AGREEMENT AND PLAN OF MERGER
Among
PURDUE PHARMA L.P.,
PURDUE ACQUISITION CORPORATION
and
COCENSYS, INC.
Dated as of August 5, 1999
TABLE OF CONTENTS
PAGE
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ARTICLE I The Offer ................................................................................... 2
SECTION 1.01. The Offer ............................................................................ 2
SECTION 1.02. Company Actions ...................................................................... 5
ARTICLE II The Merger ................................................................................. 8
SECTION 2.01. The Merger ........................................................................... 8
SECTION 2.02. Closing .............................................................................. 8
SECTION 2.03. Effective Time ....................................................................... 8
SECTION 2.04. Effects of the Merger..................................................................9
SECTION 2.05. Certificate of Incorporation and By-laws...............................................9
SECTION 2.06. Directors ............................................................................ 9
SECTION 2.07. Officers ............................................................................. 9
ARTICLE III Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of
Certificates...........................................................................9
SECTION 3.01. Effect on Capital Stock................................................................9
SECTION 3.02. Exchange of Certificates..............................................................12
ARTICLE IV Representations and Warranties of the Company...............................................14
SECTION 4.01. Organization .........................................................................14
SECTION 4.02. Subsidiaries .........................................................................15
SECTION 4.03. Capitalization .......................................................................15
SECTION 4.04. Authority ............................................................................17
SECTION 4.05. Consents and Approvals; No Violations.................................................18
SECTION 4.06. SEC Reports and Financial Statements..................................................19
SECTION 4.07. Absence of Certain Changes or Events..................................................19
SECTION 4.08. No Undisclosed Liabilities............................................................21
SECTION 4.09. Information Supplied..................................................................21
SECTION 4.10. Benefit Plans ........................................................................22
SECTION 4.11. Other Compensation Arrangements.......................................................24
SECTION 4.12. Litigation ...........................................................................24
SECTION 4.13. Compliance with Applicable Law........................................................25
SECTION 4.14. Tax Matters ..........................................................................25
SECTION 4.15. State Takeover Statutes...............................................................27
SECTION 4.16. Brokers; Fees and Expenses............................................................28
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SECTION 4.17. Opinion of Financial Advisor..........................................................28
SECTION 4.18. Intellectual Property.................................................................28
SECTION 4.19. Labor Relations and Employment........................................................30
SECTION 4.20. Change of Control.....................................................................32
SECTION 4.21. Environmental Matters.................................................................32
SECTION 4.22. Material Contracts....................................................................36
SECTION 4.23. Property .............................................................................39
SECTION 4.24. Insurance ............................................................................40
SECTION 4.25. Year 2000 Compliance..................................................................40
ARTICLE V Representations and Warranties of Parent and Sub.............................................41
SECTION 5.01. Organization .........................................................................41
SECTION 5.02. Authority ............................................................................41
SECTION 5.03. Consents and Approvals; No Violations.................................................42
SECTION 5.04. Information Supplied..................................................................42
SECTION 5.05. Interim Operations of Sub.............................................................43
SECTION 5.06. Financing ............................................................................43
ARTICLE VI Covenants ..................................................................................43
SECTION 6.01. Conduct of Business of the Company....................................................43
SECTION 6.02. No Solicitation ......................................................................47
SECTION 6.03. Other Actions ........................................................................49
SECTION 6.04. Notice of Certain Events..............................................................49
ARTICLE VII Additional Agreements......................................................................50
SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement..................................50
SECTION 7.02. Access to Information.................................................................52
SECTION 7.03. Reasonable Efforts....................................................................53
SECTION 7.04. Options and Warrants..................................................................53
SECTION 7.05. Directors ............................................................................53
SECTION 7.06. Redemption of Stockholders Rights Plan................................................54
SECTION 7.07. Fees and Expenses ....................................................................55
SECTION 7.08. Indemnification; Insurance............................................................55
SECTION 7.09. Certain Litigation....................................................................56
SECTION 7.10. 401(k) Plan ..........................................................................56
SECTION 7.11. Environmental Remediation.............................................................57
ARTICLE VIII Conditions.................................................................................57
SECTION 8.01. Conditions to Each Party's Obligation to Effect the Merger............................57
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ARTICLE IX Termination, Amendment and Waiver...........................................................58
SECTION 9.01. Termination ..........................................................................58
SECTION 9.02. Effect of Termination.................................................................60
SECTION 9.03. Amendment ............................................................................61
SECTION 9.04. Extension; Waiver ....................................................................61
ARTICLE X Miscellaneous ...............................................................................62
SECTION 10.01. Nonsurvival of Representations and Warranties........................................62
SECTION 10.02. Notices .............................................................................62
SECTION 10.03. Interpretation ......................................................................63
SECTION 10.04. Counterparts ........................................................................64
SECTION 10.05. Entire Agreement; Third Party Beneficiaries..........................................64
SECTION 10.06. Governing Law .......................................................................64
SECTION 10.07. Publicity ...........................................................................65
SECTION 10.08. Assignment ..........................................................................65
SECTION 10.09. Enforcement .........................................................................65
Exhibits
Exhibit A - Conditions of the Offer
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated
as of August 5, 1999, is among pURDUE PHARMA L.P., a Delaware limited
partnership ("Parent"), PURDUE ACQUISITION CORPORATION, a Delaware
corporation and an indirect wholly owned subsidiary of Parent ("Sub"), and
COCENSYS, INC., a Delaware corporation (the "Company").
WHEREAS the Board of Directors of PURDUE PHARMA INC., a New
York corporation and the general partner of Parent (the "General Partner")
and the respective Boards of Directors of Sub and the Company have approved
the acquisition of the Company by Parent on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent
proposes to cause Sub to make a tender offer (as it may be amended from time
to time as permitted under this Agreement, the "Offer") to purchase all the
outstanding shares of Common Stock, par value $0.001 per share, of the
Company (the "Company Common Stock"; all the outstanding shares of Company
Common Stock together with the rights (the "Rights") associated with each
such share issued in connection with the Company's Rights Agreement, dated as
of May 15, 1995, by and between the Company and American Stock Transfer and
Trust Company, as Rights Agent (the "Rights Plan"), being hereinafter
collectively referred to as the "Shares") at a purchase price of $1.16 per
Share (the "Offer Price"), net to the holder in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this
Agreement; and the Board of Directors of the Company has determined that the
Offer and the Merger (as defined below) are in the best interests of the
Company's stockholders and has adopted resolutions approving this Agreement,
the Offer and the Merger, determining that the Merger is advisable and
recommending that the holders of Shares accept the Offer, and approving the
acquisition of Shares by Sub pursuant to the Offer;
WHEREAS the Board of Directors of the General Partner on
behalf of Parent and the respective Boards of Directors of Sub and the
Company have each approved the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each share of Company Common Stock, other than shares of
Company Common Stock owned directly or indirectly by Parent or the Company
and Dissenting Shares (as defined in Section 3.01(f)), will be converted into
the right to receive the price per Share paid in the Offer;
WHEREAS Parent has required as a condition to entering into
this Agreement, among other things, that the holder of the outstanding Series
E Preferred Stock (as defined
herein) of the Company (the "Preferred Stockholder") enter into a Stock
Purchase Agreement (the "Preferred Stock Purchase Agreement") pursuant to
which the Preferred Stockholder has agreed, among other things, to sell the
Series E Preferred Stock to Sub, immediately upon, and subject to,
consummation of the Offer; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. THE OFFER. (a) Subject to the provisions of
this Agreement, as promptly as practicable but in no event later than five
business days after the date of the public announcement by Parent and the
Company of the execution and delivery of this Agreement, Sub shall, and
Parent shall cause Sub to, commence the Offer. The obligation of Sub, and of
Parent to cause Sub, to commence the Offer and accept for payment, and pay
for, any Shares tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (the "Offer Conditions") and to the terms
and conditions of this Agreement. Sub expressly reserves the right, subject
to compliance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to modify the terms of the Offer, except that, without the
written consent of the Company, Sub shall not (i) reduce the number of Shares
subject to the Offer, (ii) reduce the Offer Price, (iii) add to or modify
(other than by waiver) the Offer Conditions, (iv) except as provided in the
next two sentences, extend the Offer, (v) change the form of consideration
payable in the Offer, (vi) waive the Minimum Condition (as defined in Exhibit
A), or (vii) amend or alter any other term of the Offer in any manner
materially adverse to the holders of the Shares. Notwithstanding the
foregoing, at any time prior to termination of this Agreement, Sub may,
without the consent of the Company, extend the Offer, (A) if at the scheduled
or extended expiration date of the Offer any of the Offer Conditions shall
not be satisfied or waived, until such time as such conditions are satisfied
or waived, (B) for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the
"SEC") or the staff thereof applicable to the Offer, (C) for a period not to
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exceed an aggregate of 10 business days, notwithstanding that all conditions
to the Offer are satisfied as of such expiration date of the Offer, if,
immediately prior to such expiration date (as it may be extended), the Shares
tendered and not withdrawn pursuant to the Offer, when added to the number of
shares of Company Common Stock to be received by Sub upon conversion of all
of the Series E Preferred Stock to be held by Sub upon consummation of the
Preferred Stock Purchase Agreement, equal less than 90% of the Fully Diluted
Shares (as defined in Exhibit A) as of the scheduled expiration date of the
Offer, as it may be extended from time to time, and (D) until 10 business
days following the expiration of the 10 business day period referred to in
clause (iv) of condition (c) of Exhibit A and, if such clause (iv) of
condition (c) shall not have been satisfied, for so long as Parent and Sub
shall determine until, in their sole discretion, all conditions of the Offer
are satisfied or waived. Without limiting the right of Sub to extend the
Offer pursuant to the immediately preceding sentence, in the event that (i)
the Minimum Condition has not been satisfied or (ii) any condition set forth
in paragraph (a) of Exhibit A is not satisfied at the scheduled expiration
date of the Offer, Sub shall, and Parent shall cause Sub to, extend the
expiration date of the Offer in increments of five business days each until
the earliest to occur of (x) the satisfaction or waiver of the Minimum
Condition or such other condition, or Parent reasonably determines that any
Offer Condition is not capable of being satisfied on or prior to October 15,
1999, (y) the termination of this Agreement in accordance with its terms and
(z) October 15, 1999; PROVIDED, HOWEVER, that if any person or group (within
the meaning of Section 13(d)(3) of the Exchange Act) has publicly made an
Acquisition Proposal (as defined in Section 6.02(b)) or disclosed in writing
its intention to make an Acquisition Proposal, Sub shall not be required
pursuant to this sentence to extend the Offer for more than five business
days from the date of such publication or written disclosure of such
Acquisition Proposal unless the Company's Board of Directors has reaffirmed
its recommendation that the stockholders of the Company accept the Offer.
Subject to the terms and conditions of the Offer and this Agreement, Sub
shall, and Parent shall cause Sub to, accept for payment, and pay for, all
Shares validly tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer
as soon as practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and
Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal (such Schedule 14D-1 and the
documents included therein pursuant to which the Offer
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will be made, together with any supplements or amendments thereto, the "Offer
Documents") and shall mail the Schedule 14D-1 to the stockholders of the
Company. Parent and Sub agree that the Offer Documents shall comply as to
form in all material respects with the Exchange Act, and the rules and
regulations promulgated thereunder, and the Offer Documents, on the date
first filed with the SEC and on the date first published, sent or given to
the Company's stockholders, 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 or Sub with respect to
information supplied by the Company or any of its stockholders specifically
for inclusion or incorporation by reference in the Offer Documents. Parent,
Sub and the Company each agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect,
and Parent and Sub further agree to take all steps necessary to amend or
supplement the Schedule 14D-1 and, as applicable, the Offer Documents and to
cause the Schedule 14D-1 as so corrected to be filed with the SEC and the
other Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable securities
laws. The Company and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their filing with the
SEC or dissemination to the stockholders of the Company. Parent and Sub agree
to provide the Company and its counsel any comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) The Company agrees that neither the Offer nor purchases
of Shares thereunder breach the terms of the Confidentiality Agreement (as
defined in Section 7.02 below).
(d) Parent shall provide or cause to be provided to Sub on
a timely basis the funds necessary to purchase any and all Shares that Sub
becomes obligated to purchase pursuant to the Offer.
SECTION 1.02. COMPANY ACTIONS. (a) Subject to Section
6.02(a), the Company hereby approves of and consents to the Offer and
represents and warrants that (i) the Board of Directors of the Company (the
"Board"), at a meeting duly called and held, duly adopted resolutions
approving this Agreement, the Offer and the Merger, determining that the
Merger is advisable and that the terms of the Offer and the Merger are fair
to, and in the best interests of, the Company
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and the Company's stockholders and recommending that the holders of Shares
accept the Offer and tender their Shares pursuant to the Offer and approve
the Merger and this Agreement, if required under applicable law, and (ii)
Xxxxxxxxx & Xxxxx LLC (the "Financial Advisor") has delivered to the Board
its opinion (the "Fairness Opinion") to the effect that, as of the date
thereof and based upon and subject to the matters set forth in such Fairness
Opinion, the consideration to be received by the holders of Shares in the
Offer and the Merger is fair to the holders of Shares from a financial point
of view. The Company represents that such approval constitutes approval of
the Offer, this Agreement and the transactions contemplated hereby, including
the Merger, for purposes of Section 203 of the Delaware General Corporation
Law, as amended (the "DGCL"), such that Section 203 of the DGCL will not
apply to the transactions contemplated by this Agreement. The Company hereby
consents to the inclusion in the Offer Documents of such recommendation of
the Board. The Company has been authorized by the Financial Advisor to
permit, subject to the prior review and consent by the Financial Advisor
(such consent not to be unreasonably withheld), the inclusion of the Fairness
Opinion (or a reference thereto) in the Offer Documents, the Schedule 14D-9
(as hereinafter defined) and the Proxy Statement (as hereinafter defined), as
may be required under applicable law.
(b) Promptly after the time the Offer Documents are filed
with the SEC, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule
14D-9") containing the recommendation described in paragraph (a) and shall
mail the Schedule 14D-9 to the stockholders of the Company in compliance with
Rule 14d-9 promulgated under the Exchange Act. To the extent practicable, the
Company shall cooperate with Parent and Sub in mailing or otherwise
disseminating the Schedule 14D-9 with the appropriate Offer Documents to the
Company's stockholders. The Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, 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 the
Company with respect to information supplied by Parent or Sub specifically
for inclusion in the Schedule 14D-9. Each of the Company, Parent and Sub
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if
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and to the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated
to the Company's stockholders, in each case as and to the extent required by
applicable securities laws. Parent and its counsel shall be given reasonable
opportunity to review and comment upon the Schedule 14D-9 prior to its filing
with the SEC or dissemination to stockholders of the Company. The Company
agrees to provide Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule
14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall furnish
or cause its transfer agent to furnish Sub promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as
are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Merger, Parent and Sub and their agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon such
termination, promptly deliver, and will use their best efforts to cause their
agents promptly to deliver, to the Company all copies of such information
(and all copies of information derived therefrom) then in their possession or
control. The Company acknowledges that Sub intends to commence the Offer by
sending Offer materials to the holders of the Shares and, therefore, time is
of the essence with respect to the obligations of the Company as set forth in
this subparagraph.
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, Sub
shall be merged with and into the Company at the Effective Time (as defined in
Section 2.03)
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in accordance with Section 253 of the DGCL. Following the Effective Time, the
separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL. At the election of Parent, any direct or indirect wholly owned
subsidiary (as defined in Section 10.03) of Parent may be substituted for Sub
as a constituent corporation in the Merger. In such event, the parties agree
to execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
SECTION 2.02. CLOSING. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. (New York City time) on a date to be
specified by Parent or Sub, which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VIII
(the "Closing Date"), at the offices of Xxxxxxxxxx & Xxxxx LLP, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date, time or
place is agreed to in writing by the parties hereto.
SECTION 2.03. EFFECTIVE TIME. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the
Company shall file with the Secretary of State of Delaware a certificate of
merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Delaware Secretary of State, or at such other time as Sub
and the Company shall agree should be specified in the Certificate of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
SECTION 2.04. EFFECTS OF THE MERGER. The Merger shall have
the effects set forth in Section 259 of the DGCL.
SECTION 2.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a)
The Certificate of Incorporation of Sub, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law; PROVIDED, HOWEVER, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as
follows: "The name of the corporation is CoCensys, Inc."
(b) The By-Laws of Sub as in effect immediately prior to
the Effective Time shall be the By-Laws of the
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Surviving Corporation, until thereafter changed or amended as provided
therein or by applicable law.
SECTION 2.06. DIRECTORS. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be, and
the Company shall procure, prior to and as a condition to the Closing, the
resignation of each of its directors effective as of the Closing.
SECTION 2.07. OFFICERS. The officers of the Company
immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.01. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the
Company, Parent, Sub or the holder of any Shares or shares of capital stock
of the Company or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share
of capital stock of Sub shall be converted into and become 1,000 fully paid
and nonassessable shares of Common Stock, par value $.001 per share, of the
Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT OWNED STOCK.
Each share of Company Common Stock that is owned by the Company or held in
treasury and each Share that is owned by Parent, Sub or any other subsidiary
of Parent shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section
3.01(f), each Share issued and outstanding (other than Shares to be canceled
in accordance with Section 3.01(b)) shall be converted into the right to
receive from the Surviving Corporation in cash, without interest, the price
paid in the Offer (the "Merger Consideration"). As of the Effective Time, all
such Shares shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing
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any such Shares shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration, without interest.
(d) EFFECT ON OPTIONS. All stock options (individually, an
"OPTION" and collectively, the "OPTIONS") outstanding immediately prior to
the Effective Time, whether or not then fully exercisable, automatically
shall be accelerated and converted into the right to receive after the
Effective Time from the Surviving Corporation, for each share of Company
Common Stock subject to any Option, an amount in cash equal to the excess, if
any, of the Merger Consideration over the per share exercise price of such
Option, without interest. All Options not exercised at the Effective Time
shall terminate and be canceled and shall cease to exist. All amounts payable
pursuant to this paragraph shall be subject to all applicable withholding of
taxes and shall be paid as soon as practicable following the Effective Time.
(e) EFFECT ON WARRANTS. All warrants for the purchase of
Company Common Stock (individually, a "Warrant" and collectively, the
"Warrants") outstanding immediately prior to the Effective Time, whether or
not then fully exercisable, automatically shall be converted into the right
to receive after the Effective Time from the Surviving Corporation, for each
share of Common Stock subject to any Warrant, an amount in cash equal to the
excess, if any, of the Merger Consideration over the per share exercise price
of such Warrant, without interest. All Warrants not exercised at the
Effective Time shall terminate and be canceled and shall cease to exist. All
amounts payable pursuant to this paragraph shall be subject to all applicable
withholding of taxes and shall be paid as soon as practicable following the
Effective Time.
(f) SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding Shares
held by a person (a "Dissenting Stockholder") who complies with all the
provisions of Delaware law concerning the right of holders of Company Common
Stock to dissent from the Merger and require appraisal of their Shares
("Dissenting Shares") shall not be converted as described in Section 3.01(c)
but shall become the right to receive such consideration as may be determined
to be due to such Dissenting Stockholder pursuant to the laws of the State of
Delaware. If, after the Effective Time, such Dissenting Stockholder withdraws
his demand for appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the DGCL, his Shares shall be deemed to be
converted as of the Effective Time into the right to receive the Merger
Consideration. The Company shall give Parent (i) prompt notice of any demands
for appraisal of Shares
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received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, such consent
not to be unreasonably withheld, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
(g) WITHHOLDING TAX. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Shares outstanding immediately prior to the Effective Time
such amounts as may be required to be deducted and withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as
amended (the "Code"), or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the Shares outstanding immediately prior to the Effective Time in respect
of which such deduction and withholding was made.
SECTION 3.02. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall
designate a bank or trust company reasonably acceptable to the Company to act
as paying agent in the Merger (the "Paying Agent"), and, from time to time
on, prior to or after the Effective Time, Parent shall make available, or
cause the Surviving Corporation to make available, to the Paying Agent funds
in amounts and at the times necessary for the payment of the Merger
Consideration upon surrender of certificates representing Shares as part of
the Merger pursuant to Section 3.01 (it being understood that any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be turned over to Parent).
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates (or affidavits of loss in lieu thereof) to the Paying Agent and
shall be in a form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such
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letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into
which the Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 3.01, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares that
is not registered in the transfer records of the Company, payment may be made
to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore
represented by such Certificate shall have been converted pursuant to Section
3.01. No interest will be paid or will accrue on the cash payable upon the
surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.
All cash paid upon the surrender of Certificates in accordance with the terms
of this Article III shall be deemed to have been paid in full satisfaction of
all rights pertaining to the Shares theretofore represented by such
Certificates. At the Effective Time, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in
this Article III.
(d) TERMINATION OF FUND; NO LIABILITY. At any time
following six months after the Effective Time, the Surviving Corporation
shall be entitled to require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto) which had been made
available to the Paying Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither the
11
Surviving Corporation nor the Paying Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule attached to this
Agreement setting forth exceptions to the Company's representations and
warranties set forth herein (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and Sub as set forth below. The Company
Disclosure Schedule will be arranged in sections corresponding to sections of
this Agreement to be modified by such disclosure schedule.
SECTION 4.01. ORGANIZATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power and authority would not have a material adverse effect (as defined in
Section 10.03) on the Company. The Company is duly qualified or licensed to
do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
would not have a material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger. The Company
has made available to Parent complete and correct copies of its Certificate
of Incorporation and By-laws.
SECTION 4.02. SUBSIDIARIES. The Company has no subsidiaries
(as defined in Section 10.03). Except as set forth on Schedule 4.02 of the
Company Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, business, trust or other entity.
SECTION 4.03. CAPITALIZATION. The authorized capital stock
of the Company consists of 750,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"), of which 350,000 shares have been designated as Series A
Junior Participating Preferred Stock (the "Series A Preferred Stock"),
100,000 shares have been designated as Series B
12
Convertible Preferred Stock (the "Series B Preferred Stock"), 100,000 shares
have been designated as Series C Convertible Preferred Stock (the "Series C
Preferred Stock"), 100,000 shares have been designated as Series D
Convertible Preferred Stock (the "Series D Preferred Stock") and 10,000
shares have been designated as Series E Convertible Preferred Stock (the
"Series E Preferred Stock"). As of the date hereof, (a) 4,873,480 shares of
Company Common Stock were issued and outstanding; (b) 100,000 shares of the
Series C Preferred Stock were issued and outstanding; (c) 100,000 shares of
the Series D Preferred Stock were issued and outstanding; (d) 1,159.2 shares
of the Series E Preferred Stock were issued and outstanding; (e) no shares of
Company Common Stock were held by the Company in its treasury; (f) 869,353
shares of Company Common Stock were reserved for issuance upon exercise of
outstanding Options; (g) a maximum of 235,352 shares of Company Common Stock
were reserved for issuance upon the exercise of outstanding Warrants; (h) a
maximum of 350,000 shares of Series A Preferred Stock and no shares of
Company Common Stock were reserved for issuance in connection with the Rights
distributed to the holders of the Company Common Stock pursuant to the Rights
Plan; (i) a maximum of 143,021 shares of Company Common Stock were reserved
for issuance upon the conversion of the Series C Preferred Stock; (j) a
maximum of 575,000 shares of Company Common Stock were reserved for issuance
upon the conversion of the Series D Preferred Stock; (k) a maximum of
2,471,000 shares of Company Common Stock were reserved for issuance upon the
conversion of the Series E Preferred Stock; (l) a maximum of 1,067,000 shares
of Company Common Stock were reserved for issuance in connection with the $1
million convertible note issued by the Company to Xxxxxx-Xxxxxxx Company; and
(m) a maximum of 18,839 shares of Company Common Stock were reserved for
issuance under the Company's 1995 Employee Stock Purchase Plan. Except as set
forth above, as of the date of this Agreement, no shares of capital stock or
other voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and
all shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth on Schedule 4.03 of the Company Disclosure Schedule,
there are no bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
the Company may vote. Except as set forth above, and except as set forth on
Schedule 4.03 of the Company Disclosure Schedule, as of the date of this
Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
the Company is a party or by which it is bound obligating the Company to
issue, deliver or sell, or cause to
13
be issued, delivered or sold, additional shares of capital stock or other
voting securities of the Company or obligating the Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking, including any securities
pursuant to which rights to acquire capital stock became exercisable only
after a change of control of the Company or upon the acquisition of a
specified amount of the Common Stock or voting powers of the Company. Except
as set forth on Schedule 4.03 of the Company Disclosure Schedule, as of the
date of this Agreement, there are not any outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company. Except as set forth on Schedule 4.03 of the
Company Disclosure Schedule, since March 31, 1999, no shares of the capital
stock of the Company have been issued other than pursuant to the exercise of
Company stock options and warrants already in existence and outstanding on
such date, and the Company has not granted any stock options, warrants or
other rights to acquire any capital stock of the Company. There are no
securities issued by the Company or agreements, arrangements or other
understandings to which the Company is a party giving any person any right to
acquire equity securities of the Surviving Corporation at or following the
Effective Time and all securities, agreements, arrangements and
understandings relating to the right to acquire equity securities of the
Company (whether pursuant to the exercise of options, warrants or otherwise)
provide that, at and following the Effective Time, such right shall entitle
the holder thereof to receive the consideration he would have received in the
Merger had he exercised his right immediately before the Effective Time.
SECTION 4.04. AUTHORITY. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (other than, with respect to
the Merger, the approval and adoption of the terms of this Agreement by the
holders of a majority of the Shares (the "Company Stockholder Approval"), if
required by applicable law). The execution, delivery and performance of this
Agreement and the consummation by the Company of the Merger and of the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (in each case,
other than, with respect to the Merger, the Company Stockholder Approval, if
required by applicable law). The only votes of the holders of any class or
series of Company capital stock necessary to approve the Merger are the
affirmative votes of the holders of a majority of the outstanding shares of
Common Stock, voting separately
14
as a class. This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and binding
obligation of Parent and Sub, constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
SECTION 4.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act
(including the filing with the SEC of the Schedule 14D-9 and a proxy
statement relating to any approval by the Company's stockholders of this
Agreement (the "Proxy Statement"), if required by applicable law), Section
203 of the DGCL and the laws of other states in which the Company is
qualified to do or is doing business, state takeover laws and foreign laws,
neither the execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-laws of the Company, (ii) require any
filing with, or permit, authorization, consent or approval of, any federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency,
domestic, foreign or supranational (a "Governmental Entity") (except where
the failure to obtain such permits, authorizations, consents or approvals or
to make such filings would not have a material adverse effect on the Company
or prevent or materially delay the consummation of the Offer and/or the
Merger), (iii) except as set forth on Schedule 4.05 of the Company Disclosure
Schedule, result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to
which the Company is a party or by which it or any of its properties or
assets may be bound; PROVIDED, HOWEVER, that certain contracts and agreements
set forth on Schedule 4.05 of the Company Disclosure Schedule, (A) provide
for their termination upon a change of control of the Company or (B) contain
provisions restricting their assignment pursuant to a merger, or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to the Company or any of its properties or assets, except in the case of
clauses (iii) or (iv) for violations,
15
breaches or defaults that would not have a material adverse effect on the
Company or prevent or materially delay the consummation of the Offer and/or
the Merger.
SECTION 4.06. SEC REPORTS AND FINANCIAL STATEMENTS. The
Company has filed with the SEC, and has heretofore made available to Parent
true and complete copies of, all forms, reports, schedules, statements and
other documents required to be filed by it under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (such forms,
reports, schedules, statements and other documents, including any financial
statements or schedules included therein, are referred to as the "Company SEC
Documents"). Except as set forth in Schedule 4.06 of the Company Disclosure
Schedule, the Company SEC Documents, at the time filed, (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Forms 10-Q and 8-K of the SEC) and fairly present
in all material respects (subject, in the case of the unaudited statements,
to normal, year-end audit adjustments that will not be material in amount or
effect) the financial position of the Company (and its consolidated
subsidiaries, to the extent applicable) as at the dates thereof and the
results of its (or their) operations and cash flows for the periods then
ended.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as set forth on Schedule 4.07 of the Company Disclosure Schedule, since March
31, 1999, the Company has conducted its business only in the ordinary course,
and there has not been any material adverse change (as defined in Section
10.03) with respect to the Company. Except as set forth on Schedule 4.07 of
the Company Disclosure Schedule, since March 31, 1999, there has not been (i)
any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock or any redemption, purchase or
other acquisition of any of its capital stock (or securities convertible into
its capital stock), (ii) any split, combination or reclassification of any of
its capital stock or
16
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
(iii) (w) any granting by the Company to any officer or director of the
Company of any increase in compensation other than in the ordinary course of
business, (x) any granting by the Company to any such officer or director of
any increase in severance or termination pay, (y) except employment
arrangements in the ordinary course of business consistent with past practice
with employees other than any executive officer of the Company, any entry by
the Company into any employment, severance or termination agreement with any
such employee or executive officer or director or (z) any increase in or
establishment of any bonus, insurance, deferred compensation, pension,
retirement, profit-sharing, stock option (including the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards or the amendment of any existing stock options, stock appreciation
rights, performance awards or restricted stock awards), stock purchase or
other employee benefit plan or agreement or arrangement, (iv) any damage,
destruction or loss, whether or not covered by insurance, that has or
reasonably could be expected to have a material adverse effect on the
Company, (v) any payment to an affiliate of the Company other than in the
ordinary course of business consistent with past practice, (vi) any
revaluation by the Company of any of its material assets, (vii) mortgage,
lien, pledge, encumbrance, charge, agreement, claim or restriction placed
upon any of the material properties or assets of the Company, (viii) any
material change in accounting methods, principles or practices by the Company
or (ix) (A) any licensing or other agreement with regard to the acquisition
or disposition of any Intellectual Property Rights (as defined in Section
4.18) or rights thereto other than licenses or other agreements in the
ordinary course of business consistent with past practice or (B) any
amendment or consent with respect to any licensing agreement filed, or
required to be filed, by the Company with the SEC.
SECTION 4.08. NO UNDISCLOSED LIABILITIES. Except as and to
the extent set forth in the Company Fiscal Year 1998 Financial Statements, as
of December 31, 1998, and except as subsequently disclosed in Company SEC
Documents, or as set forth on Schedule 4.08 of the Company Disclosure
Schedule, the Company had no liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by
generally accepted accounting principles to be reflected on a balance sheet
of the Company (including the notes thereto). Since December 31, 1998, except
as and to the extent set forth in the Company SEC Documents, the Company has
not incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, other than in the ordinary course of business and
that would not have a material adverse
17
effect on the Company. As of the date of this Agreement, the Company does not
have indebtedness for borrowed money in excess of $1,000,000.
SECTION 4.09. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule
14D-9, (iii) the information to be filed by the Company in connection with
the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement"), or (iv) the Proxy Statement, will, in the case of
the Offer Documents, the Schedule 14D-9 and the Information Statement, at the
respective times the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or, in the case of the Proxy Statement, at the time
the Proxy Statement is first mailed to the Company's stockholders or at the
time of the Stockholders Meeting (as defined in Section 7.01) to the extent
required by applicable law, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Schedule 14D-9, the Information
Statement and the Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference therein.
SECTION 4.10. BENEFIT PLANS. (a) Each "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (a "Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA) (a "Welfare
Plan") and each other plan, pension or welfare arrangement or policy (written
or oral) relating to stock options, stock purchases, compensation, deferred
compensation, bonuses, severance, fringe benefits or other employee benefits,
in each case maintained or contributed to, or required to be maintained or
contributed to, by the Company for the benefit of any present or former
employee, officer or director (each of the foregoing, a "Benefit Plan") has
been administered in all material respects in accordance with its terms. The
Company and all the Benefit Plans are in compliance in all material respects
with the applicable provisions of ERISA, the Code and all other applicable
laws.
(b) Schedule 4.10 of the Company Disclosure Schedule sets
forth a complete list of each Benefit Plan as
18
well as each employment, termination, indemnity, consulting and severance
agreement and any and all other contracts, binding arrangements and
understandings (whether written or oral) with any present or former
directors, officers, employees or consultants of the Company.
(c) None of the Pension Plans is subject to Title IV of
ERISA or Section 412 of the Code and none of the Company or any other person
or entity that, together with the Company, is treated as a single employer
under Section 414 (b), (c), (m) or (o) of the Code (each, including the
Company, a "Commonly Controlled Entity"): (i) currently has an obligation to
contribute to, or during any time during the last six years had an obligation
to contribute to, a Pension Plan subject to Title IV of ERISA or Section 412
of the Code, or (ii) has incurred any liability to the Pension Benefit
Guaranty Corporation, which liability has not been fully paid. All
contributions and other payments required to be made by the Company to any
Pension Plan with respect to any period ending before the Closing Date have
been made or reserves adequate for such contributions or other payments have
been or will be set aside therefor and have been or will be reflected in
financial statements.
(d) Neither the Company nor any Commonly Controlled Entity
is required to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such
withdrawal has resulted or would result in any "withdrawal liability" (within
the meaning of Section 4201 of ERISA) or "mass withdrawal liability" within
the meaning of PBGC Regulation 4219.2 that has not been fully paid.
(e) Except as set forth on Schedule 4.10 of the Company
Disclosure Schedule, each Benefit Plan (and its related trust, if any) that
is intended to be qualified under Section s 401 and 501(a) of the Code has
been determined by the IRS to qualify under such sections and nothing has
occurred to cause the loss of such qualified status.
(f) Each Benefit Plan that is a Welfare Plan may be amended
or terminated at any time after the Effective Time without material liability
to the Company.
(g) Except as set forth on Schedule 4.10 of the Company
Disclosure Schedule, or as required under Section 4980B of the Code, the
Company does not have any obligation to provide post-retirement health
benefits.
(h) The Company has heretofore delivered to Parent correct
and complete copies of each of the following:
19
(i) All written, and descriptions of all binding
oral, employment, termination, consulting and severance agreements,
contracts, arrangements and understandings listed on Schedule 4.10 of
the Company Disclosure Schedule;
(ii) Each Benefit Plan and all amendments thereto;
the trust instrument and/or insurance contracts, if any, forming a part
of such Benefit Plan and all amendments thereto;
(iii) The most recent IRS Form 5500 and all schedules
thereto, if any;
(iv) The most recent determination letter issued by
the IRS regarding the qualified status of each such Pension Plan;
(v) The most recent accountant's report, if any; and
(vi) The most recent summary plan description, if
any.
SECTION 4.11. OTHER COMPENSATION ARRANGEMENTS. Except as
disclosed in the Company SEC Documents or on Schedule 4.11 of the Company
Disclosure Schedule, or except as provided in this Agreement, as of the date
of this Agreement, the Company is not a party to any oral or written (i)
consulting agreement not terminable on not more than 60 calendar days notice
(except for third party agreements for the development of, and assignment to,
the Company of Intellectual Property in the ordinary course of business) and
involving the payment of more than $30,000 per annum, (ii) agreement with any
executive officer or other key employee of the Company (x) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated
by this Agreement or (y) providing any term of employment or compensation
guarantee extending for a period longer than two years or the payment of more
than $30,000 per annum or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, other than as contemplated by
Section 3.01(d), or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
20
SECTION 4.12. LITIGATION. Except as set forth on Schedule
4.12 of the Company Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending before any Governmental Entity or, to the
knowledge of the Company, overtly threatened against the Company that could
reasonably be expected to have a material adverse effect on the Company. The
Company is not subject to any outstanding order, writ, injunction or decree
that could reasonably be expected to have a material adverse effect on the
Company.
SECTION 4.13. COMPLIANCE WITH APPLICABLE LAW. The Company
holds all permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary for the lawful conduct of its business
(the "Company Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals that would not have a material
adverse effect on the Company. Except as set forth on Schedule 4.13 of the
Company Disclosure Schedule, the Company is in compliance with the terms of
the Company Permits, except where the failure so to comply would not have a
material adverse effect on the Company. Except as disclosed in the Company
SEC Documents and except as set forth on Schedule 4.13 of the Company
Disclosure Schedule, to the best knowledge of the Company, the business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations that
would not have a material adverse effect on the Company or prevent or
materially delay the consummation of the Offer and/or the Merger. As of the
date of this Agreement, no investigation or review by any Governmental Entity
with respect to the Company is pending or, to the knowledge of the Company,
overtly threatened, nor has any Governmental Entity indicated an intention to
conduct any such investigation or review, other than, in each case, those the
outcome of which would not be reasonably expected to have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Offer and/or the Merger.
SECTION 4.14. TAX MATTERS. Except as disclosed in the
Company SEC Documents or on Schedule 4.14 of the Company Disclosure Schedule:
(a) The Company (and any affiliated group of which the
Company is now or has ever been a member) has timely filed all federal income
tax returns and all other material tax returns and reports required to be
filed by it. All such returns are complete and correct in all material
respects. The Company (i) has paid to the appropriate authorities all taxes
required to be paid by it, except taxes for which an adequate reserve has
been established on the financial statements contained in the Company SEC
Documents or the Company Fiscal Year 1998 Financial Statements, and (ii) has
21
withheld and paid to the appropriate authorities all material withholding
taxes required to be withheld by it. The most recent financial statements
contained in the Company SEC Documents reflect an adequate reserve for all
taxes payable by the Company for all taxable periods and portions thereof
through the date of such financial statements.
(b) No federal income tax return or other material tax
return of the Company is under audit or examination by any taxing authority,
and no written or unwritten notice of such an audit or examination has been
received by the Company. Each material deficiency resulting from any audit or
examination relating to taxes by any taxing authority has been paid, except
for deficiencies being contested in good faith. No material issues relating
to taxes were raised in writing by the relevant taxing authority in any
completed audit or examination that can reasonably be expected to recur in a
later taxable period. The federal income tax returns of the Company do not
contain any positions that could give rise to a material substantial
understatement penalty within the meaning of Section 6662 of the Code.
(c) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
taxes and no power of attorney with respect to any taxes has been executed or
filed with any taxing authority.
(d) No material liens for taxes exist with respect to any
assets or properties of the Company, except for liens for taxes not yet due.
(e) The Company is not a party to and is not bound by any
tax sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to taxes (including any advance pricing
agreement, closing agreement or other agreement relating to taxes with any
taxing authority).
(f) The Company will not be required to include in a
taxable period ending after the Effective Time taxable income attributable to
income that accrued in a prior taxable period but was not recognized in any
prior taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) The Company (i) is not a party to a safe harbor lease
within the meaning of Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect prior to
22
amendment by the Tax Equity and Fiscal Responsibility Act of 1982, (ii) is
not a "consenting corporation" under Section 341(f) of the Code, (iii) has
not agreed or is not obligated to make any payments for services which would
not be deductible pursuant to Sections 162(a)(1), 162(m) or 280G of the Code,
(iv) has not participated in an international boycott as defined in Section
999 of the Code, (v) is not required to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise,
(vi) does not own any assets which directly or indirectly secure any debt the
interest on which is tax-exempt under Section 103(a) of the Code, or (vii)
does not own any asset which is tax-exempt use property within the meaning of
Section 168(h) of the Code.
(h) The Company is not a party to any joint venture,
partnership or other arrangement or contract which is treated as a
partnership for tax purposes, or has elected to be treated as a branch or a
partnership pursuant to Treasury Regulation Section 301.7701-3.
(i) The Company is a United States person within the
meaning of Section 7701(a)(30) of the Code.
(j) As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, sales, excise,
withholding and other taxes, tariffs or governmental charges of any nature
whatsoever.
(k) For purposes of this Section 4.14, all references to
the Company shall include any former subsidiary of the Company, as the
context may require.
SECTION 4.15. STATE TAKEOVER STATUTES. The Board of
Directors of the Company has approved the Offer, the Merger, this Agreement
and the acquisition of Shares by Sub pursuant to the Offer and such approval
is sufficient to render inapplicable to the Offer, the Merger, this Agreement
and the transactions contemplated by this Agreement the provisions of Section
203 of the DGCL. To the knowledge of the Company, no other state takeover
statute or similar statute or regulation, including without limitation
Section 2115 or Chapters 11 and 12 of the California Corporations Code,
applies or purports to apply to the Offer, the Merger, this Agreement, or any
of the transactions contemplated by this Agreement.
SECTION 4.16. BROKERS; FEES AND EXPENSES. No broker,
investment banker, financial advisor or other person, other than Xxxxxxxxx &
Xxxxx LLC, the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated
23
by this Agreement based upon arrangements made by or on behalf of the
Company. The estimated fees and expenses incurred and to be incurred by the
Company in connection with this Agreement and the transactions contemplated
by this Agreement (including the fees of the Company's legal counsel and the
legal counsel for its financial advisor) are set forth in a letter dated
August 5, 1999 from the Company to Parent.
SECTION 4.17. OPINION OF FINANCIAL ADVISOR. The Board of
Directors of the Company has received the opinion of Xxxxxxxxx & Xxxxx LLC,
dated August 5, 1999, to the effect that, as of that date, the consideration
to be received by the holders of Shares pursuant to the Offer and the Merger
is fair to such holders from a financial point of view, and a complete and
correct signed copy of such opinion has been, or promptly upon receipt
thereof will be, delivered to Parent for inclusion in the Offer Documents.
SECTION 4.18. INTELLECTUAL PROPERTY. (a) The list of
patents and patent applications (collectively the "Company Patent Rights") as
listed on Schedule 4.18 of the Company Disclosure Schedule is a complete and
correct listing of all the patents and patent applications owned solely or
jointly by the Company, and, to the knowledge of the Company, there are no
unpaid maintenance fees, patents that have lapsed, or abandonment of patent
applications, or any reason why any patent application should not be allowed.
(b) The Company is the sole and exclusive owner of all
right, title, and interest in the trademarks ("Registered Marks") and
trademark applications ("Pending Marks") listed on Schedule 4.18 to the
Company Disclosure Schedule, and to the knowledge of the Company, the Company
has not allowed any of the Registered Marks or Pending Marks to be abandoned,
canceled, or to expire.
(c) Except as set forth on Schedule 4.18 of the Company
Disclosure Schedule, to the knowledge of the Company, other than patent and
trademark prosecution by the Company, there are no legal or governmental
proceedings pending relating to patents, trade secrets, trademarks, service
marks or other proprietary information or materials of the Company, and to
the knowledge of the Company no such proceedings are overtly threatened or
contemplated by Governmental Entity or other person.
(d) The Company has made available to Parent true and
correct copies of all license agreements relating to the Intellectual
Property Rights to which the Company is a party listed on Schedule 4.18 to
the Company Disclosure Schedule.
24
(e) Except as set forth on Schedule 4.18 of the Company
Disclosure Schedule, the Company owns, or is licensed or otherwise has the
right to use (in each case, clear of any liens or encumbrances of any kind),
all Intellectual Property Rights used in or necessary for the conduct of its
business as currently conducted, and no claims are pending or, to the
knowledge of the Company, overtly threatened that the Company is infringing
on or otherwise violating the rights of any person with regard to any
Intellectual Property Rights owned by and/or licensed to the Company, and to
the knowledge of the Company, no person is infringing on or otherwise
violating any right of the Company with respect to any Intellectual Property
owned by and/or licensed to the Company.
(f) None of the former or current members of management or
key personnel of the Company, including all former and current employees,
agents, consultants and contractors who have contributed to or participated
in the conception and development of Intellectual Property Rights of the
Company have any valid claim against the Company in connection with the
involvement of such persons in the conception and development of any
Intellectual Property Rights of the Company, and to the knowledge of the
Company no such claim has been asserted or overtly threatened.
(g) The Company has taken reasonable and necessary steps to
protect its Intellectual Property Rights, and to the knowledge of the Company
no Intellectual Property Rights have been lost or are in jeopardy of being
lost through failure to act by the Company.
(h) For purposes of this Agreement, "Intellectual Property
Rights" shall mean inventions, discoveries and ideas, whether patented,
patentable or not in any jurisdiction, patents, patent applications
(including reexaminations, reissues, extensions and the like), trademarks
(registered or unregistered), service marks, brand names, certification
marks, trade dress, assumed names, trade names and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; trade secrets, know-how and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrighted,
copyrightable or not in any jurisdiction; registration or applications for
registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; computer programs and software (including source code,
object code and data); licenses, immunities, covenants not to xxx and the
like relating to the foregoing; any similar intellectual property or
proprietary
25
rights and any claims or causes of action arising out of or related to any
infringement or misappropriation of any of the foregoing.
SECTION 4.19. LABOR RELATIONS AND EMPLOYMENT. (a) Except as
set forth on Schedule 4.19 of the Company Disclosure Schedule, (i) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending, or,
to the best knowledge of the Company, threatened against the Company, and
during the past three years there has not been any such action; (ii) no union
claims to represent the employees of the Company; (iii) the Company is not a
party to or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the Company;
(iv) none of the employees of the Company is represented by any labor
organization and the Company does not have any knowledge of any current union
organizing activities among the employees of the Company, nor are there
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed with the National Labor Relations Board or any other labor relations
tribunal; (v) to the knowledge of the Company, the Company is, and has been
at all times, in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health, and are not engaged
in any unfair labor practices as defined in the National Labor Relations Act
or other applicable law, ordinance or regulation; (vi) there is no unfair
labor practice charge or complaint against the Company pending or, to the
knowledge of the Company, threatened before the National Labor Relations
Board or any similar state or foreign agency; (vii) there is no grievance
with respect to or relating to the Company arising out of any collective
bargaining agreement or other grievance procedure; (viii) no charges with
respect to or relating to the Company are pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (ix) the Company has not received notice of
the intent of any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws to conduct an investigation with
respect to or relating to the Company and no such investigation is in
progress; and (x) there are no complaints, lawsuits or other proceedings
pending or to the knowledge of the Company threatened in any forum by or on
behalf of any present or former employee of the Company alleging breach of
any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or
27
tortious conduct in connection with the employment relationship.
(b) To the knowledge of the Company, since the enactment of
the Worker Adjustment and Retraining Notification ("WARN") Act, there has not
been (i) a "plant closing" (as defined in the WARN Act) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company; or (ii) a "mass layoff" (as defined in
the WARN Act) affecting any site of employment or facility of the Company;
nor has the Company been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth on Schedule 4.19 of the
Company Disclosure Schedule, to the knowledge of the Company, none of the
employees of the Company has suffered an "employment loss" (as defined in the
WARN Act) since three months prior to the date of this Agreement.
SECTION 4.20. CHANGE OF CONTROL. Except as set forth on
Schedule 4.20 of the Company Disclosure Schedule, the transactions
contemplated by this Agreement will not constitute a "change of control"
under, require the consent from or the giving of notice to a third party
pursuant to, permit a third party to terminate or accelerate vesting,
repayment or repurchase rights, give rise to any right, license or
encumbrance or create any other detriment under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which the Company is a party,
including without limitation any Intellectual Property Rights of the Company,
or by which it or any of its properties or assets may be bound, except where
the adverse consequences resulting from such change of control or where the
failure to obtain such consents or provide such notices would not,
individually or in the aggregate, have a material adverse effect on the
Company.
SECTION 4.21. ENVIRONMENTAL MATTERS. (a) Except as set
forth on Schedule 4.21 of the Company Disclosure Schedule, the Company has
been and is in compliance with all applicable Environmental Laws (as this
term and the other terms in this section are defined below), except for such
violations and defaults as would not, individually or in the aggregate, have
a material adverse effect on the Company.
(b) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule, to the knowledge of the Company, the Company possesses
all required Environmental Permits; all such Environmental Permits are in
full force and effect; there are no pending or, to the knowledge of the
Company, threatened proceedings to revoke such Environmental Permits and the
Company
28
is in compliance with all terms and conditions thereof, except for such
failures to possess or comply with Environmental Permits as would not,
individually or in the aggregate, have a material adverse effect on the
Company.
(c) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule, and except for matters which would not, individually or
in the aggregate, have a material adverse effect on the Company, to the
knowledge of the Company, the Company has not received any notification that
the Company or any former subsidiary as a result of any of the current or
past operations of the Business, or any property currently or formerly owned
or leased or used in connection with the Business, is or may be adversely
affected by any proceeding, investigation, claim, lawsuit or order by any
Governmental Entity or other person relating to whether (i) any Remedial
Action is or may be needed to respond to a Release or threat of Release into
the environment of Hazardous Substances arising out of or caused by any
current or past operations of the Company or any of its former subsidiaries,
(ii) any Environmental Liabilities and Costs imposed by, under or pursuant to
Environmental Laws as in effect on or prior to the date hereof shall be
sought, or proceeding commenced, arising from the current or past operations
of the Business or (iii) the Company or any former subsidiary is or may be a
"potentially responsible party" for a Remedial Action, pursuant to any
Environmental Law for the costs of investigating or remediating Releases or
threatened Releases into the environment of Hazardous Substances, whether or
not such Release or threatened Release has occurred or is occurring at
properties currently or formerly owned or operated by the Company and its
former subsidiaries.
(d) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule and except for Environmental Permits, the Company has not
entered into any written agreement with any entity or persons including any
Governmental Entity by which the Company has assumed the responsibility,
either directly or by services rendered or as a guarantor or surety, to pay
for the remediation of any condition arising from or relating to a Release of
Hazardous Substances as defined under Environmental Laws as in effect on or
prior to the date hereof into the environment in connection with the
Business, including for cost recovery by third parties with respect to such
Releases or threatened Releases.
(e) Except as set forth on Schedule 4.21 of the Company
Disclosure Schedule, to the knowledge of the Company, there is not now and
has not been at any time in the past, a Release in connection with the
current or former conduct of the Business of substances that would constitute
Hazardous Substances as regulated under Environmental Laws as in effect
28
on or prior to the date hereof for which the Company is required or is
reasonably likely to be required to perform, at its own expense, or to pay
for a Remedial Action pursuant to Environmental Laws as currently in effect,
or will incur Environmental Liabilities and uncompensated costs that would,
individually or in the aggregate, have a material adverse effect on the
Company.
(f) For purposes hereof:
(i) "Business" means the current and former
businesses of the Company and its subsidiaries including, but not
limited to, businesses or subsidiaries that have been previously sold
by the Company, or otherwise disposed of or merged into the Company, or
any predecessors thereto.
(ii) "Environmental Laws" means all Laws relating to
the protection of human health or the environment, or to any emission,
discharge, generation, processing, storage, holding, abatement,
existence, Release, threatened Release or transportation of any
chemical or substance, including, but not limited to, (i) CERCLA, the
Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, property transfer statutes
or requirements and (ii) all other requirements pertaining to
reporting, licensing, permitting, investigation or remediation of
Hazardous Substances in the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of
Hazardous Substances or relating to human health or safety from
exposure to Hazardous Substances.
(iii) "Environmental Liabilities and Costs" means all
damages, natural resource damages, claims, losses, expenses, costs,
obligations, and liabilities (collectively, "Losses"), whether direct
or indirect, known or unknown, current or potential, past, present or
future, imposed by, under or pursuant to Environmental Laws, including,
but not limited to, all Losses related to Remedial Actions, and all
fees, capital costs, disbursements, penalties, fines and expenses of
counsel, experts, contractors, personnel and consultants and the value
of any services that might be provided by the Company in lieu thereof
and expenditures necessary to cause any such property or the Company or
any former subsidiary to be in compliance with requirements of
Environmental Laws.
29
(iv) "Environmental Permits" means any federal,
state, provincial or local permit, license, registration, consent,
order, administrative consent order, certificate, approval or other
authorization necessary for the conduct of the Business as currently
conducted, and wherever it is currently conducted, under any applicable
Environmental Law.
(v) "Governmental Entity" means any government or
subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or regulatory authority, agency,
commission, tribunal or body, domestic, foreign or supranational.
(vi) "Hazardous Substances" means any substance that
(a) is defined, listed or identified or otherwise regulated under any
Environmental Law (including, without limitation, radioactive
substances, polycholorinated-biphenyls, petroleum and petroleum
derivatives and products) or (b) requires investigation, removal or
remediation under applicable Environmental Law.
(vii) "Laws" means all (A) constitutions, treaties,
statutes, laws (including, but not limited to, the common law), rules,
regulations, ordinances or codes of any Governmental Entity, (B)
Environmental Permits, and (C) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Entity.
(viii) "Release" means as defined in CERCLA.
(ix) "Remedial Action" means all actions required by
any Governmental Entity pursuant to Environmental Law or otherwise
taken as necessary to comply with Environmental Law to (A) clean up,
remove, treat or in any other way remediate any Hazardous Substances;
(B) prevent the release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or
the environment; or (C) perform studies, investigations or monitoring
in respect of any such matter.
SECTION 4.22. MATERIAL CONTRACTS. (a) The Company is not in
default under or in violation of any provision of any Contract (as
hereinafter defined), except for such defaults or violations which would not,
individually or in the aggregate, reasonably be expected to result in a
material adverse effect on the Company.
(b) Except as set forth on Schedule 4.22(b) of the Company
Disclosure Schedule, the Company is not a party to or bound by any:
30
(i) employment agreement or employment contract
that has an aggregate future liability in excess of $30,000 and is not
terminable by the Company by notice of not more than 60 days for a cost
of less than $20,000;
(ii) employee collective bargaining agreement or
other contract with any labor union;
(iii) covenant of the Company not to compete;
(iv) agreement, contract or other arrangement with
any current or former officer, director, or affiliate or relative
thereof, of the Company (other than employment agreements covered by
clause (i) above);
(v) lease, sublease or similar agreement involving
annual payments in excess of $30,000 under which the Company is a
lessor or sublessor of, or makes available for use to any person, (A)
any Company Property (as hereinafter defined) or (B) any portion of any
premises otherwise occupied by the Company;
(vi) lease or similar agreement with any person
under which (A) the Company is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property owned
by any person or (B) the Company is a lessor or sublessor of, or makes
available for use any person, any tangible personal property owned or
leased by the Company, in any such case which has an aggregate annual
future liability or receivable, as the case may be, in excess of
$30,000 and is not terminable by the Company by notice of not more than
60 days for a cost of less than $20,000;
(vii) (A) continuing contract for the future purchase
of materials, supplies or equipment (other than purchase contracts and
orders for inventory in the ordinary course of business consistent with
past practice) in excess of $30,000 annually, (B) management, service,
consulting or other similar type of contract or (C) advertising
agreement or arrangement, in any such case which has an aggregate
future liability to any person in excess of $30,000 and is not
terminable by the Company by notice of not more than 60 days for a cost
of less than $20,000;
(viii) license, option or other agreement relating in
whole or in part to intellectual property (including any license or
other agreement under which the Company is licensee or licensor of any
such intellectual property, other than as set forth on Schedule 4.18 of
the Company Disclosure Schedule);
31
(ix) agreement, contract or other instrument under
which the Company has borrowed any money from, or issued any note,
bond, debenture or other evidence of indebtedness to, any person or any
other note, bond, debenture or other evidence of indebtedness issued to
any person;
(x) agreement, contract or other instrument
(including so-called take-or-pay or keepwell agreements) under which
(A) any person has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or (B) the Company has
directly or indirectly guaranteed indebtedness, liabilities or
obligations of any person (in each case other than endorsements for the
purpose of collection in the ordinary course of business);
(xi) agreement, contract or other instrument under
which the Company has, directly or indirectly, made any advance, loan,
extension or credit or capital contribution in excess of $20,000 to, or
other investment in any person;
(xii) mortgage, pledge, security agreement, deed of
trust or other instrument granting a lien or other encumbrance upon any
Company Property;
(xiii) agreement or instrument providing for
indemnification of any person with respect to liabilities relating to
any current or former business of the Company, a former subsidiary or
any predecessor person exclusive of indemnifications included in other
documents listed in the Company Disclosure Schedule or granted to
sellers of real property owned or leased by the Company or its
affiliates; or
(xiv) any other material agreement, contract,
management contract, lease, license, commitment or instrument to which
the Company is a party or by or to which it or any of its assets or
business is bound or subject, not covered by any of the categories
specified in clauses (i) through (xiii) above.
Except as set forth on Schedule 4.22(b) of the Company
Disclosure Schedule, all agreements, contracts, leases, licenses, commitments
or instruments of the Company listed in the Company Disclosure Schedule
(collectively, the "Contracts") are valid, binding and in full force and
effect and are enforceable by the Company in accordance with their respective
terms. Except as set forth on Schedule 4.22(b) of the Company Disclosure
Schedule, the Company has performed all material obligations required to be
performed by it to date under the
32
Contracts and it is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and,
to the knowledge of the Company, no other party to any of the Contracts is
(with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder nor has any other party
to any of the Contracts taken any action or failed to take any action that
would (with or without the lapse of time or the giving of notice or both)
cause any of the Contracts to terminate, or threatened, or otherwise
indicated to the Company that such party intends to, is considering, or may
terminate any of the Contracts. Except as set forth on Schedule 4.22(b) of
the Company Disclosure Schedule, there are no change of control or similar
provisions or any obligations arising under any Contract with are created,
accelerated or triggered by the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby or
thereby.
SECTION 4.23. PROPERTY. Schedule 4.23 of the Company
Disclosure Schedule accurately identifies all real property, leases and other
rights in real property, structures and other buildings of the Company
(collectively, the "Company Properties"). All properties and assets of the
Company, real and personal, material to the conduct of its business are,
except for changes in the ordinary course of business since March 31, 1999,
reflected in the balance sheet, and except as set forth on Schedule 4.23 of
the Company Disclosure Schedule, the Company has good and marketable title to
real and personal property reflected on the balance sheet or acquired by it
since the date of the balance sheet, free and clear of all Liens (as defined
below) and defects of title other than Permitted Liens (as defined below).
All real property, structures and other buildings and material equipment of
the Company are currently used in the operation of the business, are
adequately maintained and are in satisfactory operating condition and repair
for the requirements of the business as presently conducted. "Liens" means
any mortgages, pledges, claims, liens, charges, encumbrances, agreements,
restrictions and security interests of any kind or nature whatsoever.
"Permitted Liens" means any Liens for (i) taxes or other charges or levies of
a Governmental Entity which are not due and payable or which are being
contested in good faith by appropriate proceedings as described on Schedule
4.23 of the Company Disclosure Schedule and as to which adequate financial
reserves have been established and described on Schedule 4.23 of the Company
Disclosure Schedule; (ii) workmen's, repairmen's or other similar Liens
(inchoate or otherwise) arising or incurred in the ordinary course of
business in respect of obligations which are not overdue; (iii) minor title
defects, easements or Liens affecting real property, which defects, easements
or Liens do not, individually or in
33
the aggregate, materially impair the continued use, occupancy, value or
marketability of title of the real property to which they relate, assuming
that the property is used on substantially the same basis as such property is
currently being used by the Company.
SECTION 4.24. INSURANCE. Schedule 4.24 of the Company
Disclosure Schedule accurately identifies each material insurance policy
(including policies providing property, casualty, environmental liability,
liability, malpractice and workers compensation insurance) and all other
material types of insurance maintained by the Company, together with carriers
and liability limits for each such policy. Each such policy is duly in force
and no notice has been received by the Company from any insurance carrier
purporting to cancel or reduce coverage under any such policy. The Company is
current in all premiums or other payments due thereunder and no notice has
been received by the Company from any insurance carrier purporting to
increase any such premiums in any material respect. All insurance coverage
held for the benefit of the Company is adequate to cover risks customarily
insured against by similar companies in its industry.
SECTION 4.25. YEAR 2000 COMPLIANCE. Except as set forth on
Schedule 4.25 of the Company Disclosure Schedule, the Company's disclosure in
the Company's March 31, 1999, Form 10-Q under the caption "Impact of Year
2000" accurately sets forth in all material respects the Company's year 2000
compliance status regarding its internal systems, including IT and non-IT
systems, and technical infrastructure.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
SECTION 5.01. ORGANIZATION. Parent is a limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite limited partnership power
and authority to carry on its business as now being conducted, except where
the failure to be so formed, existing and in good standing or to have such
power and authority would not be reasonably expected to prevent or materially
delay the consummation of the Offer and/or the Merger. Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now
35
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not be reasonably
expected to prevent or materially delay the consummation of the Offer and/or
the Merger.
SECTION 5.02. AUTHORITY. Parent has requisite limited
partnership power and authority and Sub has requisite corporate power and
authority, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary partnership action on the part of
Parent and corporate action on the part of Sub and no other partnership
proceedings on the part of Parent or corporate proceedings on the part of Sub
are necessary to authorize this Agreement or to consummate such transactions.
No vote of the limited partner of Parent is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Sub, as the case may be, and,
assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of each of Parent and Sub
enforceable against them in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
SECTION 5.03. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act
(including the filing with the SEC of the Offer Documents), the DGCL, the
laws of other states in which Parent is qualified to do or is doing business,
state takeover laws and foreign laws, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by
Parent and Sub of the transactions contemplated hereby will (i) conflict with
or result in any breach of any provision of the certificate of limited
partnership or the limited partnership agreement of Parent or the certificate
of incorporation or by-laws of Sub, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where
the failure to obtain such permits, authorizations, consents or approvals or
to make such filings would not be reasonably expected to prevent or
materially delay the consummation of the Offer and/or the Merger), (iii)
result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of
35
termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Parent,
any of its subsidiaries or any of their properties or assets, except in the
case of clauses (iii) and (iv) for violations, breaches or defaults which
would not, individually or in the aggregate, be reasonably expected to
prevent or materially delay the consummation of the Offer and/or the Merger.
SECTION 5.04. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule
14D-9, (iii) the Information Statement, or (iv) the Proxy Statement will, in
the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9
and the Information Statement are filed with the SEC or first published, sent
or given to the Company's stockholders, or, in the case of the Proxy
Statement, at the time the Proxy Statement is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting to the extent
required by applicable law, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Offer Documents will comply as to
form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, except that no representation or
warranty is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the
Company specifically for inclusion or incorporation by reference therein.
SECTION 5.05. INTERIM OPERATIONS OF SUB. Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
SECTION 5.06. FINANCING. Sub will have sufficient funds to
pay the Offer Price upon consummation of the Offer and the Merger
Consideration upon consummation of the Merger and all related fees and
expenses.
36
ARTICLE VI
COVENANTS
SECTION 6.01. CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement or as expressly agreed to in writing by Parent
(such consent not to be unreasonably withheld), during the period from the
date of this Agreement until such time as Parent's designees shall constitute
a majority of the members of the Board of Directors of the Company, the
Company will conduct its operations according to its ordinary and usual
course of business and consistent with past practice and use commercially
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having material business dealings with it and to
preserve goodwill. Without limiting the generality of the foregoing, and
except as (x) otherwise expressly provided in this Agreement, (y) required by
law, or (z) set forth on Schedule 6.01 of the Company Disclosure Schedule,
the Company will not without the consent of Parent (such consent not to be
unreasonably withheld):
(a) (i) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such, other than dividends declared
prior to the date of this Agreement, (ii) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (iii) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(b) other than in connection with the exercise of options and
warrants outstanding prior to the date hereof in accordance with their
current terms, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or equity equivalent;
(c) amend its Certificate of Incorporation or By-Laws;
37
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets;
(e) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets;
(f) amend or otherwise modify, or terminate, any Contract;
(g) incur any additional indebtedness (including for this
purpose any indebtedness evidenced by notes, debentures, bonds, leases
or other similar instruments, or secured by any lien on any property,
conditional sale obligations, obligations under any title retention
agreement and obligations under letters of credit or similar credit
transaction) in a single transaction or a group of related
transactions, enter into a guaranty, or engage in any other financing
arrangements having a value in excess of $10,000, or make any loans,
advances or capital contributions to, or investments in, any other
person;
(h) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure or
ownership;
(i) except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(j) revalue any of its assets, including, without limitation,
writing down the value of its inventory or writing off notes or
accounts receivable other than in the ordinary course of business;
(k) make any tax election, change any annual tax accounting
period, amend any tax return, settle or compromise any income tax
liability, enter into any closing agreement, settle any tax claim or
assessment, surrender any right to claim a tax refund or fail to make
the payments or consent to any extension or waiver of the limitations
period applicable to any tax claim or assessment;
38
(l) except in the ordinary course of business, settle or
compromise any pending or threatened suit, action or claim with a cost
of $10,000 or more;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of the
Company or incurred in the ordinary course of business consistent with
past practice;
(n) increase in any manner the compensation or fringe benefits
of any of its directors, officers and other key employees or pay any
pension or retirement allowance not required by any existing plan or
agreement to any such employees, or become a party to, amend or commit
itself to any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the benefit of
any employee, other than increases in the compensation of employees who
are not officers or directors of the Company made in the ordinary
course of business consistent with past practice, or, except to the
extent required by law, voluntarily accelerate the vesting of any
compensation or benefit;
(o) waive, amend or allow to lapse any term or condition of
any confidentiality, "standstill", consulting, advisory or employment
agreement to which the Company is a party (except for any agreement
which terminates in accordance with its express terms);
(p) approve any annual operating budgets for the Company;
(q) change the Company's dividend policy;
(r) enter into any transaction with affiliates;
(s) enter into any business other than the business currently
engaged in by the Company;
(t) pursuant to or within the meaning of any bankruptcy law,
(i) commence a voluntary case, (ii) consent to the entry of an order
for relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of its
property or (iv) make a general assignment for the benefit of its
creditors;
39
(u) purchase or lease or enter into a binding agreement to
purchase or lease any real property;
(v) enter into or amend, modify or terminate any employment
agreement with any officer or employee;
(w) enter into any joint venture, lease, license, management
agreement, research agreement, development agreement, option or other
obligation relating to new development, or any other agreement of the
Company, including without limitation any agreement or arrangement
relating to Intellectual Property Rights; or
(x) take, or agree in writing or otherwise to take, any of the
foregoing actions.
During the period from the date of this Agreement through
the Effective Time, (i) as requested by Parent, the Company shall confer on a
regular basis with one or more representatives of Parent with respect to
material operational matters; (ii) the Company shall, within 30 days
following each fiscal month, deliver to Parent financial statements,
including an income statement and balance sheet for such month; and (iii)
upon the knowledge of the Company of any material adverse change to the
Company, any material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any representation or
warranty contained herein, the Company shall promptly notify Parent thereof.
Notwithstanding any provision contained in this Agreement,
action taken by the Company which is permitted under this Section 6.01 shall
not constitute a misrepresentation or breach of warranty or covenant. The
Company shall have the right to update the Company Disclosure Schedule, as it
relates to Section 4.07, between the date hereof and the Effective Time to
reflect actions taken by the Company which are permitted to be taken pursuant
to this Section 6.01.
SECTION 6.02. NO SOLICITATION. (a) The Company agrees that
from the date of this Agreement until such time as the Parent's designees
shall constitute a majority of the Board of Directors of the Company or the
termination of this Agreement (i) that neither it nor any of its officers,
directors or employees shall, and that the Company will instruct its agents
and representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its subsidiaries) not to
initiate, solicit or knowingly encourage, directly or indirectly, any
inquiries or the making or implementation of any Acquisition
40
Proposal (including, without limitation, any Acquisition Proposal to its
stockholders) or, other than in the event that the Board of Directors of the
Company determines in good faith, after receiving advice from outside
counsel, that failure to do so would be reasonably determined to constitute a
breach of its fiduciary duties to the Company's stockholders under applicable
law, and in response to an unsolicited request therefor by a person who a
majority of the Board of Directors of the Company believes intends to submit
a Superior Proposal (as defined below), engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or release
any third party from any obligations under any existing standstill agreement
or arrangement, or otherwise knowingly facilitate any effort or attempt to
make or implement an Acquisition Proposal; and (ii) that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing, and it will take the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this Section
6.02; PROVIDED, HOWEVER, that nothing contained in this Section 6.02 shall
prohibit the Company or its Board of Directors from taking and disclosing to
the Company's stockholders a position with respect to a tender offer by a
third party pursuant to Rule 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making such disclosure to the Company's stockholders
which, in the judgment of the Board of Directors of the Company after
receiving advice of outside counsel, may be required under applicable law.
From and after the execution of this Agreement, the Company shall promptly
advise Parent in writing of the receipt, directly or indirectly, of any
inquiries, discussion, negotiations, or proposals relating to an Acquisition
Proposal (including the specific terms thereof and, subject to any
confidentiality obligations of the Company existing as of the date hereof,
the identity of the other party or parties involved) and furnish to Parent
within 24 hours of such receipt an accurate description of all material terms
(including any changes or adjustment to such terms as a result of
negotiations or otherwise) of any such written proposal in addition to any
non-public information provided to any third party relating thereto. In
addition, the Company shall promptly advise Parent, in writing, if the Board
of Directors of the Company shall make any determination as to any
Acquisition Proposal.
(b) For purposes hereof: (i) "Acquisition Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of any class of equity securities of the
Company, any tender offer or exchange offer that if consummated would
41
result in any person beneficially owning 20% or more of any class of equity
securities of the Company, any merger, consolidation, business combination,
sale of substantially all the assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Offer and/or the Merger or which would
reasonably be expected to dilute materially the benefits to Parent of the
transactions contemplated hereby; and (ii) "Superior Proposal" means an
Acquisition Proposal which a majority of the disinterested directors of the
Company determines in its good faith judgment (based on advice of the
Company's independent financial advisor) to be more favorable to the
stockholders of the Company than the Offer or the Merger, and for which
financing, to the extent required, is then committed.
SECTION 6.03. OTHER ACTIONS. Except as otherwise
contemplated by this Agreement, neither the Company, on the one hand, nor the
Parent nor Sub or any of their respective subsidiaries on the other hand,
shall take any action that would reasonably be expected to result in (i) any
of the representations and warranties of the Company on the one hand, or of
Parent or Sub on the other hand, set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that are not so qualified becoming untrue in any material
respect, or (iii) except as otherwise permitted by Section 6.02, any of the
Offer Conditions not being satisfied.
SECTION 6.04. NOTICE OF CERTAIN EVENTS. The Company and
Parent shall promptly notify each other of:
(a) 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;
(b) any notice or other communication from any
Government Entity in connection with the transactions
contemplated by this Agreement;
(c) any action, suits, claims, investigations or
proceedings commenced or, to the knowledge of the notifying
party, threatened against, relating to or involving or
otherwise affecting such party or any of its subsidiaries;
(d) an administrative or other order or notification
relating to any material violation or claimed violation of
law;
42
(e) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to
the Closing Date; and
(f) any material failure of any party to comply with
or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 6.04
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. STOCKHOLDER APPROVAL; PREPARATION OF PROXY
STATEMENT. (a) If the Company Stockholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
acceptance for payment of, and payment for, any Shares by Sub pursuant to the
Offer and the expiration of the Offer, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders Meeting") for the
purpose of obtaining the Company Stockholder Approval. The Company will,
through its Board of Directors, recommend to its stockholders that the
Company Stockholder Approval be given. Notwithstanding the foregoing, if Sub
or any other subsidiary of Parent shall acquire at least 90% of the
outstanding Shares, the parties shall, at the request of Parent, take all
necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a Stockholders
Meeting in accordance with Section 253 of the DGCL. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant
to the first sentence of this Section 7.01(a) shall not be affected by (i)
the commencement, public proposal, public disclosure or communication to the
Company of any Acquisition Proposal or (ii) the withdrawal or modification by
the Board of Directors of the Company of its approval or recommendation of
the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is required by law,
the Company will, at Parent's request, as soon as practicable following the
acceptance for payment of, and payment for, any Shares by Sub pursuant to the
Offer and the expiration of the Offer, prepare and file a preliminary Proxy
43
Statement with the SEC and will use commercially reasonable efforts to respond
to any comments of the SEC or its staff and to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as practicable after responding
to all such comments to the satisfaction of the staff. The Company will notify
Parent promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Stockholders Meeting there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company will promptly prepare and mail to its
stockholders such an amendment or supplement. The Company will not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects, PROVIDED that Parent shall identify its objections and fully
cooperate with the Company to create a mutually satisfactory Proxy Statement.
(c) Parent agrees to cause all Shares purchased pursuant to
the Offer to be voted in favor of the Company Stockholder Approval.
SECTION 7.02. ACCESS TO INFORMATION. From the date hereof
until such time as Parent's designees shall constitute a majority of the members
of the Board of Directors of the Company, the Company shall give Parent and Sub,
their counsel, financial advisors, auditors and other authorized representatives
reasonable full access to the offices, properties, books and record of the
Company during normal business hours, will furnish to Parent and Sub, their
counsel, financial advisors, financial institutions auditors and other
authorized representatives such financial and operating data and other
information as such may be reasonably requested and will instruct the employees
of the Company, their counsel and financial advisors to cooperate with Parent
and Sub in their investigation of the Business; PROVIDED, that (i) no
investigation pursuant to this Section 7.02 shall affect any representation or
warranty given by the Company to Parent and Sub hereunder; (ii) any information
provided to Parent and/or Sub pursuant to this Section 7.02 shall be subject to
the Confidentiality and Non-Disclosure Agreement dated September 28, 1998, as
amended, by and between the Company and Purdue Pharma L.P., a Delaware limited
partnership and affiliated companies (the "Confidentiality Agreement"), the
terms of which shall continue to apply, except as otherwise agreed by the
parties thereto, unless and until Parent and Sub shall have purchased a majority
of the outstanding Shares pursuant to the Offer and notwithstanding termination
of this
44
Agreement; and (iii) the Company shall be required to disclose information
that would otherwise jeopardize protections offered under the attorney-client
privilege or the work-product doctrine only to appropriate counsel to the
parties whose access to such information would not jeopardize such
privileges; PROVIDED, HOWEVER, that the parties agree to otherwise provide
such information in a manner that will not jeopardize such privileges.
SECTION 7.03. REASONABLE EFFORTS.
Each of the Company, Parent and Sub agree to use its reasonable efforts to take,
or cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Offer and the
Merger (which actions shall include furnishing all information required in
connection with approvals of or filings with any Governmental Entity) and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them in connection with the Offer and
the Merger. Each of the Company, Parent and Sub will use its reasonable efforts
to take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Parent, Sub or the Company in connection with
the Offer and the Merger or the taking of any action contemplated thereby or by
this Agreement, except that no party need waive any substantial rights or agree
to any substantial limitation on its operations or to dispose of any assets.
SECTION 7.04. OPTIONS AND WARRANTS. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all action necessary to
provide that the outstanding Options and Warrants, whether or not then fully
vested or exercisable, shall, at the Effective Time, be canceled and retired and
shall cease to exist, and the holders thereof entitled to receive the
consideration from the Surviving Corporation, if any, determined in accordance
with Section 3.01(d) and (e) hereof, respectively, including obtaining all
necessary consents of the holders of Options and Warrants to the foregoing
cancellation and treatment of such Options and Warrants. In addition, the
Company shall take all necessary action to provide that the stock options plans
of the Company shall be terminated as of the Effective Time.
SECTION 7.05. DIRECTORS. Promptly upon the acceptance for
payment of, and payment for, a majority of the outstanding Shares by Sub
pursuant to the Offer, Sub shall be entitled and obligated to designate such
number of directors on the Board of Directors of the Company as will give Sub,
45
subject to compliance with Section 14(f) of the Exchange Act, a majority of such
directors, and the Company shall, at such time, cause Sub's designees to be so
elected by its existing Board of Directors; PROVIDED, HOWEVER, that in the event
that Sub's designees are elected to the Board of Directors of the Company, until
the Effective Time such Board of Directors shall have at least two directors who
are directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and PROVIDED, FURTHER, that, in such
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Subject to applicable law, the Company
shall take all action requested by Parent necessary to effect any such election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agrees to make such mailing together
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, at the option of Parent, either increase
the size of the Company's Board of Directors and/or obtain the resignation of
such number of its current directors as is necessary to enable Sub's designees
to be elected or appointed to, and to constitute a majority of, the Company's
Board of Directors as provided above.
SECTION 7.06. REDEMPTION OF STOCKHOLDERS RIGHTS PLAN. Promptly
upon the execution of this Agreement, the Board of Directors of the Company
shall take all action necessary to amend the Rights Plan (i) to provide that (A)
the Rights will not separate from the Shares as a result of the execution of
this Agreement and the consummation of the Offer and Merger, and (B) none of the
Company, Parent, Sub nor the Surviving Corporation shall have any obligations
under the Rights Plan to any holder (or former holder) of Rights as of and
following the Effective Time, and (ii) as otherwise may be necessary to render
the Rights Plan inapplicable to the transactions contemplated by the Offer and
the Merger.
SECTION 7.07. FEES AND EXPENSES. (a) Except as otherwise
specifically provided for herein, whether or not the Merger is consummated, all
costs and expenses incurred in
46
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
(b) The prevailing party in any legal action undertaken to
enforce this Agreement or any provision hereof shall be entitled to recover from
the other party the costs and expenses (including attorneys' and expert witness
fees and expenses) incurred in connection with such action.
(c) Parent and the Company shall cooperate in the preparation,
execution and filing of all returns, applications or other documents regarding
any real property transfer, stamp, recording, documentary or other taxes and any
other fees and similar taxes which become payable in connection with the Merger
(collectively, "TRANSFER TAXES"). The Company will pay all of the Transfer
Taxes.
SECTION 7.08. INDEMNIFICATION; INSURANCE. (a) Parent and Sub
agree that all rights to indemnification for acts or omissions occurring prior
to the Effective Time now existing in favor of the current or former directors
or officers (the "Indemnified Parties") of the Company as provided in its
Certificate of Incorporation or By-laws or existing indemnification contracts
(all of which have been disclosed on Schedule 4.10 of the Company Disclosure
Schedule) shall survive the Merger and shall continue in full force and effect
in accordance with their terms.
(b) For six years from the Effective Time, Parent shall,
unless Parent agrees in writing to guarantee the indemnification obligations set
forth in Section 7.08(a), maintain in effect the Company's current directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been heretofore delivered to Parent); PROVIDED, HOWEVER, that
in no event shall Parent be required to expend in any one year an amount in
excess of 150% of the annual premiums currently paid by the Company for such
insurance (which the Company represents is currently not more than $185,000);
and, PROVIDED, FURTHER, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated only to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) This Section 7.08 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Company, Parent, the
Surviving Corporation and the Indemnified Parties, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
47
SECTION 7.09. CERTAIN LITIGATION. The Company agrees that it
will not settle any litigation commenced after the date hereof against the
Company or any of its directors by any stockholder of the Company relating to
the Offer, the Merger or this Agreement, without the prior written consent of
Parent. In addition, the Company will not voluntarily cooperate with any third
party which may hereafter seek to restrain or prohibit or otherwise oppose the
Offer or the Merger and will cooperate with Parent and Sub to resist any such
effort to restrain or prohibit or otherwise oppose the Offer or the Merger,
unless the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that failing so to cooperate with such third
party or cooperating with Parent or Sub, as the case may be, would constitute a
breach of the director's fiduciary duties under applicable law.
Section 7.10. 401(K) PLAN. The Company agrees to take, or
cause to be taken, all actions necessary to identify and correct all compliance
and form defects related to the Company's 401(k) plan, including without
limitation all action necessary to correct any compliance or form defect
identified in the Memorandum dated July 21, 1999, from Ernst & Young to the
Company and any other compliance or form defects that may be identified after
the date thereof, and further agrees to take all necessary action to provide
that the Company's 401(k) plan shall be terminated effective immediately prior
to the acceptance for payment of Shares by Sub in the Offer. The Company agrees
and acknowledges that no employees of the Company shall be entitled to
participate in any defined contribution plan (including but not limited to any
401(k) plan or similar plan) of Parent or any of its affiliates for a period of
one year following the effective date of termination of the Company's 401(k)
plan.
Section 7.11. ENVIRONMENTAL REMEDIATION. The Company agrees to
take, or cause to be taken, all actions necessary to comply by September 10,
1999 in all material respects with the corrective actions recommended in the
Tenant Environmental Inspection Report dated May 18, 1999, as requested by the
Company's building property manager in the letter to the Company dated July 9,
1999.
ARTICLE VIII
CONDITIONS
SECTION 8.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions
48
(PROVIDED, HOWEVER, that paragraphs (b) and (c) shall be conditions
to each party's obligation to effect the Merger only until such time as Parent's
designees shall constitute a majority of the members of the Board of Directors
of the Company).
(a) COMPANY STOCKHOLDER APPROVAL. If required by applicable
law, the Company Stockholder Approval shall have been obtained.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement that are qualified as to
materiality shall be true and correct and any representations and warranties
that are not so qualified shall be true and correct in all material respects at
and as of the Effective Time, with the same force and effect as if made at and
as of the Effective Time, other than such representations and warranties as are
expressly made as of another date, and Parent and Sub shall have received a
certificate of the Company to that effect signed by a duly authorized officer
thereof.
(c) AGREEMENTS AND COVENANTS. The Company shall have performed
or complied with in all material respects all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Effective Time, including without limitation the redemption of the Rights Plan,
and Parent and Sub shall have received a certificate of the Company to such
effect signed by a duly authorized officer thereof.
(d) NO INJUNCTIONS OR RESTRAINTS. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect;
PROVIDED, HOWEVER, that each of the parties shall have used reasonable efforts
to prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered.
(e) PURCHASE OF SHARES. Sub shall have previously accepted for
payment and paid for Shares pursuant to the Offer.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after the Company
Stockholder Approval (if required by applicable law):
(a) by mutual written consent of Parent and the Company, by
action of the Board of Directors of the General Partner on behalf of the Parent
and by the Board of Directors of the Company;
(b) by either Parent or the Company if neither the Offer nor
the Merger shall have been consummated on or before December 31, 1999, unless
such date is otherwise extended by Parent in its sole discretion; PROVIDED,
HOWEVER, that neither Parent nor the Company may terminate this Agreement
pursuant to this Section 9.01(b) if such party shall have materially breached
this Agreement;
(c) by either Parent or the Company if any court of competent
jurisdiction in the United States or other United States Governmental Entity has
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; PROVIDED, HOWEVER, that
the party seeking to terminate this Agreement shall have used its best efforts
to remove or lift such order, decree, ruling or other action;
(d) by the Company if, prior to the Effective Time, any person
has made a bona fide proposal relating to an Acquisition Proposal, or has
commenced a tender or exchange offer for the Shares, and the Board determines in
good faith (i) after consultation with its financial advisors, that such
transaction constitutes a Superior Proposal and (ii) after having received the
advice of outside legal counsel to the Company, that the failure to engage in
such negotiations or discussions or provide such information would be reasonably
determined to constitute a breach of the fiduciary duties of the Board of
Directors of the Company under applicable law;
(e) by Parent, if (A) Parent shall not have materially
breached this Agreement and (B) the Board shall have (i) failed to recommend to
the holders of the Shares that they accept the Offer, tender their Shares
pursuant to the Offer and approve and adopt this Agreement (the "Stockholder
Acceptance"), (ii) withdrawn or modified its approval or recommendation of this
Agreement, the Offer or the Merger, (iii) shall have approved or recommended an
Acquisition
50
Proposal, (iv) shall have resolved to effect any of the foregoing or (v)
shall have otherwise taken steps to impede the Stockholder Acceptance;
(f) by either Parent or the Company, if the Company
Stockholder Approval shall not have been obtained at a Stockholders Meeting, if
required by applicable law;
(g) by the Company, if Sub or Parent shall have (A) failed to
commence the Offer within five business days after the public announcement (on
the date hereof or the following day) by Parent and the Company of this
Agreement, (B) failed to pay for Shares pursuant to the Offer in accordance with
Section 1.01(a) hereof or (C) breached in any material respect any of their
respective representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform in respect of clause (C)
is incapable of being cured or has not been cured within 20 days after the
giving of written notice to Parent or Sub, as applicable;
(h) by Parent or Sub prior to Sub's obligation to accept
Shares for payment pursuant to the Offer in the event of a breach by the Company
of any representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
paragraph (c), (d) or (e) of Exhibit A and (ii) cannot be or has not been cured
within 20 days after the giving of written notice to the Company; or
(i) by either Parent or the Company if, as the result of the
failure of any of the conditions set forth in Exhibit A to this Agreement, Sub
shall have terminated the Offer in accordance with its terms without Sub having
purchased any Shares pursuant to the Offer; PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 9.01(i) shall not be available
to any party whose failure to fulfill any of its obligations under, or breach of
any provisions of, this Agreement or results in the failure of any such
condition.
SECTION 9.02. EFFECT OF TERMINATION. In the event of a
termination of this Agreement pursuant to Section 9.01, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Parent, Sub or the Company or their respective officers or directors, except
with respect to Section 7.02, Section 7.07, this Section 9.02 and Article X;
PROVIDED, HOWEVER, that nothing herein shall relieve any party for liability for
any willful breach hereof. Further, if this Agreement is terminated pursuant to
Section 9.01(d) or (e), or any person (other than Parent or any of its
affiliates) shall have made, or proposed,
51
communicated or disclosed in an manner which is or otherwise becomes public
an Acquisition Proposal prior to the consummation of the Offer and thereafter
this Agreement is terminated in connection with such Acquisition Proposal,
the Company shall pay to Parent the amount of Two Hundred Thirty Seven
Thousand Five Hundred Dollars ($237,500.00) as liquidated damages and not as
a penalty. The parties agree that such amount is a reasonable estimate of the
costs and expenses that would be incurred and the value of services consumed
by and on behalf of Parent and Sub if the transactions contemplated hereunder
were not to go forward as a result of such a termination.
SECTION 9.03. AMENDMENT. This Agreement may be amended by the
parties hereto, by action taken or authorized by the Board of Directors of the
General Partner on behalf of the Parent and the Board of Directors of the
Company, at any time before or after obtaining the Company Stockholder Approval
(if required by law), but, after any such approval, no amendment shall be made
which by law requires further approval by such stockholders without obtaining
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto. Following the
election or appointment of the Sub's designees pursuant to Section 7.05 and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to (i)
amend or terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights or remedies under this Agreement or (iii) extend the time
for performance of Parent and Sub's respective obligations under this Agreement.
SECTION 9.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by the Board
of Directors of the General Partner on behalf of the Parent and the Board of
Directors of the Company, may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) subject to Section 9.03, waive compliance with any of the provisions of
this Agreement or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party. The failure of any party
hereto to assert any of its rights hereunder or otherwise shall not constitute a
waiver of those rights.
52
ARTICLE X
MISCELLANEOUS
SECTION 10.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Agreement or in any instrument
delivered pursuant hereto shall terminate at the Effective Time or termination
of this Agreement or, in the case of the Company, shall terminate upon the
acceptance for payment of, and payment for, Shares by Sub pursuant to the Offer,
unless the survival thereof is provided for by their terms.
SECTION 10.02. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to:
Purdue Pharma L.P.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
and
(b) if to the Company, to:
CoCensys, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: F. Xxxxxxx Xxxxxx, Ph.D.
Telecopy No.: (000) 000-0000
with a copy to:
53
Cooley Godward LLP
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx and Xxxxxxx Xxxxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
SECTION 10.03. INTERPRETATION. When a reference is made in
this Agreement to an Article or a Section, such reference shall be to an Article
or 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". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
As used in this Agreement, "material adverse change" or "material adverse
effect" means, when used in connection with the Company, any change or effect
(or any development that, insofar as can reasonably be foreseen, is likely to
result in any change or effect) that, individually or in the aggregate with
other favorable and unfavorable changes or effects, is materially adverse to the
business, financial condition, results of operations or prospects of the
Company. Notwithstanding the foregoing, a material adverse change or material
adverse effect shall not include any material adverse change or material adverse
effect resulting from or arising out of (i) this Agreement or the transactions
contemplated by this Agreement or the announcement or pendency of the Offer or
the Merger, (ii) any occurrence or condition affecting the biotechnology or
biopharmaceutical industries generally, or (iii) any changes in general
economic, regulatory or political conditions. As used in this Agreement, a
corporate party's "knowledge" means the actual knowledge of any director or
executive officer.
SECTION 10.04. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the
54
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 10.05. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 7.08, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 10.06. GOVERNING LAW. This Agreement shall be governed
and construed in accordance with the laws of the State of New York without
regard to any applicable conflicts of law, except to the extent the DGCL shall
be held to govern the terms of the Merger.
SECTION 10.07. PUBLICITY. Except as otherwise required by law
or the rules of the NASDAQ National Market, for so long as this Agreement is in
effect, neither the Company nor Parent shall, or shall permit any of its
affiliates to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 10.08. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect wholly owned subsidiary of Parent. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 10.09. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York or Delaware or in a New York or
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition,
55
each of the parties hereto (i) consents to submit to the personal
jurisdiction of any federal court located in the States of New York or
Delaware or any New York or Delaware state court in the event any dispute
arises out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (iii)
agrees that such party will not bring any action relating to this Agreement
or any of the transactions contemplated hereby in any court other than a
federal court sitting in the State of New York or Delaware or a New York or
Delaware state court and (iv) waives any right to trial by jury with respect
to any claim or proceeding related to or arising out of this Agreement or any
of the transactions contemplated hereby.
56
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
PURDUE PHARMA L.P., by its
general partner, PURDUE PHARMA INC.
By: /s/ Xxxxx X.Xxxxx
Name: Xxxxx X. Xxxxx
Title: Vice President
PURDUE ACQUISITION CORPORATION
By: /s/ Xxxxx X.Xxxxx
Name: Xxxxx X. Xxxxx
Title: Vice President
COCENSYS, INC.
By: /s/ F. Xxxxxxx Xxxxxx, Ph.D.
Name: F. Xxxxxxx Xxxxxx, Ph.D.
Title: Chairman and Chief Executive
Officer
57
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
and in addition to (and not in limitation of) Sub's right to extend and amend
the Offer at any time in its sole discretion (subject to the provisions of this
Agreement), Sub shall not be required to accept for payment or, subject to
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered Shares
after the termination or withdrawal of the Offer), to pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any Shares tendered pursuant to the Offer unless there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
such number of Shares that, when added to the number of shares of Company Common
Stock to be received by Sub upon the conversion of all of the Series E Preferred
Stock to be held by Sub upon consummation of the Preferred Stock Purchase
Agreement, would constitute at least ninety percent (90%) of the Fully Diluted
Shares (as defined below) as of the expiration date of the Offer, as it may be
extended from time to time (the "Minimum Condition"). For the purposes of this
Agreement: (i) "Fully Diluted Shares" shall mean all outstanding securities
entitled generally to vote in the election of directors of the Company after
giving effect to the exercise or conversion of all options, rights and
securities exercisable or convertible into such voting securities (other than
the Series C Preferred Stock), and (ii) both "Shares tendered" and "Fully
Diluted Shares" shall include those shares that would be received upon the
exercise of stock options contingently tendered to the Offer. Furthermore,
notwithstanding any other term of the Offer or this Agreement, Sub shall not be
required to accept for payment or, subject as aforesaid, to pay for any Shares
not theretofore accepted for payment or paid for, and may terminate the Offer
if, at any time on or after the date of this Agreement and before the acceptance
of such Shares for payment or the payment therefor, any of the following
conditions exists or shall occur and remain in effect:
(a) there shall be threatened, instituted or pending by any
Governmental Entity or instituted or pending by any person any suit, action,
investigation or proceeding (i) challenging the acquisition by Parent or Sub of
any Shares under the Offer or seeking to restrain, prohibit or delay the making
or consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by this Agreement, or seeking to obtain from the
Company, Parent or Sub any damages that are material in relation to the
58
Company, (ii) seeking to prohibit or impose any limitations on Parent's or
Sub's ownership or operation (or that of any of their respective subsidiaries
or affiliates) of all or a material portion of their or the Company's
businesses or assets, or to compel Parent, Sub, the Company or their
respective subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent, Sub and
their respective subsidiaries (provided that any prohibition, limitation,
restriction or other action or requirement with respect to any of the
Intellectual Property Rights of the Company, or rights and obligations
related to or arising from the Intellectual Property Rights of the Company,
shall be deemed a material portion for purposes hereof), (iii) seeking to
make illegal, impose material limitations on the ability of Sub, or render
Sub unable, to accept for payment, pay for or purchase some or all of the
Shares pursuant to the Offer and the Merger, (iv) seeking to impose material
limitations on the ability of Sub or Parent (or any of their affiliates) to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders, or (v) which otherwise is
reasonably likely to have a material adverse effect on the Parent, Sub or
Company;
(b) there shall be any statute, rule, regulation, judgment,
decree, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court that could reasonably be expected to, in the
judgment of the Parent, result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c)(i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or Sub
its approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any Acquisition Proposal, (ii) the Company shall have
entered into any agreement with any other Person pursuant to any Acquisition
Proposal, (iii) the Board of Directors of the Company or any committee thereof
shall have resolved to take any of the foregoing actions or (iv) the Board of
Directors of the Company shall have failed to reject any Acquisition Proposal
within 10 business days after receipt by the Company or public announcement
thereof;
(d) any of the representations and warranties of the Company
set forth in this Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each case
59
at the date of this Agreement and at the scheduled or extended expiration of
the Offer, other than any matters that individually or in the aggregate would
not have a material adverse effect on the Company (PROVIDED, HOWEVER, that
the failure of any representations and warranties with respect to, arising
from or related to the Intellectual Property Rights of the Company to be true
and correct in any material respects shall be deemed to have a material
adverse effect on the Company);
(e) the Company shall have failed to perform in any respect
any material obligation or to comply in any respect with any material agreement
or material covenant of the Company to be performed or complied with by it under
this Agreement, which failure to perform or comply is not substantially cured
within 10 days after Parent provides the Company with notice of such failure;
(f) there shall be any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company, or securities
convertible into or exercisable for shares of capital stock or other voting
securities of the Company, which gives any person any right to acquire equity
securities of the Surviving Corporation at or following the Effective Time;
(g) this Agreement shall have been terminated in accordance
with its terms; or
(h) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in securities on any national securities
exchange or over-the-counter market in the United States, (ii) a declaration of
a banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any general limitation (whether or not mandatory) by any
governmental authority on the extension of credit by banks or other lending
institutions, (iv) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening thereof, (v)
a change in general financial, bank or capital market conditions which
materially and adversely affects the ability of financial institutions in the
United States to extend credit or syndicate loans.
The foregoing conditions are for the sole benefit of Parent
and Sub, may be asserted by Parent or Sub regardless of the circumstances giving
rise to such condition (including any
60
action or inaction by Parent or Sub not in violation of this Agreement) and
may be waived by Parent or Sub in whole or in part at any time and from time
to time in the sole discretion of Parent or Sub, subject in each case to the
terms of this Agreement. The failure by Parent or Sub 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 which may be asserted at
any time and from time to time. Terms used herein but not defined herein
shall have the meanings assigned to such terms in the Agreement of which this
Exhibit A is a part.
61
