xiii)
neither Parent nor any of its Subsidiaries has entered into any compensatory
agreements with respect to the performance of services which payment thereunder
would result in a nondeductible expense to it pursuant to Section 280G or 162(m)
of the Code or an excise tax to the recipient of such payment pursuant to
Section 4999 of the Code. Parent has made available to the Company accurate and
complete copies of all material Parent Tax Returns for the years ending December
31, 2001, 2002 and 2003.
SECTION 3.22 Material Contracts.
(a) Material Contracts. For purposes of this Agreement, "PARENT MATERIAL
CONTRACT" shall mean:
(i) any employment or consulting Contract with any executive officer
or other employee of Parent earning an annual salary in excess of $50,000;
28
(ii) any agreement of indemnification or any guaranty other than any
agreement of indemnification or guaranty entered into in the ordinary course of
business;
(iii) any contract containing any covenant limiting in any material
respect the right of Parent or any of its Subsidiaries to engage in any line of
business, to make use of any Parent Intellectual Property or compete with any
Person in any material line of business or to compete with any person or entity
after the First Closing Date;
(iv) any contract relating to the disposition or acquisition by
Parent or any of its Subsidiaries after the date hereof of a material amount of
assets not in the ordinary course of business or pursuant to which Parent or any
of its Subsidiaries has any material ownership interest in any other person or
entity or other business enterprise other than its Subsidiaries;
(v) any dealer, distributor, joint marketing or development
agreement under which Parent or any of its Subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of ninety (90) days or less, or any
material agreement pursuant to which Parent or any of its Subsidiaries have
continuing material obligations to jointly develop any Intellectual Property
that will not be owned, in whole or in part, by Parent or any of its
Subsidiaries and which may not be terminated without penalty upon notice of
ninety (90) days or less;
(vi) any contract to provide source code to any third party for any
product or technology that is material to Parent and its Subsidiaries taken as a
whole;
(vii) any contract containing any material support, maintenance or
service obligation on the part of Parent or any of its Subsidiaries, other than
those obligations that are terminable by Parent or any of its Subsidiaries
involving annual revenues to Parent in excess of $50,000 on no more than ninety
(90) days notice without material liability or financial obligation to Parent or
its Subsidiaries;
(viii) any contract to license any third party to manufacture or
reproduce any of Parent's products, services or technology, except agreements in
the ordinary course of business and terminable without penalty upon notice of
ninety (90) days or less;
(ix) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other contracts relating to the borrowing of
money or extension of credit, other than accounts receivables and payables in
the ordinary course of business; or
(x) any other agreement, contract or commitment that involves a
payment to or from Parent in excess of $20,000 on its face in any individual
case.
(b) Schedule. Section 3.23(b) of the Parent Disclosure Schedule sets forth
a list of all Parent Material Contracts to which Parent or any of its
Subsidiaries is a party or is bound by as of the date hereof.
(c) No Breach. All Parent Material Contracts are valid and in full force
and effect except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which, with or without
notice, lapse of time or both would constitute a default under the provisions
of, any Parent Material Contract, except in each case for those violations and
29
defaults which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on to Parent.
SECTION 3.23 Financial Advisor. Neither Parent nor any of its Subsidiaries
has entered into or are bound by any agreements or understandings with any
investment bank, financial advisor or other similar entity whatsoever, except
for Seven Hills Partners LLC (the "PARENT FINANCIAL ADVISOR"). Parent has
furnished to the Company a true and complete copy of all agreements between
Parent and the Parent Financial Advisor pursuant to which such Parent Financial
Advisor is entitled to an "Opinion Fee" (as such term is defined in that certain
letter agreement dated July 15, 2004 between the Parent Financial Advisor and
Parent (the "PARENT FINANCIAL ADVISOR AGREEMENT")) upon the rendering of the
opinion of Financial Advisor described in Section 3.24 below, a "Transaction
Fee" (as such term is defined in the Parent Financial Advisor Agreement) upon
the occurrence of the First Closing or any other payment relating to the
transactions contemplated hereunder.
SECTION 3.24 Opinion of Financial Advisor. The Parent Board has received
the written opinion of the Parent Financial Advisor to the effect that, as of
the date of the opinion, the consideration to be paid by Parent pursuant to this
Agreement is fair from a financial point of view to Parent. Parent will provide
the Company with a written copy of such opinion as soon as practicable following
the date hereof, and the Parent Financial Advisor has consented to the
reproduction of such opinion in its entirety in the Proxy Statement/Prospectus.
SECTION 3.25 No Restrictions on the Offer; Takeover Statutes. The Parent
Board has unanimously approved this Agreement and the Offer and the other
transactions contemplated hereby and the execution of the Parent Support
Agreements, and such approval is sufficient to render inapplicable to this
Agreement, the Offer, the Loan Agreement, the Parent Support Agreements and the
other transactions contemplated hereby and thereby, the restrictions on business
combinations of Section 203 of the Delaware General Corporation Law. Parent has
not adopted any stockholder rights plan or similar "poison pill" arrangement
that would be applicable to this Agreement, the Offer, the Loan Agreement or the
Parent Support Agreements and the other transactions contemplated hereby and
thereby. No Delaware law or other takeover statute or similar law and no
provision of the certificate of incorporation or bylaws, or other organizational
documents or governing instruments of Parent or any of its Subsidiaries or any
material agreement to which any of them is a party (a) would or would purport to
impose restrictions which might adversely affect or delay the consummation of
the transactions contemplated by this Agreement, the Loan Agreement or the
Parent Support Agreement or (b) as a result of the consummation of the
transactions contemplated by this Agreement, the Loan Agreement or the Parent
Support Agreement would or would purport to entitle any person to acquire
securities of Parent.
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.1 Conduct of Business. During the period from the date of this
Agreement to the earlier of the First Closing Date or the termination of this
Agreement, the Company shall carry on its business in the ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such ordinary course, use all reasonable efforts to preserve
intact its current business organizations, keep available the services of its
current officers and employees (as a group) and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the earlier of the First
Closing Date or the termination of this Agreement, except as is strictly
necessary to perform its specific obligations hereunder and except for the
execution, delivery and performance of its obligations under the Modified
Agreements, the Company shall not, without the prior written approval of Parent:
30
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock, (ii) adjust, split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities, provided that the foregoing shall not prohibit the
Company from making repurchases from employees following the termination of
their employment with the Company pursuant to the terms of preexisting
agreements at prices not exceeding fair market value on the date of such
repurchase;
(b) issue, deliver, sell, pledge, grant options over or otherwise encumber
any of its share capital, any other voting securities or any securities
convertible into, or any rights, warrants or options, including Company Options,
to acquire, any such shares, voting securities or convertible securities (other
than (i) the issuance of Shares upon the exercise of Company Options outstanding
as of the date hereof), or (ii) the issuance of 277,778 B Preferred Shares with
respect to the investment of up to (pound)500,000 in the capital of the Company
pursuant to the Subscription and Shareholders' Agreement dated July 30, 2004
(the "SHAREHOLDERS' AGREEMENT") between the Company and certain shareholders
listed therein, together with a further 66,667 A Ordinary Shares issued as bonus
shares to satisfy the anti-dilution provisions, each as contemplated by the
Shareholders' Agreement); provided, however, that Parent's consent to the
Company's requested grant of options over the share capital of the Company shall
not be unreasonably withheld;
(c) amend its Memorandum of Association, Articles of Association or other
comparable charter or organizational documents;
(d) mortgage or otherwise encumber or subject to any material Lien or,
except in the ordinary course of business consistent with past practice and
pursuant to existing contracts or commitments, sell, lease, license, transfer or
otherwise dispose of any material properties or assets;
(e) incur, assume, guarantee or become obligated with respect to any
indebtedness, or incur, assume, guarantee or become obligated with respect to
any other material obligations;
(f) make any material tax election or take any material tax position
(unless required by law) or change its fiscal year or accounting methods,
policies or practices (except as required by changes in UK GAAP) or settle or
compromise any material income tax liability;
(g) make any loan, advance or capital contributions to or investment in
any person or entity;
(h) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction thereof, in the ordinary course of
business consistent with past practice and in accordance with their terms,
modify, amend or terminate any material contract or agreement to which it is a
party, or release or waive any material rights or claims, or waive the benefits
of, or agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company is a party;
(i) (i) grant to any current or former director, officer or employee of
the Company any increase in compensation (cash, equity or otherwise) or benefits
(provided that the Company may increase the compensation of non-executive
employees in the ordinary course of business consistent with past practice),
(ii) grant to any such current or former director, officer, or employee any
increase in severance or termination pay (cash, equity or otherwise) or adopt
any new severance plan or amend or modify in any respect any severance plan,
agreement or arrangement existing on the date hereof, (iii) except as may
31
be required by applicable Law, adopt or amend any Company Plan or enter into any
employment, deferred compensation, severance or termination agreement or
arrangement with or for the benefit of any such current or former director,
officer, or employee, (iv) waive any stock repurchase right, accelerate, amend
or change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant, director or other stock
plan or authorize cash payments in exchange for any options granted under any
such plans, (v) hire or offer to hire any employee or independent contractors;
provided, however, that Parent's consent to the Company's request to hire, or
offer to hire, any employee or independent contractor shall not be unreasonably
withheld.
(j) transfer or license to any person or entity or otherwise extend, amend
or modify any rights to the Company Intellectual Property, or enter into grants
to transfer or license to any person future rights to the Company Intellectual
Property other than non-exclusive licenses granted to end-users and
non-exclusive distribution, reseller and similar commercial agreements entered
into in the ordinary course of business and consistent with past practice;
provided that in no event shall the Company (i) license, or enter into a
distribution, reseller or similar arrangement, on an exclusive basis, or sell,
any Company Intellectual Property; or (ii) enter into any contract (v)
containing pricing or discounting terms or provisions other than in the ordinary
course of business consistent with past practice, (w) requiring the Company to
use its "best efforts" or (x) limiting the right of the Company to engage in any
line of business or to compete with any person;
(k) enter into any contract or commitment with aggregate commitments of
the Company in excess of $50,000;
(l) take or agree or commit to take any action that would make any
representation or warranty of the Company hereunder inaccurate in any material
respect at, or as of any time prior to, the First Closing Date or (ii) omit or
agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time;
(m) commence or settle any litigation, other than to enforce the Company's
rights under this Agreement; or
(n) authorize any of, or commit or agree to take any of, the foregoing
actions.
SECTION 4.2 Access to Information. From the date hereof until the First
Closing Date, the Company will give Parent, its counsel, financial advisors,
auditors and other authorized representatives full access (during normal
business hours and upon reasonable notice) to the offices, properties, officers,
employees, accountants, auditors, counsel and other representatives, books and
records of the Company, will furnish to Parent, its counsel, financial advisors,
auditors and other authorized representatives such financial, operating and
property related data and other information as such persons may reasonably
request, and will instruct the Company's employees, counsel and financial
advisors to cooperate with Parent in its investigation of the business of the
Company.
SECTION 4.3 Waiver of Change of Control and Acceleration Benefits.
Following the date hereof, the Company shall use its reasonable best efforts to
obtain the waiver of the applicable Company securityholders and employees with
respect to any change of control or acceleration benefits, other than the
acceleration of Company Options pursuant to the Option Offer, that would
otherwise be triggered by the consummation of the Offer and the other
transactions contemplated hereby.
SECTION 4.4 No Solicitation.
32
(a) The Company agrees that neither the Company nor any of its officers,
directors, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by the Company) of the
Company shall, (i) initiate, continue, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of the Company) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or equity securities
of, the Company involving any person other than Parent (any such proposal or
offer being hereinafter referred to as an "COMPANY ACQUISITION PROPOSAL"), or
(ii) engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Company Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Company Acquisition Proposal or enter into any agreement or
understanding with any other person or entity with the intent to effect any
Company Acquisition Proposal. Notwithstanding the foregoing, prior to the First
Closing Date the Company may, in the event that a third party that has made (and
not withdrawn) a bona fide Company Acquisition Proposal that the Company Board
reasonably concludes in good faith constitutes, or is likely to lead to, a
Company Superior Proposal, (i) engage or participate in discussions or
negotiations with such third party and/or (ii) furnish to such third party
nonpublic information relating to Company pursuant to a confidentiality
agreement with terms no less favorable to Company than those contained in the
Confidentiality Agreement; provided, that in each case (x) neither Company nor
any representative of Company shall have violated any of the restrictions set
forth in this Section 4.3, (y) the Company Board reasonably concludes in good
faith, after consultation with its outside legal counsel, that in light of such
Company Acquisition Proposal the failure to take such action would be reasonably
expected to be a violation of the fiduciary obligations of the Company Board to
the Company's shareholders, and (z) contemporaneously with furnishing any such
information to such person or group, the Company furnishes such information to
Parent (to the extent such information has not been previously furnished by
Company to Parent). The Company will take all necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 4.3. The Company will notify Parent
promptly, orally and in writing (including the names of any party making, the
principal terms of, and any written materials provided in connection with, any
such proposal, request or inquiry), if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with the Company.
Immediately following the execution of this Agreement, the Company will request
each person which has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Company or any portion
thereof to return all confidential information heretofore furnished to such
person by or on behalf of the Company. The Company will keep Parent fully and
promptly informed of the status and details (including amendments or proposed
amendments) of, and will promptly provide copies of any written materials
provided in connection with, any such request, proposal or inquiry.
(b) For purposes of this Agreement, "COMPANY SUPERIOR PROPOSAL" means any
bona fide Company Acquisition Proposal (1) to acquire, directly or indirectly,
at least a majority of the Shares then outstanding, or all or substantially all
of the assets of the Company, (2) that contains terms and conditions that the
Board of Directors reasonably determines in good faith (after consultation with
its financial advisor) to be more favorable from a financial point of view to
the Company's shareholders than the Offer, (3) that the Company Board reasonably
determines in its good faith judgment (after consultation with its legal
counsel) to be reasonably capable of being completed (taking into account all
legal, financial, regulatory and other aspects of the proposal and the person
making the proposal), and (4) that does not contain any "due diligence"
condition and for which any financing upon which it is conditioned is committed.
(c) Except as set forth in this Section 4.3(c), the Company Board shall
not make a change in its recommendation that the shareholders accept the Offer
(a "CHANGE IN COMPANY RECOMMENDATION").
33
Notwithstanding the foregoing, if the Company Board determines in its reasonable
good faith judgment prior to the First Closing Date, after consultation with
outside legal counsel, that the failure to make a Change in Company
Recommendation would be a violation of its fiduciary duties to the Company's
shareholders, then the Company Board may make a Change in Company
Recommendation. In the event that the Company Board determines that it shall be
necessary to make a Change in Company Recommendation, it shall give Parent at
least four (4) Business Day's prior written notice of such determination before
making a public announcement regarding such Change in Company Recommendation.
ARTICLE V
COVENANTS OF PARENT
SECTION 5.1 Conduct of Business. During the period from the date of this
Agreement to the earlier of the First Closing Date or the termination of this
Agreement, Parent shall, and shall cause its Subsidiaries to, carry on their
business in the ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent with such ordinary course, use all
reasonable efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees (as a group) and
preserve their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the earlier of the First Closing Date or the termination of this Agreement,
except as is strictly necessary to perform its specific obligations hereunder
and except for the execution, delivery and performance of its obligations under
the Modified Agreements, Parent shall not, and shall not permit any of its
Subsidiaries to, without the prior written approval of the Company:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock, other than dividends and distributions by any direct or indirect
wholly-owned subsidiary of Parent to its parent, (ii) adjust, split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of Parent or any Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities,
provided that the foregoing shall not prohibit Parent from making repurchases
from employees following the termination of their employment with Parent or one
of its Subsidiaries pursuant to the terms of preexisting agreements at prices
not exceeding fair market value on the date of such repurchase;
(b) issue, deliver, sell, pledge, grant options over or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options, including Parent Options
and warrants to purchase Parent capital stock ("PARENT WARRANTS"), to acquire,
any such shares, voting securities or convertible securities (other than (i) the
issuance of Parent Common Stock upon the exercise of Parent Options and Parent
Warrants outstanding as of the date hereof or (ii) the issuance of Parent
Options and/or Parent Warrants in exchange for the cancellation of Parent
Options or Parent Warrants, as the case may be, which are outstanding as of the
date of this Agreement and which are "out-of-the-money" at the time of such
exchange and cancellation; provided that such exchange and cancellation is done
without the expenditure of any cash or cash equivalents by Parent and is
otherwise effected on terms satisfactory to the Company in its reasonable
discretion); provided, however, that the Company's consent to Parent's requested
grant of options to purchase Parent Common Stock shall not be unreasonably
withheld;
(c) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents;
34
(d) mortgage or otherwise encumber or subject to any material Lien or,
except in the ordinary course of business consistent with past practice and
pursuant to existing contracts or commitments, sell, lease, license, transfer or
otherwise dispose of any material properties or assets;
(e) incur, assume, guarantee or become obligated with respect to any
indebtedness, or incur, assume, guarantee or become obligated with respect to
any other material obligations;
(f) make or agree to make any new capital expenditures or acquisitions of
assets or property or other acquisitions or commitments in excess of $15,000
individually or $50,000 in the aggregate payable in any calendar month or
otherwise acquire or agree to acquire any material assets or property other than
in the ordinary course and consistent with past practice;
(g) make any material tax election or take any material tax position
(unless required by law) or change its fiscal year or accounting methods,
policies or practices (except as required by changes in US GAAP) or settle or
compromise any material income tax liability;
(h) make any loan, advance or capital contributions to or investment in
any person or entity;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction thereof, in the ordinary course of
business consistent with past practice and in accordance with their terms,
modify, amend or terminate any material contract or agreement to which it is a
party, or release or waive any material rights or claims, or waive the benefits
of, or agree to modify in any manner, any confidentiality, standstill or similar
agreement to which Parent or any Subsidiary is a party;
(j) (i) grant to any current or former director, officer or employee of
Parent or any Subsidiary any increase in compensation (cash, equity or
otherwise) or benefits (provided that Parent may increase the compensation of
non-executive employees in the ordinary course of business consistent with past
practice), (ii) grant to any such current or former director, officer, or
employee any increase in severance or termination pay (cash, equity or
otherwise) or adopt any new severance plan or amend or modify in any respect any
severance plan, agreement or arrangement existing on the date hereof, (iii)
except as may be required by applicable Law, adopt or amend any Parent Plan or
enter into any employment, deferred compensation, severance or termination
agreement or arrangement with or for the benefit of any such current or former
director, officer, or employee, (iv) waive any stock repurchase right,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant,
director or other stock plan or authorize cash payments in exchange for any
options granted under any such plans, or (v) hire or offer to hire any employee
or independent contractors; provided, however, that the Company's consent to
Parent's request to hire, or offer to hire, any employee or independent
contractor shall not be unreasonably withheld.
(k) transfer or license to any person or entity or otherwise extend, amend
or modify any rights to Parent Intellectual Property, or enter into grants to
transfer or license to any person future rights to Parent Intellectual Property
other than non-exclusive licenses granted to end-users and non-exclusive
distribution, reseller and similar commercial agreements entered into in the
ordinary course of business and consistent with past practice; provided that in
no event shall Parent (i) license, or enter into a distribution, reseller or
similar arrangement, on an exclusive basis, or sell, any Company Intellectual
Property; or (ii) enter into any contract (v) providing for any site licenses,
(w) containing pricing or discounting terms or provisions other than in the
ordinary course of business consistent with past practice, (x) requiring Parent
to use its "best efforts" or (y) limiting the right of Parent to engage in any
line of business or to compete with any person;
35
(l) enter into any contract or commitment with aggregate commitments of
Parent in excess of $50,000;
(m) take or agree or commit to take any action that would make any
representation or warranty of Parent hereunder inaccurate in any material
respect at, or as of any time prior to, the First Closing Date or (ii) omit or
agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time;
(n) commence or settle any litigation, other than to enforce the Parent's
rights under this Agreement; or
(o) authorize any of, or commit or agree to take any of, the foregoing
actions.
SECTION 5.2 Access to Information.
From the date hereof until the First Closing Date, Parent will give the
Company, its counsel, financial advisors, auditors and other authorized
representatives full access (during normal business hours and upon reasonable
notice) to the offices, properties, officers, employees, accountants, auditors,
counsel and other representatives, books and records of Parent and its
Subsidiaries, will furnish to the Company, its counsel, financial advisors,
auditors and other authorized representatives such financial, operating and
property related data and other information as such persons may reasonably
request, and will instruct Parent's and its Subsidiaries' employees, counsel and
financial advisors to cooperate with the Company in its investigation of the
business of Parent and its Subsidiaries.
SECTION 5.3 No Solicitation.
(a) Parent agrees that neither Parent nor any Subsidiary nor any of the
respective officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by Parent or any Subsidiary) of Parent or any Subsidiary shall, (i)
initiate, continue, solicit or encourage, directly or indirectly, any inquiries
or the making of any proposal or offer (including, without limitation, any
proposal or offer to stockholders of Parent) with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or equity securities of, Parent or any
Subsidiary involving any person other than the Company (any such proposal or
offer being hereinafter referred to as an "PARENT ACQUISITION PROPOSAL"), or
(ii) engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to a
Parent Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement a Parent Acquisition Proposal or enter into any agreement or
understanding with any other person or entity with the intent to effect any
Parent Acquisition Proposal. Notwithstanding the foregoing, prior to the First
Closing Date Parent may, in the event that a third party that has made (and not
withdrawn) a bona fide Parent Acquisition Proposal that the Parent Board
reasonably concludes in good faith (after consultation with its financial
advisor) constitutes, or is likely to lead to, a Parent Superior Proposal, (i)
engage or participate in discussions or negotiations with such third party
and/or (ii) furnish to such third party nonpublic information relating to Parent
or any Subsidiary pursuant to a confidentiality agreement with terms no less
favorable to Parent than those contained in the Confidentiality Agreement;
provided, that in each case (x) neither Parent nor any representative of Parent
and its Subsidiaries shall have violated any of the restrictions set forth in
this Section 5.3, (y) the Parent Board reasonably concludes in good faith, after
consultation with its outside legal counsel, that in light of such Parent
Acquisition Proposal the failure to take such action would be reasonably
expected to be a violation of the fiduciary obligations of Parent Board to
Parent's stockholders, and (z) contemporaneously with furnishing any such
information to such person or group, Parent furnishes such information to the
Company (to the extent such information has not been previously furnished by
Parent to the Company).
36
Parent will take all necessary steps to inform the individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 5.3. Parent will notify the Company promptly, orally and in writing
(including the names of any party making, the principal terms of, and any
written materials provided in connection with, any such proposal, request or
inquiry), if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with Parent. Immediately following the
execution of this Agreement, Parent will request each person which has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring Parent or any portion thereof to return all
confidential information heretofore furnished to such person by or on behalf of
Parent. Parent will keep the Company fully and promptly informed of the status
and details (including amendments or proposed amendments) of, and will promptly
provide copies of any written materials provided in connection with, any such
request, proposal or inquiry.
(b) For purposes of this Agreement, "PARENT SUPERIOR PROPOSAL" means any
bona fide Parent Acquisition Proposal (1) to acquire, directly or indirectly, at
least a majority of the shares of Parent Common Stock then outstanding, or all
or substantially all of the assets of Parent, (2) that contains terms and
conditions that the Parent Board reasonably determines in good faith (after
consultation with its financial advisor) to be more favorable from a financial
point of view to Parent's stockholders than the transactions contemplated
hereby, (3) that the Parent Board reasonably determines in its good faith
judgment (after consultation with its financial advisor and its legal counsel)
to be reasonably capable of being completed (taking into account all legal,
financial, regulatory and other aspects of the proposal and the person making
the proposal), and (4) that does not contain any "due diligence" condition and
for which any financing upon which it is conditioned is committed.
(c) Except as set forth in this Section 5.3(c), the Parent Board shall not
make a change in its recommendation that the stockholders of Parent approve the
issuance of shares of Parent Common Stock pursuant to the Offer and the other
matters referred to in Section 1.1(f) (a "CHANGE IN PARENT RECOMMENDATION").
Notwithstanding the foregoing, if the Parent Board determines in its reasonable
good faith judgment prior to the First Closing Date, after consultation with
outside legal counsel, that the failure to make a Change in Parent
Recommendation would be a violation of its fiduciary duties to Parent's
stockholders, then the Parent Board may make a Change in Parent Recommendation.
In the event that the Patent Board determines that it shall be necessary to make
a Change in Parent Recommendation, it shall give the Company at least four (4)
Business Days' prior written notice of such determination before making a public
announcement regarding such Change in Parent Recommendation. Parent acknowledges
that the occurrence of a Change in Parent Recommendation shall in no way affect
the obligation of Parent to continue the Offer in accordance with Section 1.1(a)
and to convene the Parent Stockholders Meeting in accordance with the terms of
Section 1.1(f) hereof. Parent shall not submit to a vote of its stockholders any
transaction contemplated by a Parent Acquisition Proposal, or propose to do so,
prior to or at the Parent Stockholders Meeting.
SECTION 5.4 Listing of Additional Shares. Parent shall use its reasonable
best efforts to file with Nasdaq prior to the First Closing Date a Notification
Form: Listing of Additional Shares for the listing of the Parent Common Stock to
be issued in connection with the transactions contemplated by this Agreement,
such listing to be effective prior to or as of the First Closing Date.
SECTION 5.5 Director and Officer Liability. (a) For six years after the
First Closing Date, Parent will, or will cause the Company to, indemnify and
hold harmless the present and former officers, directors, employees and agents
of the Company (the "INDEMNIFIED PARTIES") in respect of acts or omissions
occurring on or prior to the First Closing Date or arising out of or pertaining
to the transactions contemplated by this Agreement to the extent provided under
the Company's articles of incorporation and bylaws in effect on the date hereof
and indemnification agreements existing on the date
37
hereof; and shall pay any expenses of the Indemnified Parties, as incurred, in
advance of the final disposition of any such action or proceeding, provided that
such indemnification shall not be provided in violation of applicable Laws.
Parent shall not amend the Memorandum of Association or Articles of Association
of the Company to amend the indemnification provisions therein in a manner
inconsistent with this Section 5.5 for the six-year period referred to above.
For six years after the First Closing Date, Parent will use its reasonable best
efforts to cause to be maintained an extension of coverage of each of Parent's
and the Company's policies of directors and officers liability insurance
maintained by Parent and the Company, respectively, at the First Closing Date,
for the benefit of those persons who are covered by such policies at the First
Closing Date, with respect to matters occurring prior to the First Closing Date;
provided, however, that Parent shall not be required to cause to be maintained
such liability insurance policies to the extent that the annual cost of
maintaining such policies exceeds 125% of the premium paid by each of Parent and
the Company in respect of such insurance for the year ended December 31, 2003.
(b) The Indemnified Parties are intended third party beneficiaries of this
Section 5.5 to the extent such provisions benefit any such Indemnified Party.
(c) Parent will not, nor will Parent permit the Company following the
First Closing Date to, merge or consolidate with any other person or sell all or
substantially all of its assets unless Parent or the Company will ensure that
the surviving or resulting entity assumes the obligations imposed by this
Section 5.5.
SECTION 5.6 Section 16 Matters. Prior to the First Closing Date, Parent
shall take all such steps as may be required to cause the transactions
contemplated by this Agreement, including any acquisitions of Parent securities
(including derivative securities with respect to Parent securities) by each
individual who will be subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to Parent, as the case may be, to be exempt under
Rule 16b-3 promulgated under the Exchange Act.
SECTION 5.7 Compulsory Acquisition. Parent hereby agrees that promptly
following the First Closing Date, Parent shall, so far as it is eligible to do
so, deliver a notice to the holders of Company Shares who did not accept the
Offer that Parent intends to acquire such Shares in accordance with sections 428
through 430F of the Companies Xxx 0000 (the "COMPULSORY ACQUISITION"). Each
holder of B Preferred Shares, A Ordinary Share and Ordinary Shares who did not
accept the Offer shall receive, in exchange for each such Share held by such
shareholder, the applicable Exchange Ratio as set forth in Section 1.1(b)
hereof.
SECTION 5.8 Waiver of Change of Control and Acceleration Benefits.
Following the date hereof, Parent shall use its reasonable best efforts to
obtain the waiver of the applicable Parent securityholders and employees with
respect to any change of control or acceleration benefits that would otherwise
be triggered by the consummation of the Offer and the other transactions
contemplated hereby.
ARTICLE VI
COVENANTS OF PARENT AND THE COMPANY
SECTION 6.1 Reasonable Efforts; Notification.
(a) Subject to Section 6.1(b) below, each of the parties agrees to use
reasonable efforts to take, or cause to be taken, all other actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all other things reasonably necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable the Offer and the
other transactions contemplated by this Agreement, including (i) the obtaining
of all other necessary actions or nonactions, waivers, consents
38
and approvals from Governmental Entities and the making of all other necessary
registrations and filings (including other filings with Governmental Entities,
if any), (ii) the obtaining of all necessary consents, approvals or waivers from
third parties, (iii) the preparation of the Registration Statement, the Proxy
Statement/Prospectus and the Offer Documents, and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(b) Notwithstanding the foregoing, promptly following the date hereof,
Parent and the Company agree to fully cooperate with one another and shall each
use their reasonable best efforts to identify the detailed steps, actions,
documents and procedures necessary or desirable to effect the Offer, the Option
Offer and the other transactions contemplated by this Agreement, and shall
negotiate in good faith such amendments or additions to Section 1.1(a), (c), (d)
and (f), Section 1.4 and Section 5.4 of this Agreement, whether required by Law
or otherwise, as each shall deem necessary or advisable to effect the
transactions contemplated by this Agreement in the most expeditious manner
possible.
(c) The Company shall give prompt notice to Parent and Parent shall give
prompt notice to the Company of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any respect or (ii)
the failure by it to comply with or satisfy in any respect any covenant,
condition or agreement to be compiled with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(d) The Company shall give prompt notice to Parent, and Parent shall give
prompt notice to the Company, of (i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement and (ii) any
notice or other communication from any Governmental Entity in connection with
the transactions contemplated by this Agreement.
SECTION 6.2 Public Announcements. Parent, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement or with respect to, or relating to, the business of Parent or the
Company, as applicable, and shall not issue any such press release with respect
to the transactions contemplated by this Agreement or make any such public
statement with respect to the transactions contemplated by this Agreement
without the prior consent of the other party, except as may be required by
applicable Laws, court process or by obligations pursuant to any listing
agreement with any national securities exchange or with Nasdaq. The parties
agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement will be in a form to be reasonably
agreed to by the parties.
SECTION 6.3 Modified Agreements. Promptly following the date hereof,
Parent and the Company will negotiate in good faith and use their respective
reasonable best efforts to modify the Colony Technology Sharing Agreement dated
March 22, 2004 (the "CTSA")and to enter into a proposed OEM arrangement between
Parent and the Company, which terms shall include a payment commitment by the
Company of $500,000 (subject to the satisfaction by Parent of Parent's
obligations under such agreements), in form and upon terms to be mutually agreed
by the parties (the "MODIFIED AGREEMENTS"). In addition to the foregoing, Parent
and the Company shall enter into all required modifications to the CTSA as
required by the Loan Agreement.
SECTION 6.4 Joint Remuneration Planning Committee. Promptly following the
date hereof, Parent and the Company will appoint a joint remuneration planning
committee consisting of Xxxxx Xxxxxx and the members of the Company's existing
remuneration committee (the "JOINT REMUNERATION
39
PLANNING COMMITTEE"). The Joint Remuneration Planning Committee will negotiate
in good faith and use its reasonable efforts to (a) negotiate and execute an
employment agreement with Xxxx Xxxx which sets forth the terms of Xx. Xxxx'x
proposed employment with Parent as its Chief Executive Officer effective upon,
and subject to, the First Closing Date, and which agreement shall maintain the
economic terms and legal protections of Xx. Xxxx'x existing employment agreement
with the Company; provided, however, that such terms and protections may be
amended as necessary to cause such employment agreement to comply with the laws
of the United States or any individual state within the United States, as
applicable; and (b) review other remuneration matters that may arise from time
to time following the execution of this Agreement and prior to the First Closing
Date and which may affect the combined company following the First Closing Date.
SECTION 6.5 Certain Tax Matters.
(a) This Agreement is intended to constitute a "plan of reorganization"
within the meaning of section 1.368-2(g) of the income tax regulations
promulgated under the Code. From and after the date of this Agreement and until
the First Closing Date (and thereafter where relevant), each party hereto shall
use its reasonable best efforts to cause the exchange of shares contemplated by
the Offer to qualify, and will not knowingly take any action, cause any action
to be taken, fail to take any action or cause any action to fail to be taken
which action or failure to act could prevent such exchange of shares from
qualifying, as a reorganization within the meaning of Section 368(a) of the
Code.
(b) As of the date hereof, the Company does not know of any reason (i) why
it would not be able to deliver to counsel to the Company and Parent, at the
date of the legal opinions referred to below, a certificate substantially in
compliance with IRS published advance ruling guidelines, with customary
exceptions and modifications thereto, to enable such firms to deliver the legal
opinions contemplated by paragraph (p) of Section 2 of Annex A, or (ii) why
counsel to the Company and Parent would not be able to deliver the opinions
contemplated by paragraph (p) of Section 2 of Annex A. The Company will deliver
such certificate to counsel to the Company and Parent, effective as of the date
of such opinions.
(c) As of the date hereof, Parent does not know of any reason (i) why it
would not be able to deliver to counsel to the Company and Parent, at the date
of the legal opinions referred to below, a certificate substantially in
compliance with IRS published advance ruling guidelines, with customary
exceptions and modifications thereto, to enable such firms to deliver the legal
opinions contemplated by paragraph (p) of Section 2 of Annex A, or (ii) why
counsel to the Company and Parent would not be able to deliver the opinions
contemplated by paragraph (p) of Section 2 of Annex A. Parent will deliver such
certificate to counsel to the Company and Parent, effective as of the date of
such opinions.
(d) In the period prior to the First Closing Date, the Company shall be
entitled to seek confirmation from Inland Revenue pursuant to Section 138 of the
TCGA that the sale of the Shares in exchange of shares of Parent Common Stock
will be effected for bona fide commercial reasons and will not form part of any
such scheme or arrangement as is mentioned in Section 137(l) of the TCGA and
that, therefore, the proposed share exchange qualifies for roll-over relief from
capital gains tax pursuant to Section 135 of the TCGA.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the Offer
may be abandoned at any time prior to the First Closing Date:
(a) by mutual written consent of the Company and Parent;
40
(b) by either Parent or the Company, if:
(i) the Offer shall have expired, terminated or been withdrawn in
accordance with the terms of this Agreement without Parent having
exchanged any Shares pursuant to the Offer (unless a principal cause
of the Offer having expired or having been terminated or withdrawn
is a breach by the party seeking to terminate this Agreement of any
of its obligations under this Agreement);
(ii) the First Closing not having taken place on or before March 31,
2005 (the "FINAL DATE") (unless a principal cause of the First Offer
not having taken place by such date is a breach by the party seeking
to terminate this Agreement of any of its obligations under this
Agreement); or
(iii) there shall be any law or regulation that makes consummation
of the Offer illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Parent or the Company from
consummating the Offer is entered and such judgment, injunction,
order or decree shall become final and non-appealable;
(c) by Parent, at any time prior to the First Closing Date, if a Change in
Company Recommendation shall have occurred or the Company Board shall have
resolved to do so;
(d) by the Company, at any time prior to the First Closing Date, if a
Change in Parent Recommendation shall have occurred or the Parent Board shall
have resolved to do so;
(e) by Parent, if an event or circumstance shall have occurred that makes
satisfaction of or compliance with the conditions set forth in paragraphs of (b)
or (c) of Section 1 of Annex A impossible, or if there shall have been a breach
by the Company causing a failure of either of such conditions and such breach
shall have remained uncured for 30 days following receipt of written notice
thereof from Parent;
(f) by the Company, if an event or circumstance shall have occurred that
makes satisfaction of or compliance with the conditions set forth in paragraphs
of (c), (d) or (h) of Section 2 of Annex A impossible, or if there shall have
been a breach by Parent or one of its Subsidiaries causing a failure of either
of such conditions and such breach shall have remained uncured for 30 days
following receipt of written notice thereof from the Company;
(g) by either Parent or the Company, if the Parent Stockholders Meeting
shall have been duly convened and the Parent Stockholder Approvals shall not
have been obtained; or
(h) by the Company, if an event or circumstance set forth in paragraphs
(e) or (n) of Section 2 of Annex A shall have occurred; provided, however, that
the event or circumstance set forth in paragraph (n) of Section 2 of Annex A is
not the direct result of the Company's failure to perform its obligations
pursuant to the Loan Agreement or the Modified Agreements;
(i) by the Company, if an event or circumstance set forth in paragraph (o)
of Section 2 of Annex A shall have occurred and such event or circumstance shall
have remained uncured for 45 days following receipt of written notice thereof
from the Company; or
(j) by Parent, if an event or circumstance set forth in paragraph (k) of
Section 1 f Annex A shall have occurred and such event or circumstance shall
have remained uncured for 45 days following receipt of written notice thereof
from Parent.
41
SECTION 7.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 7.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto or their respective officers and
directors, except that the agreements contained in this Section 7.2 and in
Sections 8.4 (Fees and Expenses) and 8.6 (Governing Law) shall survive the
termination hereof. Specifically, and without limiting the generality of the
foregoing and except as otherwise contemplated by the Loan Agreement and the
Loan Agreement Side Letter, Parent agrees that termination of this Agreement
shall be its sole and exclusive remedy for any nonwillful breach by the Company
of its representations, warranties and covenants under this Agreement and the
Company agrees that termination of this Agreement shall be its sole and
exclusive remedy for any nonwillful breach by Parent of its representations,
warranties and covenants under this Agreement. Any such termination shall not
relieve any party from liability for any willful breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given:
if to the Company, to:
Solexa Limited
c/o Abingworth Management Ltd.
0000 Xxxx Xxxx Xxxx
Xxxx. 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile: 000.000.0000
Telephone: 000.000.0000
Attn: Xxxx Xxxx
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx XX
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx. XX 00000
Facsimile: 000.000.0000
Telephone: 000.000.0000
Attn: Xxxxxx X. Xxxxxxxxx
and with a copy to:
CMS Xxxxxxx XxXxxxx
Mitre House
000 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Facsimile: x00 00 0000 0000
Telephone: x00 00 0000 0000
Attn: Xxxxxxx Xxxxxx
if to Parent, to:
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Lynx Therapeutics, Inc.
00000 Xxxxxxxxxx Xxxx.
Xxxxxxx, XX 00000
Facsimile: 000.000.0000
Telephone: 000.000.0000
Attn: President and Chief Executive Officer
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Facsimile: 000.000.0000
Telephone: 000.000.0000
Attn: Xxxxx X. Xxxxx
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be deemed to be properly delivered, given and
received: (i) when delivered by hand; (ii) on the day sent by facsimile,
provided that the sender has received confirmation of transmission as of or
prior to 5:00 p.m. local time of the recipient, on such day; (iii) the first
Business Day after sent by facsimile (to the extent that (a) the sender has
received confirmation of transmission after 5:00 p.m. local time of the
recipient on the day sent by facsimile or (b) notice is sent on a day that is
not a Business Day); or (iv) the third Business Day after sent by registered
mail or by courier or express delivery service.
SECTION 8.2 Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
First Closing Date or the termination of this Agreement; provided, however, that
the covenants set forth in Section 7.2 (Effect of Termination), Section 8.4
(Fees and Expenses), and Section 8.6 (Governing Law) and the Confidentiality
Agreement (as defined in Section 8.8 below), the Loan Agreement and the Loan
Agreement Side Letter shall survive any such termination.
SECTION 8.3 Amendments; No Waivers. Any provision of this Agreement may be
amended or waived prior to the First Closing Date if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Company, Parent, or in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.4 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense.
SECTION 8.5 Successors and Assigns; Parties in Interest. The provisions of
this Agreement shall be binding, upon and inure to the benefit of the parties
hereto and their respective successors and assigns, provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto except that
Parent may transfer or assign, in whole or from time to time in part, to one or
more of its wholly-owned Subsidiaries, any or all of its rights or obligations,
but any such transfer or assignment will not relieve Parent of its obligations
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under this Agreement. Except as expressly set forth herein, nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
not a party hereto any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, including to confer third party beneficiary
rights.
SECTION 8.6 Governing Law; Enforcement. This Agreement shall be construed
in accordance with and governed by the laws of the State of Delaware, without
regard to the conflict of laws principles thereof; provided, however, that the
terms and provisions of this Agreement with respect to the implementation and
provisions of the Offer shall be construed in accordance with and governed by
the laws of England. Each of the parties hereto, (a) consents to submit itself
to the personal jurisdiction of the Court of Chancery of the State of Delaware
and Federal District Court for the District of Delaware in the event a dispute
arises out of this Agreement or any agreement or transaction contemplated
hereby, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that it will not bring any action relating to this Agreement or any
agreement or transaction contemplated hereby in any court other than the Court
of Chancery of the State of Delaware or Federal District Court for the District
of Delaware and (d) waives any right to trial by jury with respect tot any
action related to or arising out of this Agreement or any agreement or
transaction contemplated hereby.
SECTION 8.7 Counterparts; Effectiveness; Interpretation. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
When a reference is made in this Agreement to a Section, such reference shall be
to a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
SECTION 8.8 Entire Agreement. This Agreement, the Loan Agreement, the Loan
Agreement Side Letter, the Mutual Confidentiality Agreement between Parent and
the Company dated August 12, 2004 (the "CONFIDENTIALITY AGREEMENT") and the
Colony Technology Sharing Agreement between Parent and the Company dated March
22, 2004 constitute the entire agreement among the parties hereto and supersede
all prior agreements and understandings, both written and oral, among the
parties hereto with respect to the subject matter hereof.
SECTION 8.9 Definitions. The definitions used in this Agreement are
defined in the following sections:
DEFINED TERM SECTION
------------------------------------------------ -------------------
A Ordinary Share Exchange Ratio Section 1.1(b)(ii)
A Ordinary Shares Recitals
First Closing Date Section 1.3(a)
Agreement Preamble
Annual Report Section 3.12
B Preferred Exchange Ratio Section 1.1(b)(iii)
B Preferred Shares Recitals
Business Day Section 1.1(c)
Change in Parent Recommendation Section 5.3(c)
Code Recitals
44
DEFINED TERM SECTION
------------------------------------------------ -------------------
Companies Act Section 1.1(a)
Company Preamble
Company Acquisition Proposal Section 4.4(a)
Company Balance Sheet Section 2.2(a)
Company Balance Sheet Date Section 2.2(b)
Company Board Recitals
Company Disclosure Letter Article II
Company Financial Statements Section 2.2(a)
Company Intellectual Property Section 2.7(a)
Company License Section 2.7(a)
Company Material Contract Section 2.15(a)
Company Option; Company Options Section 1.4(a)
Company Property Section 2.6(a)
Company Share Option Schemes Section 1.4(a)
Company Superior Proposal Section 4.4(b)
Company Support Agreements Recitals
Company Third-Party Intellectual Property Rights Section 2.7(a)
Compulsory Acquisition Section 5.7
Confidentiality Agreement Section 8.8
Consultant Share Option Scheme Section 1.4(a)
CTSA Section 6.3
Disclosure Materials Section 3.6
Effective Date Section 1.1(a)
Encumbrances Section 2.6(b)
Environmental Law Section 2.6(m)
ERISA Section 3.21
Exchange Act Section 3.5
Exchange Rate Section 1.4(b)
Exchange Ratio Section 1.1(b)(iii)
Final Date Section 7.1(b)(ii)
First Closing Section 1.1(a)
First Closing Date Section 1.1(c)
FSA Section 1.1(d)
Government Entity Annex A
Government Grant Section 2.17
GPP Scheme Section 2.10(h)
Hazardous Substance Section 2.6(m)
ICTA Section 2.3(c)
Indemnified Parties Section 5.5
Intellectual Property Section 2.7(a)
Joint Remuneration Planning Committee Section 6.4
Knowledge Section 2.3
Law Section 1.1(d)
Life Assurance Scheme Section 2.10(i)
Loan Agreement Recitals
Loan Agreement Side Letter Recitals
Management Accounts Section 2.2(e)
Management Share Option Scheme Section 1.4(a)
Material Adverse Effect Section 2.4(f)
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DEFINED TERM SECTION
------------------------------------------------ -------------------
Material Permits Section 3.17
Minimum Condition Section 1.1(a)
Modified Agreements Section 6.3
Nasdaq Section 1.1(c)
Offer Recitals
Offer Documents Section 1.1(d)
Option Exercise Section 1.4(b)
Option Offer Section 1.4(a)
Option Roll Over Section 1.4(b)
Ordinary Share Exchange Ratio Section 1.1(b)(i)
Ordinary Shares Recitals
Parent Preamble
Parent Acquisition Proposal Section 5.3(a)
Parent Balance Sheet Section 3.22
Parent Board Recitals
Parent Common Stock Recitals
Parent Confidential Information Section 3.15(f)
Parent Disclosure Schedule Article III
Parent ERISA Affiliate Section 3.21(a)
Parent Financial Advisor Section 3.23
Parent Financial Advisor Agreement Section 3.23
Parent Financial Statements Section 3.6(c)
Parent Intellectual Property Section 3.15(a)
Parent Material Contract Section 3.23
Parent Options Section 3.7
Parent Plans Section 3.21(a)
Parent Stockholder Approval Section 1.1(f)
Parent Stockholders Meeting Section 1.1(f)
Parent Superior Proposal Section 5.3(b)
Parent Support Agreements Recitals
Parent Third-Party Intellectual Property Rights Section 3.15(a)
Parent Warrants Section 5.1(b)
Proxy Statement/Prospectus Section 1.1(d)
Registration Statement Section 1.1(d)
SEC Section 1.1(c)
Securities Act Section 3.6
Shareholders' Agreement Section 4.1(b)
Shares Recitals
Subscription Agreement Addendum Recitals
Subsequent Closing Date Section 1.1(c)
Subsidiary Section 2.14
Tax Section 2.4(f)
Tax Authority Section 2.4(f)
Tax Return(s) Section 2.4(f)
TCGA Recitals
Total Share Consideration Section 1.1(b)(iv)
UK GAAP Section 2.2(a)
Unapproved Share Option Scheme Section 1.4(a)
US GAAP Section 3.6
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[signature page immediately follows]
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The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
SOLEXA LIMITED
By: /s/ Xxxx Xxxx
-----------------------
Title: CEO
LYNX THERAPEUTICS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------
Title: President & CEO
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Exhibit A
Form of Company Support Agreement
[The Form of Company Support Agreement is filed separately as Exhibit 99.2 of
the Company's Current Report on Form 8-K, filed on September 30, 2004.]
1
Exhibit B
Form of Parent Support Agreement
[The Form of Parent Support Agreement is filed separately as Exhibit 99.1 of
the Company's Current Report on Form 8-K, filed on September 30, 2004.]
1
