EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
by and among
ENDOCARE, INC.,
TMT ACQUISITION CORPORATION
and
XXXX MEDICAL TECHNOLOGIES, INC.
and
its Principal Stockholders
dated February 21, 2002
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TABLE OF CONTENTS
Page
Article I Definitions.......................................................................2
1.1 Defined Terms.........................................................2
1.2 Construction of Certain Terms and Phrases............................11
Article II The Merger......................................................................12
2.1 The Merger...........................................................12
2.2 Effective Time.......................................................12
2.3 Effect of the Merger.................................................12
2.4 Certificate of Incorporation; Bylaws.................................12
2.5 Directors and Officers...............................................12
2.6 Effect on Capital Stock/Merger Consideration.........................12
2.7 Dissenters' Rights...................................................14
2.8 Exchange Procedure...................................................15
2.9 Closing..............................................................16
2.10 Effective Time.......................................................18
2.11 Private Placement....................................................18
Article III Representations and Warranties of the Company..................................18
3.1 Organization of the Company..........................................18
3.2 Capital Stock of the Company.........................................19
3.3 Ownership of Shares..................................................20
3.4 Authority of the Company.............................................20
3.5 No Affiliates........................................................20
3.6 No Conflicts.........................................................21
3.7 Consents and Governmental Approvals and Filings......................21
3.8 Books and Records....................................................21
3.9 Company Financial Statements.........................................21
3.10 Absence of Changes...................................................22
3.11 No Undisclosed Liabilities...........................................22
3.12 Tangible Personal Property...........................................22
3.13 Benefit Plans; ERISA.................................................22
3.14 Real Property........................................................24
3.15 Intellectual Property Rights.........................................24
3.16 Proprietary Information of Third Parties.............................27
3.17 Compliance with Legal Requirements; Governmental Authorizations......27
3.18 Legal Proceedings; Orders............................................28
3.19 Contracts............................................................29
3.20 Environmental Matters................................................31
3.21 Inventory............................................................33
3.22 Accounts Receivable..................................................33
3.23 Equipment............................................................33
3.24 Insurance............................................................34
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TABLE OF CONTENTS (Continued)
Page
3.25 Tax Matters..........................................................34
3.26 Labor and Employment Relations.......................................35
3.27 Certain Employees....................................................36
3.28 Absence of Certain Developments......................................37
3.29 Customers and Suppliers..............................................38
3.30 Necessary Property...................................................38
3.31 Bank Accounts........................................................38
3.32 Permits..............................................................39
3.33 Regulatory Compliance................................................39
3.34 Third Party Consents.................................................40
3.35 Relationships with Related Persons...................................40
3.36 Certain Payments.....................................................40
3.37 Brokers..............................................................40
3.38 Material Misstatements and Omissions.................................41
Article IV Representations and Warranties of Parent and Acquisition Co....................41
4.1 Organization.........................................................41
4.2 Authority............................................................41
4.3 Litigation...........................................................41
4.4 Reports and Financial Statements.....................................42
4.5 Brokers..............................................................42
Article V Representations, Warranties and covenants Of The Principal Stockholders..........42
5.1 Requisite Power and Authority........................................42
5.2 Ownership of Shares..................................................42
5.3 Investment Representations...........................................43
5.4 Transfer Restrictions................................................44
5.5 Notification of Change...............................................44
5.6 Proxy................................................................44
Article VI Covenants.......................................................................44
6.1 Proxy; Election of Directors.........................................44
6.2 No Solicitation or Negotiation.......................................45
6.3 Public Announcements; Company Literature.............................45
6.4 Fees and Expenses....................................................45
6.5 Confidentiality......................................................46
6.6 Stock Options........................................................46
6.7 Argomed Agreement....................................................47
6.8 Consents.............................................................47
6.9 Tail Policy..........................................................47
Article VII Conditions to Consummation of the Merger.......................................48
7.1 Conditions to Each Party's Obligations to Effect the Merger..........48
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TABLE OF CONTENTS (Continued)
Page
Article VIII Termination...................................................................48
8.1 Termination..........................................................48
8.2 Effect of Termination................................................48
Article IX Stockholder Representatives.....................................................48
9.1 Authorization of the Stockholder Representatives.....................48
9.2 Exculpation; Indemnity...............................................49
9.3 Replacement of a Stockholder Representatives; Successor Stockholder
Representatives......................................................50
Article X Actions by the Parties After the Closing.........................................50
10.1 Survival of Representations, Warranties, Etc. .......................50
10.2 Indemnification......................................................50
10.3 Indemnity Escrow Account.............................................53
10.4 Exclusivity..........................................................53
Article XI Miscellaneous...................................................................53
11.1 Restriction on Transferability of the Parent Common Shares...........53
11.2 Further Assurances...................................................54
11.3 Notices..............................................................54
11.4 Entire Agreement.....................................................55
11.5 Waiver...............................................................56
11.6 Amendment............................................................56
11.7 No Third Party Beneficiary...........................................56
11.8 No Assignment; Binding Effect........................................56
11.9 Headings.............................................................56
11.10 Severability.........................................................56
11.11 Governing Law........................................................56
11.12 Consent to Jurisdiction and Forum Selection..........................56
11.13 Construction.........................................................57
11.14 Counterparts.........................................................57
11.15 Attorneys Fees.......................................................57
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SCHEDULES AND EXHIBITS
Schedules
Schedule 1 Key Employees
Schedule 2 Merger Consideration
Company Disclosure Schedule
Exhibits
Exhibit A -- Certificate of Merger
Exhibit B -- Escrow Agreement
Exhibit C -- Spousal Consent
Exhibit D -- Non-Competition and Non-Solicitation Agreements
Exhibit E -- Lock-Up Agreement
Exhibit F -- Proxy
Exhibit G -- Company Officer's and each Principal Stockholder's Certificate
Exhibit H -- Company Secretary Certificate
Exhibit I -- Release
Exhibit J -- Opinion of Counsel to Company and Company Stockholders
Exhibit K -- Registration Rights Agreement
Exhibit L -- Stockholder Rights Termination Agreement
Exhibit M -- Parent Officer's Certificate
Exhibit N -- Parent Secretary Certificate
Exhibit O -- Opinion of Counsel to Parent and Acquisition Co.
Exhibit P -- Option Assumption Agreement
Exhibit Q -- Option Termination Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of February 21, 2002 (the "Effective Date"), by and among
Endocare, Inc., a Delaware corporation ("Parent"), TMT Acquisition Corporation,
a Delaware corporation and a wholly-owned subsidiary of Parent ("Acquisition
Co."), Xxxx Medical Technologies, Inc., a Delaware corporation (the "Company"),
FFT Partners I, L.P., FFT Executive Partners I, L.P., Xxxxxx X. Xxxx, Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxxxxx, and D&W Ventures I, LLC (collectively, the
"Principal Stockholders").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Parent and
the Company will enter into a business combination transaction pursuant to which
the Company will merge with and into Acquisition Co. (the "Merger").
B. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and fair to, and in the best interests of, Parent and its stockholders, and (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement.
C. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders, and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. The Principal Stockholders, constituting holders of Company Shares
having not less than the minimum number of votes necessary to authorize any
action by the Company have approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
E. Parent, as sole stockholder of Acquisition Co., has approved this
Agreement, the Merger and other transactions contemplated by this Agreement.
F. Parent, Acquisition Co. and the Company desire to make certain
representations and warranties and other agreements in connection with the
Merger.
G. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code, and to cause the
Merger to qualify as a reorganization under the provisions of Section 368(a) of
the Code.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following defined terms
have the meanings indicated below:
"Accounts Receivable" has the meaning set forth in Section 3.22.
"Acquisition Co." has the meaning set forth in the first paragraph of this
Agreement.
"Acquisition Co. Common Stock" has the meaning set forth in Section 2.6(g).
"Actions or Proceedings" means any action, suit, proceeding, arbitration,
Order, inquiry, hearing, assessment with respect to fines or penalties or
litigation (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.
"Affiliate" means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person, but shall in no event
include Imagyn Medical Technologies, Inc. or its Affiliates.
"Agreement" has the meanings set forth in the first paragraph of this
Agreement and in Section 2.2.
"Assets and Properties" and "Assets or Properties" of any Person each means
all assets and properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible, whether
absolute, accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person, including, without limitation, cash, cash equivalents, accounts and
notes receivable, chattel paper, documents, instruments, general intangibles,
real estate, equipment, inventory, goods and Intellectual Property.
"Benefit Plan" means any Plan established, arranged or maintained by the
Company or any corporate group of which the Company is or was a member, existing
at the Effective Date or prior thereto, to which the Company contributes or has
contributed, or under which any employee, officer, director or former employee,
officer or director of the Company or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"Books and Records" of any Person means all files, documents, instruments,
papers, books, computer files (including but not limited to files stored on a
computer's hard drive or on floppy disks), electronic files and records in any
other medium relating to the business, operations or condition of such Person.
"Breach" means a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement or any other agreement or document will be deemed to
have occurred if there is or has been (a) any inaccuracy in a breach of, or any
failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim (by any Person) or other
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occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence or circumstance.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of New York are authorized or obligated to close.
"Cash Consideration" means up to a total of $11,000,000, consisting of (i)
the cash portion of the Series A Consideration, plus cash paid to Non-Principal
Stockholders pursuant to Section 2.6(d) or Section 2.7(a), less (ii) the
Severance Obligations plus the Unaccrued Bonus Obligations.
"Certificate of Merger" has the meaning set forth in Section 2.2.
"Closing" has the meaning set forth in Section 2.9(a).
"Closing Date" has the meaning set forth in Section 2.9(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Share Consideration" has the meaning set forth in Section 2.6(c).
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Common Stock" has the meaning set forth in Section 3.2(a) of this
Agreement.
"Company Convertible Securities" has the meaning set forth in Section
3.2(b).
"Company Disclosure Schedule" means the disclosure schedule attached hereto
which sets forth the exceptions to the representations and warranties contained
in Article III hereof and certain other information called for by this
Agreement.
"Company Financial Statements" means (i) the audited balance sheets of the
Company and the related audited statements of income and retained earnings for
the fiscal period ended December 31, 2000, (ii) the audited balance sheets of
the Company on December 31, 1999 and the unaudited financial statements of
income and retained earnings for the fiscal period ended December 31, 1999,
(iii) the unaudited balance sheets of the Company and the related unaudited
financial statements of income and retained earnings for the fiscal period ended
December 31, 2001, and (iv) the Interim Financial Statements.
"Company Options" means each outstanding vested or unvested option to
purchase shares of Company Common Stock under the Company Stock Option Plans.
"Company Preferred Stock" has the meaning set forth in Section 3.2(a).
"Company Series A Stock" has the meaning set forth in Section 3.2(a).
"Company Series B Stock" has the meaning set forth in Section 3.2(a).
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"Company Shares" means the Company Common Stock and the Company Preferred
Stock outstanding as of the Effective Time.
"Company Stock Option Plans" the Company's 1997 Stock Option Plan, 1999
Long Term Incentive and Stock Option Plan and the Company 2001 Option Plan.
"Company Stockholders" means all of the stockholders of the Company.
"Company Underwater Options" means each outstanding vested or unvested
option to purchase shares of Company Common Stock under the Company's 1997 Stock
Option Plan or 1999 Long Term Incentive and Stock Option Plan.
"Company 1997 Options" means each outstanding vested or unvested option to
purchase shares of Company Common Stock under the Company's 1997 Stock Option
Plan.
"Company 1999 Options" means each outstanding vested or unvested option to
purchase shares of Company Common Stock under the Company's 1999 Long Term
Incentive and Stock Option Plan.
"Company 2001 Option Plan" means the Company's 2001 Long Term Incentive and
Stock Option Plan.
"Company 2001 Options" means each outstanding vested or unvested option to
purchase shares of Company Common Stock under the Company 2001 Option Plan.
"Confidential Memorandum and Consent Solicitation" means the Confidential
Memorandum and Consent Solicitation delivered to the Principal Stockholders on
February 19, 2002.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" means all of the transactions contemplated by
this Agreement, including: (a) the Merger; (b) the execution, delivery, and
performance of the Lock-Up Agreements, the Employment Agreements, the
Non-Competition Agreements, the Releases, the Proxy, the Registration Rights
Agreement, the Option Termination Agreement, the Stockholders' Rights
Termination Agreement and the Escrow Agreement; (c) the performance by Parent
and the Company of their respective covenants and obligations under this
Agreement; and (d) Parent's acquisition and ownership of the Company Shares and
exercise of control over the Company.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Copyrights" has the meaning set forth in the definition of "Intellectual
Property."
"Daily Price" means the last reported sales price on such day reported by
the National Association of Securities Dealers, Inc. Automated Quotation System.
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"Damages" has the meaning set forth in Section 10.2(a).
"Defined Benefit Plan" means each Benefit Plan which is subject to Part 3
of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"DGCL" has the meaning set forth in the first recital of this Agreement.
"Dissenting Shares" has the meaning set forth in Section 2.7.
"Effective Date" has the meaning set forth in the first paragraph of this
Agreement.
"Effective Time" has the meaning set forth in Section 2.2.
"Employment Agreements" has the meaning set forth in Section 2.9(b)(iv).
"Encumbrances" means any mortgage, pledge, assessment, security interest,
deed of trust, lease, lien, adverse claim, equitable interest, levy, charge,
community property interest, right of first refusal or other encumbrance of any
kind, or any conditional sale or title retention agreement or other agreement to
give any of the foregoing in the future.
"Environment" has the meaning set forth in Section 3.20.
"Environmental Laws" has the meaning set forth in Section 3.20.
"Environmental Notice" has the meaning set forth in Section 3.20.
"Environmental Permits" has the meaning set forth in Section 3.20.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any entity which is a member of a "controlled group
of corporations" or which is or was under "common control" with the Company as
defined in Section 414 of the Code.
"Escrow Agent" has the meaning set forth in Section 2.6(i).
"Escrow Agreement" has the meaning set forth in Section 2.6(i).
"Escrow Period" has the meaning set forth in Section 10.3.
"Escrow Stockholders" shall mean each of FFT Partners I, LP, FFT Executive
Partners I, LP and Xxxxxx X. Xxxx.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect Parent Common Stock, $15.77, which
is the average Daily Price per share of Parent Common Stock for the 30
consecutive days ending three days prior to the Effective Date, except in the
case of issuances pursuant to Section 10.2(b), in
5
which case Fair Market Value shall mean the average Daily Price per share of
Parent Common Stock (adjusted for any stock splits, stock dividends, or other
reclassifications during the applicable time period) for the 30 consecutive days
ending three days prior to the date of such issuance.
"FDA" means the United States Food and Drug Administration.
"GAAP" means United States generally accepted accounting principles, as
currently in effect, applied on a basis consistent with the basis on which the
Company Financial Statements were prepared.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental or Regulatory Authority
or pursuant to any Legal Requirement.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or other country, any state, county, city or other political
subdivision.
"Inbound License Agreements" has the meaning set forth in Section 3.15(e).
"Indemnity Escrow Shares" has the meaning set forth in Section 2.6(e).
"Intellectual Property" means (i) inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof (collectively, "Patents"); (ii) trademarks, service
marks, trade dress, logos, trade names and current corporate names, together
with all translations, adaptations, derivations and combinations thereof and
including all goodwill associated therewith, and all applications, registrations
and renewals in connection therewith (collectively, "Trademarks"), (iii)
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith and mask works and all applications,
registrations and renewals in connection therewith (collectively, "Copyrights");
(iv) trade secrets and confidential business information (including without
limitation, product specifications, data, know-how, inventions and ideas, past,
current and planned research and development, customer lists, current and
anticipated customer requirements, price lists, market studies, business plans),
however documented; (v) proprietary computer software and programs (including
object code and source code) and other proprietary rights and copies and
tangible embodiments thereof (in whatever form or medium); (vi) database
technologies, systems, structures and architectures (and related processes,
formulae, compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information) and any other
related information, however, documented; (vii) all industrial designs and any
registrations and applications therefor; (viii) all databases and data
collections and all rights therein (items (ix)- (viii) shall be referred to as
"Trade Secrets and Other Proprietary Information"); and (x) any similar or
equivalent rights to any of the foregoing anywhere in the world.
6
"Interim Financial Statements" means the unaudited balance sheet and the
related unaudited statement of income and retained earnings for the Company, in
each case for the one month period ended January 31, 2002.
"Key Employees" means those employees of the Company that Parent in its
sole discretion has designated as "key employees" prior to the Closing and set
forth on Schedule 1 attached hereto.
"Knowledge of the Company" or "the Company's Knowledge" means the knowledge
of any director of the Company or each of Xxxxxx X. Xxxx, Xxxxxx X. Xxxxxx,
Xxxxxx X. Xxxxxxxxx, Xxxxxxxxx Xxxxxxx, Xxxx X. XxXxxxxx and Xxxxxxx Xxxxxxx. A
director of the Company or each of Xxxxxx X. Xxxx, Xxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxxxxx, Xxxxxxxxx Xxxxxxx, Xxxx X. XxXxxxxx and Xxxxxxx Xxxxxxx will be
deemed to have Knowledge of a particular fact or other matter if: (i) such
individual is actually aware of such fact or other matter; or (ii) a prudent
individual acting in any such individual capacity could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"Letter of Transmittal" has the meaning set forth in Section 2.8(a).
"Lock-Up Agreements" has the meaning set forth in Section 2.9(b)(iv).
"Material" has the meaning set forth in Section 3.20.
"Material Adverse Effect" means, for any Person, a material adverse effect
whether individually or in the aggregate (a) on the business, operations,
financial condition, Assets and Properties, liabilities or prospects of such
Person taken as a whole, or (b) on the ability of such Person to consummate the
transactions contemplated hereby.
"Merger" has the meaning set forth in Recital A of this Agreement.
"Merger Consideration" means the Cash Consideration and Stock
Consideration.
"NNM" means the distinct tier of the Nasdaq Stock Market referred to as the
Nasdaq National Market.
"Non-Competition Agreements" has the meaning set forth in Section
2.9(b)(ii).
"Non-Principal Stockholders" shall mean all of those stockholders of the
Company who are not Principal Stockholders.
"Option Assumption Agreement" has the meaning set forth in Section 6.6(b).
"Option Termination Agreement" has the meaning set forth in Section 6.6(d).
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"Oral" shall mean, with respect to any notices or communication received,
shall be limited to those matters which are within the Company's Knowledge.
"Order" means any award, decision, writ, judgment, decree, ruling,
subpoena, verdict, injunction or similar order of any Governmental or Regulatory
Authority (in each such case whether preliminary or final).
"Ordinary Course of Business" means the action of a Person that is (i)
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person; and (ii) not required
to be authorized by the board of directors or similar body of a Person.
"Outbound License Agreement" has the meaning set forth in Section 3.15(e).
"Parent" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Common Stock" means the shares of common stock of Parent, $.001 par
value.
"Parent Group" has the meaning set forth in Section 10.2(a).
"Parent SEC Documents" means each form, report, schedule, statement and
other document required to be filed by the Parent since April 2, 2001 through
the date of this Agreement under the Exchange Act or the Securities Act or by
the rules and regulations of the NNM, including any amendment to such document,
whether or not such amendment is required to be so filed.
"Patents" has the meaning set forth in the definition of "Intellectual
Property."
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations and similar consents granted or issued
by any Governmental or Regulatory Authority.
"Permitted Encumbrance" means (a) any Encumbrance for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP and (b) any
minor imperfection of title or similar Encumbrance which individually or in the
aggregate with other such Encumbrances does not impair the value of the property
subject to such Encumbrance or the use of such property in the conduct of the
business of the Company.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workers' compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether
8
written or oral, including, but not limited to, any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
"Principal Stockholders" has the meaning set forth in the first paragraph
of this Agreement.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental or Regulatory Authority.
"Proxy" has the meaning set forth in Section 2.9(b)(v).
"Qualified Plan" means each Benefit Plan which is intended to qualify under
Section 401 of the Code.
"Real Property" has the meaning set forth in Section 3.14.
"Registration Rights Agreement" has the meaning set forth in Section
2.9(b)(xi).
"Regulated Products" has the meaning set forth in Section 3.33.
"Related Person" means with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serve as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,\
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
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(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect benefit
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least 10% of the outstanding voting
power of a Person or equity securities or other equity interests representing at
least 10% of the outstanding equity securities or equity interests in a Person.
"Release" has the meaning set forth in Section 2.9(b)(viii).
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Consideration" has the meaning set forth in Section 2.6(a).
"Series B Consideration" has the meaning set forth in Section 2.6(b).
"Severance Obligations" means the salary continuation liability of the
Company equal to $185,000 resulting from the termination of employment of
Xxxxxxx Xxxxxxx and Xxxxxx X. Xxxxxx, as set forth in that certain Employment
Agreement by and between the Company and Xxxxxxx Xxxxxxx dated June 15, 2001 and
that certain Employment Agreement by and between the Company and Xxxxxx X.
Xxxxxx dated February 8, 2000, as amended, but does not include (i) salary
payable during the 30 day notice period prior to the effective date of
termination provided for in such employment agreements, or (ii) the cost of
benefits provided to such employee subsequent to termination of employment
pursuant to such employment agreements.
"Software" has the meaning set forth in Section 3.15(k).
"Stock Certificates" has the meaning set forth in Section 2.8.
"Stock Consideration" means 1,620,529 shares of Parent Common Stock.
"Stockholder Representatives" shall mean Xxxxx X. Xxxxxxx and Xxxxxx X.
Xxxx.
"Stockholders Rights Termination Agreement" shall have the meaning set
forth in Section 2.9(b)(xii).
"Survival Period" has the meaning set forth in Section 10.1.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" (and, with correlative meaning, "Taxes," "Taxable" and "Taxing")
means (i) any federal, state, local or foreign income, alternative or add-on
minimum tax, gross income, gross
10
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental or Regulatory Authority responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for payment
of any amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined, unitary or other group for any Taxable
period and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied obligation to
indemnify any other person.
"Tax Return" means any return, report, information return, schedule or
other document (including any related or supporting information) filed or
required to be filed with respect to any taxing authority with respect to Taxes.
"Third Party Expenses" has the meaning set forth in Section 6.4.
"Threatened" means a claim, Proceeding, dispute, action or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist that would
lead a prudent Person to conclude that such a claim, proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Trademarks" has the meaning set forth in the definition of "Intellectual
Property."
"Trade Secrets and Other Proprietary Information" has the meaning set forth
in the definition of "Intellectual Property."
"Unaccrued Bonus Obligations" means the $45,000 of bonus payments that the
Company has made or agreed to make for its executive employees subsequent to
December 31, 2001 in excess of the amount accrued as bonuses on the December 31,
2001 Company Financial Statements.
1.2 CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of this
Agreement otherwise requires, (a) words of any gender include each other gender;
(b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; (e) the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or;" and (f) "including" means
"including without limitation." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
11
ARTICLE II
THE MERGER
2.1 THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the DGCL, the
Company shall be merged with and into Acquisition Co., the separate corporate
existence of the Company shall cease and Acquisition Co. shall continue as the
surviving corporation. Acquisition Co. as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
2.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing of a
certificate of merger on the Effective Date substantially in the form attached
hereto as Exhibit A (the "Certificate of Merger") with the Secretary of State of
Delaware in accordance with the relevant provisions of the DGCL with the
effective date of the Merger specified in the Certificate of Merger to be March
25, 2002 (the "Effective Time"). The Certificate of Merger shall not be amended
or modified after the Effective Date and prior to the Effective Time without the
consent of Parent and the Stockholder Representatives. Unless the context
otherwise requires, the term "Agreement" as used herein refers collectively to
this Agreement and the Certificate of Merger.
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of the Company and Acquisition Co. shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and Acquisition Co. shall
become the debts, liabilities and duties of the Surviving Corporation. The
Surviving Corporation shall become a wholly-owned subsidiary of Parent.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
Acquisition Co. shall be the Certificate of Incorporation of the Surviving
Corporation, except that Article I thereof shall be amended to read in its
entirety as follows: "The name of the Corporation is Xxxx Medical Technologies,
Inc."
(b) At the Effective Time, the Bylaws of Acquisition Co. shall be the
Bylaws of the Surviving Corporation, except that the Bylaws shall be amended to
reflect that the name of the Surviving Corporation shall be "Xxxx Medical
Technologies, Inc."
2.5 DIRECTORS AND OFFICERS. The directors of Acquisition Co. immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of Acquisition Co. immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
to serve until their successors are duly elected or appointed or qualified.
2.6 EFFECT ON CAPITAL STOCK/MERGER CONSIDERATION.
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(a) Conversion of Company Series A Stock Held by the Principal
Stockholders. At the Effective Time, by virtue of the Merger and without any
action on the part of any Person, each share of Company Series A Stock issued
and outstanding immediately prior to the Effective Time held by a Principal
Stockholder shall be canceled and automatically converted into the right to
receive 0.11315 shares of Parent Common Stock, plus cash in the amount of
$1.39698 (collectively, the "Series A Consideration").
(b) Conversion of Company Series B Stock Held by the Principal
Stockholders. At the Effective Time, by virtue of the Merger and without any
action on the part of any Person, each share of Company Series B Stock issued
and outstanding immediately prior to the Effective Time held by a Principal
Stockholder shall be canceled and automatically converted into the right to
receive 0.12852 shares of Parent Common Stock (the "Series B Consideration").
(c) Conversion of Company Common Stock Held by the Principal
Stockholders. At the Effective Time, by virtue of the Merger and without any
action on the part of any Person, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time held by a Principal
Stockholder shall be canceled and automatically converted into the right to
receive 0.12852 shares of Parent Common Stock (the "Common Share
Consideration").
(d) Conversion of Company Shares Held by Non-Principal Stockholders.
(i) At the Effective Time, by virtue of the Merger and without any action on the
part of any Person, each share of Company Series A Stock issued and outstanding
immediately prior to the Effective Time (excluding Dissenting Shares) held by a
Non-Principal Stockholder shall be canceled and automatically converted into the
right to receive cash in the amount of $3.18139; (ii) At the Effective Time, by
virtue of the Merger and without any action on the part of any Person, each
share of Company Series B Stock issued and outstanding immediately prior to the
Effective Time (excluding Dissenting Shares) held by a Non-Principal Stockholder
shall be canceled and automatically converted into the right to receive cash in
the amount of $2.02680; and (iii) At the Effective Time, by virtue of the Merger
and without any action on the part of any Person, each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
Dissenting Shares) held by a Non-Principal Stockholder shall be canceled and
automatically converted into the right to receive cash in the amount of
$2.02680.
(e) Distribution of Merger Consideration. The Merger Consideration
will be distributed as set forth on Schedule 2 attached hereto.
(f) Rights with Respect to Company Shares; Fractional Shares. At the
Effective Time, all rights in respect of Company Shares (other than Dissenting
Shares and the securities referred to in Section 2.6(h)(ii) below) shall cease
to exist, other than the right to receive the Cash Consideration and Stock
Consideration as set forth in this Section 2.6, and all such shares will
automatically, by virtue of the Merger and without any action on the part of the
holder thereof, be cancelled and retired. No certificates representing
fractional shares shall be issued to the Principal Stockholders. In lieu of
fractional shares that would otherwise be issued to Principal Stockholders, each
Principal Stockholder that would have been entitled to receive a fractional
share shall receive such whole number of shares of Parent Common Stock as is
equal
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to the precise number of shares of Parent Common Stock to which such person
would be entitled rounded to the nearest whole number.
(g) Capital Stock of Acquisition Co. At the Effective Time, each
share of common stock of Acquisition Co. ("Acquisition Co. Common Stock") issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully-paid and nonassessable share of common stock of the
Surviving Corporation. Each stock certificate of Acquisition Co. evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(h) Additional Actions at the Effective Time. At the Effective Time:
(i) Each share of Company Common Stock held in the treasury of
the Company shall be canceled and retired without payment of any consideration
therefor.
(ii) All Company 2001 Options shall be assumed by Parent and all
Company Underwriter Options will be dealt with in accordance with Section 6.7
hereof.
(i) Stock Consideration Escrow Holdback. At the Effective Time,
Parent shall withhold 63,412 shares of Parent Common Stock (the "Indemnity
Escrow Shares") from the Stock Consideration payable by Parent to the Escrow
Stockholders as a holdback for any indemnity claims that Parent may have
hereunder. The Indemnity Escrow Shares shall be deposited in escrow by Parent
and the Stockholder Representatives for the Survival Period or such longer
period as is necessary to resolve any indemnity claims in accordance with the
terms and provisions hereof and an Escrow Agreement among Parent, the
Stockholder Representatives, the Surviving Corporation and US Bank Trust,
National Association. (the "Escrow Agent") in the form attached hereto as
Exhibit B (the "Escrow Agreement").
2.7 DISSENTERS' RIGHTS. Notwithstanding any provision of this Agreement to
the contrary, the Company shall, within ten days of the Effective Date, give
each Non-Principal Stockholder notice summarizing the Merger, in form reasonably
satisfactory to Parent, providing that appraisal rights are available for any
and all Company Shares held by each such Non-Principal Stockholder and shall
further include a copy of Section 262 of the DGCL and a summary of each such
Non-Principal Stockholder's appraisal rights. Each such Non-Principal
Stockholder who demands and effects appraisal rights for such shares in
accordance with the DGCL and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights for such shares (the "Dissenting
Shares") shall not be entitled to have such Dissenting Shares be converted into
or represent a right to receive cash in the per share amount specified in
Section 2.6(d), and the holder thereof shall only be entitled to such rights as
are granted by the DGCL.
(a) Notwithstanding the provisions of subsection (a), if any
Non-Principal Stockholder who demands appraisal of such shares under the DGCL
shall effectively withdraw the right to appraisal, then, as of the later of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive cash in
the per share amount specified in Section 2.6(d), without interest thereon, upon
surrender of the certificate representing such Company Shares.
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(b) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any Company Shares, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
which relate to any such demand for appraisal and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
2.8 EXCHANGE PROCEDURE.
(a) Promptly after the Effective Date, the Stockholder
Representatives shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Date represented the
Company Shares, other than the Dissenting Shares (the "Stock Certificates"), (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Stock Certificates shall pass, only upon
delivery of the Stock Certificates to the Parent and which shall be in such form
and have such other provisions as Parent may reasonably specify, including
appropriate investment representations) (the "Letter of Transmittal") and (ii)
instructions for use in effecting the surrender of the Stock Certificates in
exchange for a portion of the Cash Consideration or a portion of the Cash
Consideration and Stock Consideration, as the case may be, as determined in
accordance with Section 2.6. Upon surrender of a Stock Certificate for
cancellation to the Stockholder Representatives (and the subsequent delivery of
the same to Parent), duly endorsed in blank (or accompanied by a duly executed
stock power) and, if necessary, a spousal consent by the spouse, if any, of the
Company Stockholder, substantially in the form of Exhibit C attached hereto,
duly executed by such spouse, together with such Letter of Transmittal duly
executed, the holder of such Stock Certificate shall be entitled to receive in
exchange therefor such portion of the Cash Consideration or the Cash
Consideration and Stock Consideration, as the case may be, to which such holder
of Company Shares is entitled pursuant to Section 2.6 hereof. The Stock
Certificate so surrendered shall forthwith be canceled. No interest will accrue
or be paid to the holder of any of the Company Shares. From and after the
Effective Time, until surrendered as contemplated by this Section 2.8, each
Stock Certificate shall be deemed for all corporate purposes to evidence the
portion of the Cash Consideration or Cash Consideration and Stock Consideration
into which the shares represented by such Stock Certificate have been converted.
(b) The Cash Consideration and Stock Consideration (including any
Indemnity Escrow Shares released from escrow pursuant to this Agreement and the
Escrow Agreement) delivered to the Stockholder Representatives upon the
surrender for exchange of Company Shares in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such Company Shares. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of Company
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Stock Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.8, provided that the presenting holder is listed on the Company's
stockholder list as a holder of Company Shares.
15
(c) In the event that any Stock Certificates evidencing Company
Shares shall have been lost, stolen or destroyed, Parent shall pay in exchange
for such lost, stolen or destroyed Stock Certificates, upon the making by the
holder thereof of an affidavit of that fact and agreement by such holder to
indemnify Parent against any claim that may be made against Parent with respect
to the Stock Certificates alleged to have been lost, stolen or destroyed by the
holder thereof, such portion of the Cash Consideration or Cash Consideration and
Stock Consideration as may be required pursuant to Section 2.6 hereof; provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed Stock
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent with respect to the
Stock Certificates alleged to have been lost, stolen or destroyed.
(d) Notwithstanding anything to the contrary in this Section 2.8,
none of the Parent, the Surviving Corporation or any party hereto shall be
liable to a holder of Company Shares for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code.
(f) Each of the Parent, Acquisition Co. and the Company will take all
such reasonable and lawful acts as may be necessary or desirable in order to
effectuate the Merger in accordance with this Agreement as promptly as possible.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company, the officers and
directors of the Company and Acquisition Co. are fully authorized in the name of
the respective corporations or otherwise to take, and will take, all such lawful
and necessary action so long as such action is not inconsistent with this
Agreement.
2.9 CLOSING.
(a) Time and Place. The consummation of the Merger under this
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Xxxxxxx
LLP, 00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000, at 10:00
a.m. on March 25, 2002, or at such time and in such manner as the parties
mutually agree (the "Closing Date").
(b) Pre-Closing Deliveries by the Company and the Principal
Stockholders. At the Effective Date, the Company shall have delivered or caused
to be delivered to Parent and/or Acquisition Co., as the case may be:
(i) the Escrow Agreement, duly executed by the Company and the
Stockholder Representatives;
(ii) the Non-Competition and Non-Solicitation Agreements by and
between Parent and certain of the Principal Stockholders, substantially in the
form of Exhibit D (the "Non-Competition Agreements"), duly executed by each of
FFT Partners I., L.P. and FFT Executive Partners I., L.P.;
16
(iii) the Lock-Up Agreement by and between Parent and each of the
Principal Stockholders, substantially in the form of Exhibit E (the "Lock-Up
Agreements") duly executed by each of such Principal Stockholders;
(iv) written acknowledgements of the assumption of the existing
employment agreements by and between the Company and each of the Key Employees
by the Surviving Corporation in form and substance reasonably satisfactory to
Parent (the "Employment Agreements") duly executed by each of the Key Employees;
(v) an Irrevocable Proxy, duly executed by each of the Principal
Stockholders, substantially in the form of Exhibit F (the "Proxy");
(vi) a certificate of an officer of the Company substantially in
the form of Exhibit G attached hereto, duly executed by the Company;
(vii) a certificate of the Secretary of the Company substantially
in the form of Exhibit H attached hereto, certifying as of the Effective Date
(A) a true and complete copy of the organizational documents of the Company
certified as of a recent date by the Secretary of State of Delaware, (B) a
certificate of each appropriate Secretary of State certifying the good standing
of the Company in its state of incorporation and all states in which it is
qualified to do business, (C) a true and complete copy of the resolutions of the
board of directors of the Company and the resolutions of the stockholders of the
Company, each authorizing the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby and (D) incumbency matters;
(viii) a Release by each of the Principal Stockholders,
substantially in the form of Exhibit I attached hereto (the "Release"), duly
executed by each Principal Stockholder;
(ix) a resignation letter of each of the directors of the Company
dated effective as of the Effective Date;
(x) an opinion of Xxxxxx & Whitney, LLP, counsel to the Company
substantially in the form attached hereto as Exhibit J;
(xi) a Registration Rights Agreement by and between Parent and
each of the Principal Stockholders, substantially in the form of Exhibit K (the
"Registration Rights Agreement"), duly executed by each of the Principal
Stockholders; and
(xii) a Stockholders Rights Termination Agreement, substantially
in the form of Exhibit L, duly executed by the Company, FFT Partners I., L.P.,
FFT Executive Partners I., L.P. and Xxxxxx X. Xxxx.
(c) Pre-Closing Deliveries By Parent. At the Effective Date, Parent
and/or Acquisition Co., as the case may be, shall have delivered or caused to be
delivered to the Company and/or the Company Stockholders, as the case may be:
(i) the Certificate of Merger, duly executed by Acquisition Co.;
17
(ii) the Escrow Agreement, duly executed by Parent;
(iii) the Non-Competition Agreements, duly executed by Parent;
(iv) the Employment Agreements, duly executed by Parent;
(v) a certificate of an officer of Parent, substantially in the
form of Exhibit M attached hereto, duly executed by Parent;
(vi) the Registration Rights Agreement, duly executed by Parent;
(vii) a certificate of the Secretary of Parent substantially in
the form of Exhibit N attached hereto, certifying as of the Effective Date (A) a
true and complete copy of the organizational documents of Parent certified as of
a recent date by the Secretary of State of Delaware, (B) a true and complete
copy of the resolutions of the board of directors of Parent authorizing the
execution, delivery and performance of this Agreement by Parent and the
consummation of the transactions contemplated hereby and (C) incumbency matters;
and
(viii) an opinion of Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel to
Parent and Acquisition substantially on the form attached hereto as Exhibit O.
2.10 EFFECTIVE TIME. If all of the pre-closing delivery items set forth in
Sections 2.8 and 2.9 above have been delivered, the Certificate of Merger shall
be filed by Acquisition Co. on the Effective Date, to become effective as of the
Effective Time.
2.11 PRIVATE PLACEMENT. The issuance of the Parent Common Stock issuable as
Stock Consideration will be exempt from registration requirements of the
Securities Act pursuant to the private placement exemption provided by Rule 505
and/or 506 of Regulation D promulgated under the Securities Act and/or Section
4(2) of the Securities Act, and applicable state securities laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Acquisition Co. as of the
Effective Date, except as set forth on the Company Disclosure Schedule furnished
to Parent specifically identifying the relevant subparagraph hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder, as follows:
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated, validly existing, and in good standing under the laws of the State
of Delaware. The Company is duly authorized to conduct business and is in good
standing in Minnesota and each jurisdiction where such qualification is
required, except for any jurisdiction where failure so to qualify would not have
a Material Adverse Effect upon the Company. The Company has full power and
authority, and holds all Permits and authorizations necessary to carry on its
business and to own and use the Assets and Properties owned and used by the
Company, except where the failure to have such power and authority or to hold
such Permit or authorization would not have
18
a Material Adverse Effect on the Company's business. The Company has delivered
to Parent correct and complete copies of its charter documents and
organizational documents, each as amended to date.
3.2 CAPITAL STOCK OF THE COMPANY.
(a) The authorized capital stock of the Company consists of (i)
30,000,000 shares of common stock, par value $0.001 per share ("Company Common
Stock"), of which 892,091 shares are issued and outstanding as of the date
hereof; (ii) 26,250 shares of capital stock of the Company are in the treasury;
(iii) 7,272,730 shares of Series A Preferred Stock, $0.001 par value per share
(the "Company Series A Stock"), of which 7,272,730 shares are issued and
outstanding as of the date hereof; and (iv) 7,000,000 shares of Series B
Preferred Stock, $0.001 par value per share (the "Company Series B Stock" and
together with the Company Series A Stock, the "Company Preferred Stock"), of
which 5,615,156 shares are issued and outstanding as of the date hereof. As of
the Effective Date, each share of Company Series A Stock is convertible into
0.5246 shares of Company Common Stock and each share of Company Series B Stock
is convertible into one share of Company Common Stock. Each share of the issued
and outstanding capital stock of the Company is duly authorized, fully paid and
nonassessable and was validly issued. Section 3.2(a) of the Company Disclosure
Schedule sets forth a complete and accurate list specifying the number of shares
of Company Common Stock and Company Preferred Stock held by each Company
Stockholder.
(b) As of the Effective Date, 1,717,822 shares of Company Common
Stock are subject to issuance pursuant to outstanding Company Options to
purchase Company Common Stock, of which 1,322,566 shares of Company Common Stock
are subject to issuance pursuant to outstanding vested or unvested options to
purchase Company Common Stock granted pursuant to the Company's 2001 Option
Plan. Section 3.2(b) of the Company Disclosure Schedule sets forth a list of all
subscriptions, options, warrants, calls, commitments and other rights of any
kind for the purchase or acquisition of, and any securities convertible or
exchangeable for, any capital stock of the Company (collectively, the "Company
Convertible Securities"), including the holder thereof, the number of shares of
Company Common Stock or Company Preferred Stock subject thereto, the exercise
price, date of grant, vesting schedule and expiration thereof and any terms
regarding the acceleration of vesting thereof. The Company has made available to
Parent accurate and complete copies of the form of all stock option agreements,
option plans and other agreements evidencing Company Options, including any
non-conforming grants. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable.
(c) All Company Shares and all outstanding Company Options have been
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all material requirements set forth in
applicable agreements or instruments. The Company has not granted (i) any
options or other equity awards outside of the Company Stock Option Plans or (ii)
any tax gross up bonuses pursuant to the Company 2001 Option Plan. None of the
terms of any outstanding grant will cause adverse accounting consequences to
Parent or Acquisition Co. after the Effective Time, including without
limitation, generation of a charge to earnings.
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(d) All Company Convertible Securities (other than Company Options)
shall have been converted or exchanged, accelerated and/or exercised or
terminated, as the case may be, as of the Closing Date, and there will be no
outstanding Company Convertible Securities (other than Company Options) as of
the Closing Date. All shares of Company Common Stock that may be issued upon the
exercise or conversion of such Company Convertible Securities will (upon
issuance in accordance with their terms) be duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights.
(e) Except as set forth in the Company's Certificate of
Incorporation, there are no agreements to which the Company is a party or by
which it is bound with respect to the voting (including voting trusts or
proxies), registration under the Securities Act, or sale or transfer (including
agreements relating to pre-emptive rights, rights of first refusal, co-sale
rights or "drag-along" rights) of any securities of the Company. To the
Knowledge of the Company, there are no agreements among other parties, to which
the Company is not a party and by which it is not bound, with respect to the
voting (including voting trusts or proxies) or sale or transfer (including
agreements relating to rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company.
3.3 OWNERSHIP OF SHARES. Each of the Company Stockholders owns of record
that number of shares of Company Shares listed opposite such stockholder's name
in Section 3.2(a) of the Company Disclosure Schedule. Each holder of the Company
Convertible Securities owns of record that number of the Company Convertible
Securities listed opposite such holder's name in Section 3.2(b) of the Company
Disclosure Schedule. The delivery of the stock certificate(s) representing the
Company Shares and any shares of capital stock resulting from the conversion of
any Company Convertible Securities owned by the Company Stockholders in the
manner provided in Section 2.8 will terminate all rights of each Company
Stockholder in the such Company Shares owned by such Company Stockholder. No
Company Stockholder is entitled to receive a portion of the Merger Consideration
which is greater or less than the portion of such Merger Consideration set forth
next to such Company Stockholder's name on Schedule 2.
3.4 AUTHORITY OF THE COMPANY. The Company has all necessary power and
authority and has taken all action necessary to enter into this Agreement and
each agreement included in the Contemplated Transactions to which the Company is
a party, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder and no other proceedings on the
part of the Company are necessary to authorize this Agreement or each agreement
included in the Contemplated Transactions to which the Company is a party or to
consummate the transactions contemplated hereby or thereby. This Agreement and
each agreement included in the Contemplated Transactions to which the Company is
a party have been duly and validly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective 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.
3.5 NO AFFILIATES. The Company does not have any Affiliates or
subsidiaries and is not a partner in any partnership or a party to a joint
venture.
20
3.6 NO CONFLICTS. The execution and delivery by the Company of this
Agreement does not, and the performance by the Company of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or Breach of any of the
terms, conditions or provisions of the charter documents, bylaws or other
organizational documents of the Company;
(b) conflict with or result in a violation or Breach of, or give any
Governmental or Regulatory Authority the right to revoke, withdraw, suspend,
cancel, termination or modify any term or provision of any law, Order, Permit,
statute, rule or regulation applicable to the Company, the business or Assets or
Properties of the Company or the capital stock of the Company Common Stock;
(c) result in a Breach of, or default under (or give rise to right of
termination, modification, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other similar instrument or obligation to which the Company,
any of its Assets and Properties or the Company Common Stock may be bound,
except for such breaches or defaults as set forth in Section 3.6(c) of the
Company Disclosure Schedule;
(d) cause any of the Assets or Properties of the Company to be
reassessed or revalued by any taxing authority or any Governmental or Regulatory
Authority;
(e) result in an imposition or creation of any Encumbrance or Tax on
the business or Assets or Properties of the Company or the Company Common Stock.
3.7 CONSENTS AND GOVERNMENTAL APPROVALS AND FILINGS. Except for the filing
of the Certificate of Merger with the State of Delaware and other securities law
related filings pursuant to the Parent's issuance of Parent Common Stock, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of the Company is required in connection with
the execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby.
3.8 BOOKS AND RECORDS. The minute books and other corporate records of the
Company as made available to Parent contain a true and complete record of all
actions taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of the Company. The Company has delivered or made available true and
complete copies of each document which has been requested by Parent or its
counsel in connection with their legal and accounting review of the Company. The
stock transfer ledgers and other similar records of the Company accurately
reflect all issuances and record transfers of the capital stock of the Company.
The other Books and Records of the Company are true, correct and complete in all
material respects and have been maintained in accordance with sound business
practices.
3.9 COMPANY FINANCIAL STATEMENTS. The Company has previously delivered to
Parent the Company Financial Statements. Such Company Financial Statements (i)
are true, correct and complete in all material respects, (ii) have been prepared
in accordance with the
21
Books and Records of the Company, (iii) have been prepared in conformity with
GAAP, and (iv) fairly present the financial condition and results of operations
of the Company as of the respective dates thereof and for the periods covered
thereby; provided that the Interim Financial Statements and the financial
statements for the annual period ended December 31, 2001 are subject to normal
year-end adjustments and lack footnotes and certain other presentation items.
3.10 ABSENCE OF CHANGES. Except for the execution and delivery of this
Agreement and the transactions to take place pursuant hereto on or prior to the
Closing Date, since December 31, 2001, there has not been any material adverse
change, or any event or development which, individually or together with other
such events, could reasonably be expected to result in a Material Adverse Effect
on the Company.
3.11 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Company
Financial Statements, there are no liabilities (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including but not limited to any liability for Taxes), nor to the Company's
Knowledge any basis for any claim against the Company for any such liabilities,
relating to or affecting the Company or any of its Assets and Properties, other
than such liabilities incurred after December 31, 2001 in the Ordinary Course of
Business which have not had, and could not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the Company.
3.12 TANGIBLE PERSONAL PROPERTY. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under written agreements to use, all tangible personal property,
equipment, plants, buildings, structures, facilities and all other Assets and
Properties used in or reasonably necessary for the conduct of the Company's
business, including all tangible personal property reflected on the Company
Financial Statements dated December 31, 2001 and any tangible personal property
acquired since December 31, 2001, other than property disposed of since such
date in the Ordinary Course of Business. All such tangible personal property,
equipment, plants, buildings, structures, facilities and all other assets and
properties are free and clear of all Encumbrances, other than (a) Permitted
Encumbrances which have not had a Material Adverse Effect on the Company or (b)
Encumbrances listed in Section 3.12 of the Company Disclosure Schedule. The
Company has also provided the Parent with true, accurate and complete copies of:
(i) the Company's fixed assets listing, as of December 31, 2001, and (ii) the
Company's current capitalization and depreciation policies.
3.13 BENEFIT PLANS; ERISA.
(a) Section 3.13(a) of the Company Disclosure Schedule lists each
Benefit Plan together with a brief description of the type of plan and benefit
provided thereunder. The Company has no commitment, proposal, or communication
to employees regarding the creation of an additional Plan or any increase in
benefits under any Benefit Plan. The Company has provided to Parent (i) a copy
of each Benefit Plan (including amendments) or, where substantially similar
arrangements exist, a sample copy and a list of persons participating in such
arrangement, (ii) the most recent annual reports on the Form 5500 series for
each Benefit Plan required to file such report and (iii) the most recent annual
trustee's report for each Benefit Plan
22
funded through a trust or the most recent annual report of the custodian holding
the assets for such Benefit Plan.
(b) Neither the Company, any ERISA Affiliate nor predecessor thereof
has ever maintained, contributed to or been obligated to contribute to any
Defined Benefit Plan or multiemployer plan (as defined in Section (3)(37) or
4001(a)(3) of ERISA) and no condition exists that presents a material risk to
the Company or an ERISA Affiliate of incurring a liability under Title IV of
ERISA.
(c) Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms or in compliance with applicable
Legal Requirements currently in effect and, as of the Effective Date, will be in
material compliance, in form and operation, with all Legal Requirements
(including but not limited to ERISA and the Code) currently in effect as
required by the Internal Revenue Service and any other applicable Governmental
or Regulatory Authority. The reserves reflected in the December 31, 2001 Company
Financial Statements for the obligations of the Company under all Benefit Plans
are adequate and were determined in accordance with GAAP. Neither the Company
nor, to the Knowledge of the Company, any other Person, has any express or
implied commitment, whether legally enforceable or not, to continue (for any
period), modify, change or terminate any Company Benefit Plan, other than (i)
with respect to a modification, change or termination required by ERISA or the
Code, or (ii) as set forth in Section 3.13 of the Company's Disclosure Schedule.
(d) Each plan intended to be a Qualified Plan has received a
determination or an opinion letter from the Internal Revenue Service regarding
the qualified status of such Qualified Plan under Section 401(a) of the Code and
no notice has been received from the Internal Revenue Service or any
Governmental or Regulatory Authority questioning or challenging such qualified
status, and the Company does not have any Knowledge of any facts that would
adversely affect the qualified status of such Qualified Plan.
(e) No Benefit Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company or any ERISA Affiliate beyond their termination
of service (other than (i) coverage mandated by applicable law, (ii) benefits
under such Benefit Plan (e.g., disability benefits or retirement benefits
provided under a life insurance program), (iii) deferred compensation benefits
accrued as liabilities on the books of the Company or any ERISA Affiliate or
(iv) benefits the full cost of which is borne by any current or former employee
(or his or her beneficiary)). To the Company's Knowledge, the Company is in
compliance with (1) the requirements of the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA") and (2) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996, as amended.
(f) The consummation of the transactions contemplated by this
Agreement will not, either immediately or upon the occurrence of any event
thereafter, (i) entitle any current or former employee or officer or director of
the Company or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment pursuant to an existing Company plan
23
or agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation otherwise due any such individual.
(g) There are no pending or, to the Knowledge of the Company,
anticipated or threatened claims by or on behalf of any Benefit Plan, by any
employee or beneficiary covered under any such Benefit Plan, or otherwise
involving any such Benefit Plan (other than routine claims for benefits).
3.14 REAL PROPERTY. The Company does not own any real property. Section
3.14 of the Company Disclosure Schedule contains the address and amount of
leased spaced of each parcel of real property leased by the Company (as lessee
or lessor) (the "Real Property"). The Company has a valid leasehold interest in
all real property used in the conduct of the Company's business, free and clear
of all Encumbrances other than Encumbrances that may affect the underlying real
estate. The Company has rights of ingress and egress with respect to the Real
Property and all buildings, structures, facilities, fixtures and other
improvements thereon material for the operation of the Company's business. To
the Knowledge of the Company, there is no pending or contemplated or threatened
condemnation of any of the respective parcels of Real Property or any part
thereof. To the Company's Knowledge, none of the Real Property, or the
buildings, structures, facilities, fixtures or other improvements thereon, or
the use thereof, contravenes or violates any building, zoning, fire protection,
administrative, occupational safety and health or other applicable law, rule, or
regulation except for any contravention or violation which individually or in
the aggregate could not reasonably be expected to result in a Material Adverse
Effect on the Company. Each lease with respect to the Real Property is a legal,
valid and binding agreement of the Company that is subsisting in full force and
effect and is enforceable in accordance with its terms, and except as set forth
in Section 3.14 of the Company Disclosure Schedule and since January 1, 2001,
the Company has not received notice of any Company default (or any condition or
event which, after notice or lapse of time or both, would constitute a default)
thereunder.
3.15 INTELLECTUAL PROPERTY RIGHTS.
(a) Generally. Section 3.15(a) of the Company Disclosure Schedule
sets forth, for the Intellectual Property owned, in whole or in part, including
jointly with others (such schedule specifies if such Intellectual Property is
owned jointly), by the Company, a complete and accurate list of all United
States and foreign (a) Patents and Patent applications; (b) Trademark
registrations and applications and unregistered Trademarks; (c) copyright
registrations and applications, indicating for each, the applicable
jurisdiction, registration number (or application number) and date issued (or
date filed); and (d) all other Intellectual Property which is essential to the
Company's business and to which the Company has any ownership rights (including
common law rights).
(b) Trademarks.
(i) Except where noted as "Lapsed" or "Abandoned" on Schedule
3.15(a) to the Company Disclosure Schedule, all of the Company's registered
Trademarks are currently in compliance with all legal requirements (including
the timely post-registration filing of affidavits of use and incontestability
and renewal applications) other than any requirement
24
that, if not satisfied, would not result in a cancellation of any such
registration or otherwise affect the priority and enforceability of the
Trademark in question.
(ii) None of the Company's registered Trademarks has been within
the last three years or is now involved in any opposition or cancellation
proceeding in the United States Patent and Trademark Office and no such action
has been threatened in writing within the one-year period prior to the date of
this Agreement.
(iii) To the Knowledge of the Company, there has been no prior
use of any of the Company's registered Trademarks by any third party that
confers upon said third party superior rights in any such Trademark.
(c) Patents.
(i) Except where noted as "Pending," "Abandoned," "Inactive" or
"Expired" on Schedule 3.15(a) to the Company Disclosure Schedule, all of the
Company's Patents are currently in compliance with legal requirements (including
payment of filing, examination, and maintenance fees and proofs of working or
use) other than any requirement that, if not satisfied, would not result in a
revocation or lapse or otherwise affect the enforceability of the Patent in
question.
(ii) None of the Company's Patents has been or is now involved in
any interference, reissue, reexamination or opposing proceeding in the United
States Patent and Trademark Office or any foreign patent office and no such
action has been threatened in writing within the one-year period prior to the
date of this Agreement.
(iii) To the Company's Knowledge, there is no Patent of any
person that claims the same subject matter as any Patent of the Company or
invalidates any claim of any Patent of the Company.
(d) Trade Secrets and Other Proprietary Information. The Company has
taken all reasonable steps necessary to enforce the proprietary information and
confidentiality agreements that have been entered into by its employees,
consultants, contractors and other entities.
(e) License Agreements. Section 3.15(e)(1) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements
granting to the Company any right to use or practice any rights under any
Intellectual Property other than over-the-counter "shrink wrap" software
(collectively, the "Inbound License Agreements"). Section 3.15(e)(2) of the
Company Disclosure Schedule also sets forth a complete and accurate list of all
license agreements under which the Company grants licenses or other rights in or
to use or practice any rights under any Intellectual Property (collectively, the
"Outbound License Agreements"). There is no outstanding or, to the Knowledge of
the Company, threatened dispute or disagreement with respect to any Inbound
License Agreement or any Outbound License Agreement.
(f) Ownership and Other Rights; Sufficiency of Intellectual Property
Assets. The Company owns or possesses adequate licenses, re-marketing or
sublicensing rights, or other
25
rights to use, free and clear of Encumbrances, orders and arbitration awards,
all of its Intellectual Property used in its business. The Intellectual Property
identified in Section 3.15(a) of the Company Disclosure Schedule, together with
the Company's Trade Secrets and Other Proprietary Information and the Company's
unregistered Copyrights and the Company's and such subsidiaries' rights granted
to the Company under the Inbound License Agreements, constitute all the material
Intellectual Property rights and Inbound License Agreements used in the
operation of the Company's business as it is currently conducted and are all
such Intellectual Property rights and Inbound License Agreements necessary to
operate such business as of the Effective Date in substantially the same manner
as such business has been operated by the Company prior thereto.
(g) [Intentionally omitted.]
(h) No Infringement by the Company. The products used, manufactured,
marketed, sold or licensed by the Company, and all Intellectual Property used in
the conduct of the Company's business as currently conducted, do not infringe
upon, violate or constitute the unauthorized use of any rights owned or
controlled by any third party, including any Intellectual Property of any third
party.
(i) No Pending or Threatened Infringement Claims. No litigation is
now or, within the three years prior to the date of this Agreement, was pending
and no notice or other claim in writing has been received by the Company, (A)
alleging that the Company has engaged in any activity or conduct that infringes
upon, violates or constitutes the unauthorized use of the Intellectual Property
rights of any third party or (B) challenging the ownership, use, validity or
enforceability of any Intellectual Property owned or exclusively licensed by or
to the Company. No Intellectual Property that is owned or licensed by the
Company is subject to any outstanding Order, stipulation or agreement
restricting the use thereof by the Company or, in the case of Intellectual
Property licensed by the Company to others, restricting the sale, transfer,
assignment or licensing thereof by the Company to any Person.
(j) No Infringement by Third Parties. To the Knowledge of the
Company, no third party is misappropriating, infringing, diluting or violating
any Intellectual Property owned or licensed by the Company, and no such claims
have been brought against any third party by the Company.
(k) Software. To the Knowledge of the Company, the Software (as
defined below) owned or purported to be owned by the Company, was either (i)
developed by employees of the Company within the scope of their employment; (ii)
developed by independent contractors who have assigned their rights to the
Company pursuant to written agreements; or (iii) otherwise acquired by the
Company from a third party. The Company has not received any written
notification that any such Software contains any programming code, documentation
or other materials or development environments that embody Intellectual Property
rights of any person other than the Company, except for such materials or
development environments obtained by the Company from other persons who make
such materials or development environments generally available to all interested
purchasers or end-users on standard commercial terms. For purposes of this
Section 3.15(k), "Software" means any and all (i) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code
26
or object code, (ii) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (iii) descriptions,
schematics, flow-charts and other work product used to design, plan, organize
and develop any of the foregoing, and (iv) all documentation, including user
manuals and training materials, relating to any of the foregoing.
3.16 PROPRIETARY INFORMATION OF THIRD PARTIES. No third party has claimed
or, to the Knowledge of the Company, has reason to claim that any person
employed by or affiliated with the Company in connection with and during the
Company's ownership and operation of its business has (i) violated or may be
violating any of the terms or conditions of such person's employment,
non-competition or non-disclosure agreement with such third party, (ii)
disclosed or may be disclosing or utilized or may be utilizing any Trade Secret
or Other Proprietary Information or documentation of such third party, or (iii)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which relates to such a claim. To the
Knowledge of the Company, (a) no person employed by or affiliated with the
Company in connection with and during the Company's ownership and operation of
its business has employed or proposes to employ any trade secret or any
information or documentation proprietary to any former employer and (b) no
person employed by or affiliated with the Company in connection with and during
the Company's ownership and operation of its business has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company, and to the Knowledge of the Company, there is no reason to
believe there will be any such employment or violation.
3.17 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) the Company is, in material compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its Assets;
(b) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a material
violation by the Company of, or failure on the part of the Company to comply
with, any Legal Requirement, or (B) may give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(c) the Company has not received any notice or other communication
(whether oral or written) from any Governmental or Regulatory Authority or any
other Person regarding (A) any actual, alleged, possible, or potential violation
of, or failure to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(d) Section 3.17(b) of the Company Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that is
27
necessary in the operation of the business of the Company. Each Governmental
Authorization listed or required to be listed in Section 3.17(b)of the Company
Disclosure Schedule is valid and is in full force and effect. Except as set
forth on Section 3.17(b) of the Company Disclosure Schedule:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Section 3.17(b) of the
Company Disclosure Schedule;
(ii) to the Knowledge of the Company, no event has occurred or
circumstance exists that may (with or without notice or lapse of time, other
than the periodic renewal of the Company's Permits in the Ordinary Course of
Business) (A) constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental Authorization
listed or required to be listed in Section 3.17(b) of the Company Disclosure
Schedule, or (B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any material and adverse
modification to, any Governmental Authorization listed or required to be listed
in Section 3.17(b) of the Company Disclosure Schedule;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental or Regulatory
Authority or any other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in Section
3.17(b) of the Company Disclosure Schedule have been duly filed on a timely
basis with the appropriate Governmental or Regulatory Authority, and all other
filings required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental or Regulatory Authority.
The Governmental Authorizations listed in Section 3.17(b) of the Company
Disclosure Schedule collectively constitute all of the Governmental
Authorizations necessary to permit the company to lawfully conduct and operate
its business in the manner it currently conducts and operates such business and
to permit the Company to own and use its assets in the manner in which it
currently owns and uses such assets.
3.18 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding:
(i) that has been commenced by or against the Company or, to the
Knowledge of the Company, that otherwise relates to or may affect the business
of, or any of the assets owned or used by the Company; or
28
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of the Company, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. The
Company has made available to Parent all pleadings, correspondence, and other
documents relating to each Proceeding listed in Section 18(a) of the Company
Disclosure Schedule. The Proceedings listed in Section 3.18(a) of the Company
Disclosure Schedule will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) There is no Order to which the Company, or any of the assets
owned or used by the Company, is subject.
(c) The Company is not subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company.
(d) To the Knowledge of the Company, no officer, director, agent, or
employee of the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(e) The Company is, and at all times has been, in full compliance
with all of the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject.
(f) No event has occurred or circumstance exists that reasonably
could be expected to constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the Company,
is subject.
(g) The Company has not received any notice or other communication
(whether oral or written) from any Governmental or Regulatory Authority or any
other Person regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
(h) Product Liability Claims. No product liability claims have been
communicated in writing to, or to the Company's Knowledge, Threatened against
the Company.
3.19 CONTRACTS.
(a) Section 3.19 of the Company Disclosure Schedule contains a true
and complete list of each of the following contracts, agreements or other
arrangements to which the Company is a party or by which any of its Assets and
Properties is bound and which is currently in effect (and, to the extent oral,
accurately describes the terms of such contracts, agreements and arrangements):
29
(i) all collective bargaining or similar labor agreements;
(ii) all contracts for the employment of any officer, employee or
other person or entity on a full time, part time, consulting or other basis;
(iii) all loan agreements, indentures, debentures, notes or
letters of credit relating to the borrowing of money or to mortgaging, pledging
or otherwise placing a lien on any material asset or material group of assets of
the Company;
(iv) each written warranty, guaranty, or other similar
undertaking with respect to contractual performance extended by the Company;
(v) all leases or agreements under which the Company is lessee
or lessor of, or holds, or operates, any property, real or personal, owned by
any other party;
(vi) all commitments, contracts, sales contracts, purchase
orders, mortgage agreements or groups of related agreements with the same party
or any group or affiliated parties which require or may in the future require
payment of consideration in an aggregate amount exceeding $50,000 by the
Company;
(vii) all license agreements, distribution agreements or any
other agreements involving any of the Company's Intellectual Property, including
agreements with current and former employees, consultants or contractors
regarding the appropriation or the non-disclosure of any Intellectual Property;
(viii) each joint venture partnership and other Contract (however
named) involving a sharing of profits, losses, costs or liabilities by the
Company with any other Person);
(ix) any Contract for payments to or by any Person by the Company
based on sales, purchases or profits, other than direct payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Contract entered into other than in the Ordinary Course
of Business that contains or provides for an express undertaking by the Company
to be responsible for consequential damages;
(xii) each Contract for capital expenditures in excess of
$50,000;
(xiii) all subscription or other agreements related to the equity
ownership of the Company;
(xiv) all contracts or commitments that in any way restrict the
Company from carrying on its business anywhere in the world;
(xv) all other contracts and agreements that (A) involve the
payment or potential payment in excess of $50,000, pursuant to the terms of any
such contract or agreement,
30
by the Company and (B) cannot be terminated within 30 days after giving notice
of termination without resulting in any cost or penalty to the Company;
(xvi) all contracts or commitments that in any way grants a third
party a right of first refusal for the purchase of the Company or any of its
Assets or Properties; and
(xvii) each material amendment, supplement, and modification
(whether oral or written) in respect to any of the foregoing.
(b) A correct and complete copy of each Contract material to the
Company's business and disclosed in the Company Disclosure Schedule has been
previously provided to Parent. Each contract, agreement or other arrangement
disclosed in the Company Disclosure Schedule is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance with
its terms, of the Company, and to the Knowledge of the Company, the other
parties thereto; and the Company has performed all of its required obligations
under, and is not in material violation or breach of or default under, any such
contract, agreement or arrangement. To the Knowledge of the Company, the other
parties to any such contract, agreement or arrangement are not in violation or
Breach of or default under any such contract, agreement or arrangement. To the
Knowledge of the Company, none of the present employees, officers, directors or
stockholders of the Company is a party to any oral or written contract or
agreement prohibiting any of them from freely competing with any parties or
engaging in the Company's business as now operated. To the Knowledge of the
Company, no event has occurred or circumstance exists that (with or without
notice or the lapse of time) may contravene, conflict with, or result in a
violation or Breach of, or give the Company or any other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, termination, or modify, any Contract to which the
Company is a party. The Company has not given to or received from any other
Person any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default under
any Contract. There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under any current or complete Contract with any Person and, to the
Knowledge of the Company, no such Person has made written demand for such
renegotiation. The Contracts relating to the sale, design, manufacture or
provisions of products or services of the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that would be in violation of any Legal Requirement.
3.20 ENVIRONMENTAL MATTERS.
(a) The Company is in material compliance with all applicable
"Environmental Laws" (as defined below) and there are no circumstances which may
materially prevent or interfere with such compliance in the future. The Company
has not received any communication (whether written or oral), whether from a
Governmental or Regulatory Authority, citizen group, employee or otherwise, that
alleges that the Company or any of the Assets or Properties used in the
Company's business is not in full compliance with Environmental Laws. All
material Permits, registrations and other governmental authorizations currently
held by the Company pursuant to Environmental Laws (collectively, "Environmental
31
Permits") are identified in Section 3.20(a) of the Company Disclosure Schedule
and represent all Permits necessary for the conduct of its business as currently
conducted. The Company has not been notified by any relevant Governmental or
Regulatory Authority that any Permit will be modified, suspended or revoked or
cannot be renewed in the Ordinary Course of Business, and, to the Knowledge of
the Company, no Permit will be modified, suspended or revoked, or cannot be
renewed in the Ordinary Course of Business of the Company.
(b) There is no "Environmental Notice" (as defined below) that is (i)
pending or, to the Knowledge of the Company, threatened against the Company or
(ii) to the Knowledge of the Company, pending or threatened against any Person
whose liability for such Environmental Notice may have been retained or assumed
by or could reasonably be imputed or attributed to the Company.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents arising from the operation, ownership or use of
any property currently or formerly owned, operated or used by the Company (or
any entity formerly an Affiliate of the Company), including, without limitation,
the release, emission, discharge or disposal of any "Material" (as defined
below) into the "Environment" (as defined below), that (i) could reasonably be
expected to result in the incurrence of costs under Environmental Laws or (ii)
could reasonably be expected to form the basis of any Environmental Notice
against or with respect to the Company or against any Person whose liability for
any Environmental Notice may have been retained or assumed by or could be
imputed or attributed to the Company.
(d) Without in any way limiting the generality of the foregoing, (i)
to the Knowledge of the Company, there are no underground storage tanks located
on property at any time owned, leased or used by the Company, (ii) to the
Knowledge of the Company, there is no asbestos contained in or forming part of
any building, building component, structure or office space owned, leased or
used by the Company, (iii) to the Knowledge of the Company, no polychlorinated
biphenyls (PCB's) are used or stored on any property owned, leased or used by
the Company and (iv) all locations currently or formerly owned, leased or used
by the Company (or any former Affiliate of the Company) at which any Material
generated, used, owned or controlled by the Company or any former Affiliate of
the Company may have been disposed of or released into the Environment are
identified and described in Section 3.20(d) of the Company Disclosure Schedule.
(e) For purposes of this Section 3.20:
(i) "Environment" means any surface water, ground water,
drinking water supply, land surface or subsurface strata, ambient air and any
indoor workplace.
(ii) "Environmental Notice" means any written notice by any
Person alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental costs, harm or
damages to person, property, natural resources or other fines or penalties)
arising out of, based on or resulting from (a) the emission, discharge,
disposal, release or threatened release in or into the Environment of any
Material or (b) circumstances forming the basis of any violation, or alleged
violation, of any applicable Environmental Law.
32
(iii) "Environmental Laws" means all national, state, local and
foreign laws, codes, regulations, common law, requirements, directives, Orders,
and administrative or judicial interpretations thereof, all as in effect on the
date hereof or on the Effective Date, that may be enforced by any Governmental
or Regulatory Authority, relating to pollution, the protection of the
Environment or the emission, discharge, disposal, release or threatened release
of Materials in or into the Environment.
(iv) "Material" means pollutants, contaminants or chemical,
industrial, hazardous or toxic materials or wastes, including, without
limitation, petroleum and petroleum products.
3.21 INVENTORY. The inventory of the Company is in good and merchantable
condition, and is suitable and usable at its carrying value in the Ordinary
Course of Business for the purposes for which intended. To the Knowledge of the
Company, there is no material adverse condition affecting the supply of
materials available to the Company. All inventories used in or relating to the
conduct of the Company's business are owned by the Company free and clear of any
Encumbrances. All inventories not written off have been priced at the lower of
cost or market net realizable value basis. The quantities of each item of
inventory (whether raw materials, work-in-process or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.22 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the December 31, 2001 Company Financial Statements or the
accounting records of the Company as of the Effective Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. Unless paid prior to the Effective Date, the Accounts Receivable
are or will be as of the Effective Date current and collectible, net of the
respective reserves shown on the December 31, 2001 Company Financial Statements
or on the accounting records of the Company as of the Effective Date (which
reserves are adequate and calculated consistent with past practice and, in the
case of the reserve as of the Effective Date, will not represent a greater
percentage of the Accounts Receivable as of the Effective Date than the reserve
reflected in the December 31, 2001 Company Financial Statements and will not
represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within 90 days after the date on which it first becomes due and payable. There
is no contest, claim, or right of set-off, other than returns in the Ordinary
Course of Business under any contract with any obligor of Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Section 3.22 of
the Company Disclosure Schedule contains a complete and accurate list of all
Accounts Receivable as of December 31, 2001, which lists sets forth the aging of
such Accounts Receivable.
3.23 EQUIPMENT. All tangible personal property and equipment used by the
Company in the conduct of its business are structurally sound with no known
material defects and are in good operating condition and repair (subject to
normal wear and tear) so as to permit the operation of its business as presently
conducted, (ii) no such equipment or tangible personal property is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs, and
(iii) with respect to each item of equipment and tangible personal property, the
33
Company has not received notification that it is in violation, in any material
respect, of any applicable building, zoning, subdivision, fire protection,
health or other law, Order, ordinance or regulation and, to the Knowledge of the
Company, no such violation exists.
3.24 INSURANCE. Set forth in Section 3.24 of the Company Disclosure
Schedule is a complete and accurate list of all primary, excess and umbrella
policies, bonds and other forms of insurance currently owned or held by or on
behalf of and/or providing insurance coverage to the Company or the Assets and
Properties of the Company (or any of the Company's directors, officers,
salespersons, agents or employees), including the following information for each
such policy: type(s) of insurance coverage provided; name of insurer; effective
dates; policy number; per occurrence and annual aggregate deductibles or
self-insured retentions; per occurrence and annual aggregate limits of liability
and the extent, if any, to which the limits of liability have been exhausted.
All policies set forth on the Company Disclosure Schedule are in full force and
effect, and with respect to such policies, all premiums currently payable or
previously due have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. All such policies are sufficient
for compliance with all requirements of law and all agreements to which the
Company is a party or otherwise bound, and are, subject to their respective
terms and conditions, valid, outstanding, collectible and enforceable policies
and, to the Knowledge of the Company, provide adequate insurance coverage for
the Company and the business and Assets and Properties of the Company and will
remain in full force and effect through the respective dates set forth in the
Company Disclosure Schedule. None of such policies contains a provision that
would permit the termination, limitation, lapse, exclusion or change in the
terms of coverage of such policy (including, without limitation, a change in the
limits of liability) by reason of the consummation of the transactions
contemplated by this Agreement. Complete and accurate copies of all such
policies and related documentation have previously been made available to the
Parent.
3.25 TAX MATTERS.
(a) The Company has filed on a timely basis all Tax Returns that it
was required to file, and all such Tax Returns were complete and accurate in all
material respects. The Company is not and has never been a member of a group of
corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Company has paid on a timely basis all
Taxes that were due and payable. The unpaid Taxes of the Company for tax periods
and portions of periods through January 31, 2002 do not exceed the accruals and
reserves for Taxes (excluding accruals and reserves for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the Interim Financial Statements. The Company has no actual or potential
liability for any Tax obligation of any other taxpayer (including any affiliated
group of corporations or other entities that included the Company during a prior
period). All Taxes that the Company is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental or Regulatory Authority.
(b) The Company has delivered to Parent complete and accurate copies
of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company. The federal income
Tax Returns of the Company have not been audited by the Internal Revenue Service
and are not closed by the applicable statute of
34
limitations for any taxable years. The Company has delivered or made available
to Parent complete and accurate copies of all other Tax Returns of the Company,
together with all related examination reports and statements of deficiency for
all periods from and after incorporation. No examination or audit of any Tax
Return of the Company by any Governmental or Regulatory Authority is currently
in progress or, to the Knowledge of the Company, threatened or contemplated. The
Company has not been informed by any jurisdiction that the jurisdiction believes
that the Company was required to file any Tax Return that was not filed. The
Company has not waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency,
which waiver or extension is still in effect.
(c) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Code, and none of its assets is subject to an election
under Section 341(f) of the Code. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
The Company has not made any payments, is not obligated to make any payments,
and is not a party to any agreement that could obligate it to make any payments
as a result of the Merger that may be treated as an "excess parachute payment"
under Section 280G of the Code. The Company has no actual or potential liability
for any Taxes of any person (other than the Company) under Treasury Regulation
Section 1.1502-6 (or any similar provision of federal, state, local, or foreign
law), or as a transferee or successor, by contract, or otherwise.
(d) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (iii) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(e) The Company has not undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481 of the Code.
3.26 LABOR AND EMPLOYMENT RELATIONS. To the Knowledge of the Company, no
officer, executive or group of five or more employees of the Company has or have
any plans to terminate his, her or their employment with the Company. The
Company is not a party to or bound by any collective bargaining agreement with
any labor organization, group or association covering any of its employees, and
to the Knowledge of the Company, there are no attempts to organize any of the
Company's employees by any person, unit or group seeking to act as their
bargaining agent. The Company has materially complied with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining, discrimination against
race, color, national origin, religious creed, physical or mental disability,
sex, age, ancestry, medical condition, marital status or sexual orientation,
occupational health and safety and the withholding and payment of social
security and other Taxes. The Company is not liable for the payment of any
compensation, damages, Taxes, fines, penalties or other amounts, however
designated, for the failure to comply with any of the foregoing Legal
Requirements. To the Company's Knowledge, no employees of the Company are in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement, or any restrictive covenant to a former employer
relating to any such
35
employee to be employed by the Company because of the nature of the business
conducted or presently proposed to be conducted by the Company or the use of
trade secrets or proprietary information of others. All officers, sales and
technical employees and consultants of the Company have signed a proprietary
rights and confidentiality agreement substantially in the form set forth in
Section 3.26 of the Company Disclosure Schedule. There are no pending or, to the
Knowledge of the Company, threatened charges (by employees, their
representatives or governmental authorities) of unfair labor practices or of
employment discrimination or of any other wrongful action with respect to any
aspect of employment of any person employed or formerly employed by the Company.
To the Knowledge of the Company, no union representation elections relating to
the Company's employees have been scheduled by any Governmental or Regulatory
Authority, no organizational effort is being made with respect to any of such
employees, and no investigation of the Company's employment policies or
practices by any Governmental or Regulatory Authority pending or threatened. The
Company is not currently, and in the past has not been, involved in labor
negotiations with any unit or group seeking to become the bargaining unit for
any employees of the Company. The Company has never experienced any work
stoppages and to the Knowledge of the Company, no work stoppage has been
threatened or is planned.
3.27 CERTAIN EMPLOYEES.
(a) Set forth in Section 3.27 of the Company Disclosure Schedule is a
list of the names of the Company's employees and consultants as of the date
hereof involved in the management and operation of the Company's business,
together with the title or job classification of each such person and the total
compensation (with wages and bonuses, if any, separately detailed) paid in 2001
(if applicable) and the current rate of pay for each such person on the date of
this Agreement. None of such persons has an employment agreement or
understanding, whether oral or written, with the Company which is not terminable
on notice by the Company without cost or other liability to the Company.
(b) The Company has delivered to Parent true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of the Company providing for annual compensation in excess of
$100,000, (ii) all severance plans, agreements, programs and policies of the
Company with or relating to its employees, directors or consultants, and (iii)
all plans, programs, agreements and other arrangements of the Company with or
relating to its employees, directors or consultants which contain "change of
control" provisions. No payment or benefit which may be required to be made by
the Company or which otherwise may be required to be made under the terms of any
Company Benefit Plan or other arrangement will constitute a parachute payment
under Code Section 280G, and the consummation of the transactions contemplated
by this Agreement will not, alone or in conjunction with any other possible
event (including termination of employment), (i) entitle any current or former
employee or other service provider of Company to severance benefits or any other
payment, compensation benefit (including forgiveness of indebtedness), except as
expressly provided by this Agreement or the Contemplated Transactions, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation or benefit due any such employee or service provider, alone or in
conjunction with any other possible event (including termination of employment).
36
3.28 ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 2001, the Company
has not:
(a) issued any stock, bonds or other corporate securities or any
right, options or warrants with respect thereto;
(b) borrowed any amount, obtained any letters of credit or incurred
or become subject to any liabilities in excess of $25,000 in the aggregate;
(c) discharged or satisfied any lien or Encumbrance or paid any
obligation or liability, other than current liabilities paid in the Ordinary
Course of Business and other than current federal income Tax liabilities;
(d) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed any
shares of its capital stock;
(e) mortgaged or pledged any of its Assets or Properties, or
subjected them to any lien, charge or any other Encumbrance, except liens for
current property Taxes not yet due and payable;
(f) sold, leased, subleased, assigned or transferred any of its
Assets or Properties, except in the Ordinary Course of Business, or cancelled
any debts or claims;
(g) made any changes in any employee compensation, severance or
termination agreement, commitment or transaction other than routine salary
increases consistent with past practice or offer employment to any individuals;
(h) entered into any material transaction, or modified any existing
transaction (the aggregate consideration for which is in excess of $50,000);
(i) suffered any damage, destruction or casualty loss, whether or not
covered by insurance;
(j) made any capital expenditures, additions or improvements or
commitments for the same, except those made in the Ordinary Course of Business
which in the aggregate do not exceed $50,000;
(k) entered into any transaction or operated the Company's business,
not in the Ordinary Course of Business;
(l) made any change in its accounting methods or practices or ceased
making accruals for Taxes, obsolete inventory, vacation and other customary
accruals;
(m) ceased from reserving cash to pay Taxes, principal and interest
on borrowed funds, and other customary expenses and payments;
(n) caused to be made any reevaluation of any of its Assets or
Properties;
37
(o) caused to be entered into any amendment or termination of any
lease, customer or supplier contract or other material contract or agreement to
which it is a party, other than in the Ordinary Course of Business;
(p) made any material change in any of its business policies,
including, without limitation, advertising, distributing, marketing, pricing,
purchasing, personnel, sales, returns, budget or product acquisition or sale
policies;
(q) terminated or failed to renew, or received any written threat
(that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the Company's business or
its financial condition;
(r) permitted to occur or be made any other event or condition of any
character which has had a Material Adverse Effect on it;
(s) waived any rights material to its financial or business
condition;
(t) made any illegal payment or rebates; or
(u) entered into any agreement to do any of the foregoing.
3.29 CUSTOMERS AND SUPPLIERS. The Company has made available to Parent a
true and correct list of the Company's current customers and the Company's
customers during the 1999 and 2000 fiscal years related to the Company business.
Since January 1, 2001, no single customer or group of affiliated customers
contributing more than $50,000 per annum to the gross revenues of the Company's
business has stopped doing business with the Company, and no such customer has
given notice to the Company of an intention to discontinue doing business or
reduce the level of gross revenues from that in fiscal year 2001 with the
Company. The Company has not received any notice or has any reason to believe
that any significant supplier will not sell raw materials, supplies, merchandise
and other goods to the Company at any time after the Effective Date on terms and
conditions substantially similar to those used in its current sales to the
Company, subject only to general and customary price increases, unless
comparable raw materials, supplies, merchandise or other goods are readily
available from other sources on comparable terms and conditions.
3.30 NECESSARY PROPERTY. All of the Real Property and Assets and Properties
owned or leased by the Company and the Intellectual Property listed on the
Company Disclosure Schedule owned by or licensed to the Company constitute all
of the property reasonably necessary for the conduct of the Company's business
in the manner and to the extent presently conducted by the Company.
3.31 BANK ACCOUNTS. Section 3.31 of the Company Disclosure Schedule
contains a complete and accurate list of each deposit account or asset
maintained by or on behalf of the Company with any bank, brokerage house or
other financial institution, specifying with respect to each the name and
address of the institution, the name under which the account is maintained, the
account number, and the name and title or capacity of each Person authorized to
have access thereto.
38
3.32 PERMITS. Section 3.32 of the Company Disclosure Schedule contains a
true and complete list of all Permits used in and material, individually or in
the aggregate, to the Company's business. All such Permits are currently
effective and valid and have been validly issued. No additional Permits are
necessary to enable the Company to conduct its business, as it is currently
conducted, in material compliance with all applicable federal, state and local
laws. Neither the execution nor the delivery or performance of this Agreement
will have any effect on the continued validity or sufficiency of the Permits,
nor will any additional Permits be required by virtue of the execution, delivery
or performance of this Agreement to enable the Company to conduct its business
as now operated. To the Knowledge of the Company, there is no pending Action or
Proceeding by any Governmental or Regulatory Authority which could affect the
Permits or their sufficiency for the current conduct of the Company's business
or of the conduct of the Company's business after the Closing. The Company has
provided Parent with true and complete copies of all Permits listed in the
Company Disclosure Schedule.
3.33 REGULATORY COMPLIANCE.
(a) The Company has timely filed or otherwise provided all
registrations, reports, data, and other information and applications with
respect to its medical device, pharmaceutical, consumer, health care, and other
governmentally regulated Products (the "Regulated Products") required to be
filed with or otherwise provided to the FDA or any other Governmental or
Regulatory Authority with jurisdiction over the manufacture, use, or sale of the
Regulated Products, has materially complied with all applicable requirements of
the FDA or other Governmental or Regulatory Authority with respect to the
Regulated Products (including but not limited to the Federal Food, Drug, and
Cosmetic Act, the Medicare Anti-Kickback Statute, the Health Insurance
Portability and Accountability Act, the Federal False Claims Act, the Federal
laws concerning physician self-referral known as "Xxxxx I" and "Xxxxx II", and
the rules and regulations of the Joint Commission on Accreditation of Healthcare
Organizations), and all regulatory licenses or approvals in respect thereof are
in full force and effect. All documentation, correspondence, reports, data,
analyses and certifications relating to or regarding any medical devices of the
Company filed with or delivered by or on behalf of the Company to any
Governmental or Regulatory Authority was in all material respects true and
accurate when so filed or delivered and, to the Knowledge of the Company,
remains true and accurate. Each Regulated Product is being manufactured, tested,
distributed and marketed in material compliance with all Legal Requirements,
including but not limited to those relating to investigational use, premarket
clearance, good manufacturing practices, good laboratory practices, labeling,
advertising, record keeping, filing of reports and security. The Company hereby
covenants and agrees to comply at all times with all applicable laws, rules and
regulations of all governmental authorities.
(b) All or substantially all of the Company's products are Regulated
Product manufactured, marketed, distributed, sold or licensed by or on behalf of
the Company as of the date of this Agreement.
(c) Since November 20, 1998, no Regulated Products have ever been
recalled, withdrawn, suspended or discontinued by the Company (whether
voluntarily or otherwise). No proceedings (whether completed or pending) seeking
the recall, withdrawal, suspension or
39
seizure of any Regulated Product are pending or, to the Knowledge of the
Company, threatened against the Company, nor have any such proceedings ever been
instituted.
(d) Neither the Company, nor to the Company's Knowledge, any officer,
employee or agent of the Company has made an untrue statement of a material fact
or fraudulent statement to the FDA or any other Governmental or Regulatory
Authority, failed to disclose a material fact required to be disclosed to the
FDA or other Governmental or Regulatory Authority, or committed an act, made a
statement, or failed to make a statement that, at the time such disclosure was
made, could reasonably be expected to provide a basis for the FDA or any other
Governmental or Regulatory Authority to invoke its policies respecting fraud,
untrue statements of material facts, bribery or illegal gratuities or any
similar policies.
(e) The Company has not received any written notice that the FDA or
any other Governmental or Regulatory Authority has commenced, or threatened to
initiate, any action to withdraw its approval or request the recall of any
Regulated Product, or commenced, or overtly threatened to initiate, any action
to enjoin production of any Regulated Product.
3.34 THIRD PARTY CONSENTS. No consent, approval or authorization of any
third party on the part of the Company is required in connection with the
consummation of the transactions contemplated hereunder.
3.35 RELATIONSHIPS WITH RELATED PERSONS. No Related Person of the Company
has or since November 20, 1998 has had, any interest in the property, whether
real, personal or mixed, or whether tangible or intangible, used in or
pertaining to the Company's businesses. No Related Person of the Company owns,
or since November 20, 1998 has owned (of record or as beneficial owner) an
equity interest or any other financial or profit interest in a Person that has
(i) had business dealings or a material financial interest in any transaction
with the Company or (ii) engaged in competition with the Company with respect to
any line of the products or services of the Company. No Related Person of the
Company is a party to any Contract with the Company material to the Company's
business or has any material right or claim against the Company.
3.36 CERTAIN PAYMENTS. Since November 20, 1998, neither the Company nor any
director, officer, agent or employee of the Company, or to the Company's
Knowledge, any other Person associated with or acting for or on behalf of the
Company, has directly or indirectly (i) made any contribution, gift, bribe,
rebate, payoff, influence payment, kick-back or other payment to any Person,
private or public, regardless of any form, whether in money, property or
services in violation of any Legal Requirement or (ii) established or maintained
any fund or asset that has not been recorded in the Books and Records of the
Company (excluding, in each case, employment agreements or customary
indemnification arrangements).
3.37 BROKERS. Except as set forth in Section 3.37 of the Company Disclosure
Schedule, neither the Principal Stockholders, the Company nor an Affiliate of
the Company have retained any broker, finder, investment banker or Person acting
in a similar capacity in connection with the transactions contemplated
hereunder. Parent has, and will have, no obligation to pay any broker's,
finder's, investment banker's, financial advisor's or similar fee in connection
with this Agreement or the transactions contemplated hereby by reason of any
action
40
taken by or on behalf of the Principal Stockholders, the Company or an Affiliate
of the Company.
3.38 MATERIAL MISSTATEMENTS AND OMISSIONS. The statements, representations
and warranties of the Company contained in this Agreement (including the
exhibits and schedules hereto) and in each document, statement, certificate or
exhibit furnished or to be furnished by or on behalf of the Company pursuant
hereto, or in connection with the transactions contemplated hereby, taken
together, do not contain and will not contain any untrue statement of a material
fact and do not or will not omit to state a material fact necessary to make the
statements or facts contained herein or therein, in light of the circumstances
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION CO.
Parent and Acquisition Co., jointly and severally, represent and warrant to
the Company as of the Effective Date, as follows:
4.1 ORGANIZATION. Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of the Delaware. Acquisition
Co. is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware. Each of Parent and Acquisition Co. is
duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required except for any
jurisdiction where failure so to qualify would not have a Material Adverse
Effect upon Parent or Acquisition Co., as the case may be.
4.2 AUTHORITY. Each of Parent and Acquisition Co. has all necessary
corporate power and corporate authority and has taken all corporate actions
necessary to enter into this Agreement and each agreement included in the
Contemplated Transactions, to consummate the transactions contemplated hereby
and the Contemplated Transactions and to perform its respective obligations
hereunder and thereunder and no other proceedings on the part of Parent or
Acquisition Co. are necessary to authorize this Agreement or each agreement
included in the Contemplated Transactions or to consummate the transactions
contemplated hereby or thereby. This Agreement and each agreement included in
the Contemplated Transactions has been duly and validly executed and delivered
by each of Parent and Acquisition Co. and constitutes a legal, valid and binding
obligation of Parent and Acquisition Co., respectively, enforceable against each
of Parent and Acquisition Co. 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.
4.3 LITIGATION. There are no Actions or Proceedings pending or, to the
Knowledge of Parent or Acquisition Co., threatened or anticipated against,
relating to or affecting the transactions contemplated by this Agreement or any
agreement included in the Contemplated Transactions, and, to the Knowledge of
Parent or Acquisition Co., there is no basis for any such Action or Proceeding.
41
4.4 REPORTS AND FINANCIAL STATEMENTS. As of the date hereof, the Parent
has furnished or made available to the Company true and complete copies of all
Parent SEC Documents. As of their respective filing dates, all such Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act, the Exchange Act and the rules and regulations of the NNM, as
the case may be, and none of such Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a document subsequently filed with the SEC or NNM. The Parent
Financial Statements comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
and NNM with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and of the
Parent at the dates thereof and the present fairly the consolidated financial
position consolidated results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal audit
adjustments). As of the date hereof, there has been no change in the Parent
accounting policies except as described in the notes to Parent Financial
Statements.
4.5 BROKERS. Neither Parent nor Acquisition Co. has retained any broker in
connection with the transactions contemplated hereunder. Neither the Company nor
any Affiliate of the Company has, or will have, any obligation to pay any
broker's, finder's investment banker's, financial advisor's or similar fee in
connection with this Agreement or the transactions contemplated hereby by reason
of any action taken by or on behalf of Parent or Acquisition Co.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PRINCIPAL STOCKHOLDERS
Each Principal Stockholder hereby represents, warrants and covenants to
Parent and Acquisition Co. as of the Effective Date and as of the Closing Date
as to itself or himself as follows (such representations and warranties do not
lessen or obviate the representations and warranties of the Company set forth in
Article III above):
5.1 REQUISITE POWER AND AUTHORITY. Such Principal Stockholder has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and to carry out its provisions. All action on such
Principal Stockholder's part required for the lawful execution and delivery of
this Agreement has been or will be effectively taken prior to the Closing. Upon
execution and delivery, this Agreement will be the valid and binding obligation
of such Principal Stockholder, enforceable in accordance with its terms.
5.2 OWNERSHIP OF SHARES. Each Principal Stockholder owns beneficially and
of record that number of shares of Company Shares listed opposite such
stockholder's name in Section 3.2(a) of the Company Disclosure Schedule, free
and clear of all Encumbrances, and has good and valid title to such shares. Each
Principal Stockholder holding shares of the Company Convertible Securities owns
beneficially and of record that number of shares of the Company Convertible
Securities or purchase rights listed opposite such holder's name in Section
3.2(b) of
42
the Company Disclosure Schedule, free and clear of all Encumbrances, and has
good and valid title to such securities. The delivery of the stock
certificate(s) representing the Company Shares and any shares of capital stock
resulting from the conversion of any Company Convertible Securities owned by
such Principal Stockholder in the manner provided in Section 2.8 will terminate
all rights of such Principal Stockholder in such Company Shares owned by such
Principal Stockholder. Such Principal Stockholder is entitled to receive only a
portion of the Merger Consideration which is set forth next to such Principal
Stockholder's name on Schedule 2.
5.3 INVESTMENT REPRESENTATIONS. Such Principal Stockholder understands
that the shares of the Parent Common Stock have not been registered under the
Securities Act. Such Principal Stockholder also understands that the shares of
Parent Common Stock are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon such Principal
Stockholder's representations and warranties contained in this Agreement. Such
Principal Stockholder hereby represents and warrants as follows:
(a) Such Principal Stockholder is an "accredited investor" as defined
in Rule 501(a) of the Securities Act.
(b) Such Principal Stockholder has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to Parent so that he or it is capable of evaluating the merits
and risks of his or its investment in Parent and has the capacity to protect his
or its own interests. Such Principal Stockholder understands that he or it must
bear the economic risk of such investment and hold such investment indefinitely
unless the shares of Parent Common Stock are registered pursuant to the
Securities Act, or an exemption from registration is available. Such Principal
Stockholder also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow such Principal Stockholder to transfer
all or any portion of the shares of Parent Common Stock under the circumstances,
in the amounts or at the times such Principal Stockholder might propose.
(c) Such Principal Stockholder is acquiring the shares of Parent
Common Stock for such Principal Stockholder's own account for investment only,
and not with a view towards their distribution.
(d) Such Principal Stockholder represents that by reason of his or
its business or financial experience, such Principal Stockholder has the
capacity to protect his or its own interests in connection with the transactions
contemplated in this Agreement.
(e) Such Principal Stockholder has received and read the Confidential
Memorandum and Consent Solicitation (including Parent SEC Documents) and has had
an opportunity to discuss Parent's business, management and financial affairs
with the directors, officers and management of Parent and has had the
opportunity to review Parent's operations and facilities. Such Principal
Stockholder has also had the opportunity to ask questions of and receive answers
from Parent and its management regarding the terms and conditions of his or its
investment in Parent.
43
(f) Such Principal Stockholder has been advised or is aware of the
provisions of Rules 144 and 145 promulgated under the Securities Act as in
effect from time to time, which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the availability of certain current public information about
Parent, the resale occurring not less than one year after a party has purchased
and paid for the security to be sold, the sale being through an unsolicited
"broker's transaction" or in transactions directly with a market (as said term
is defined under the Exchange Act) and the number of shares being sold during
any three month period not exceeding specified limitations.
(g) Such Principal Stockholder resides or has its principal place of
business in the state identified in the address of such Principal Stockholder
set forth on the signature page to this Agreement.
5.4 TRANSFER RESTRICTIONS. Such Principal Stockholder acknowledges and
agrees that the shares of Parent Common Stock are subject to restrictions on
transfer set forth in this Section 5.4. Such Principal Stockholder agrees not to
make any disposition of all or any portion of the shares of Parent Common Stock
unless and until: (i) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or (ii) the transferee (except
for transfers in compliance with Rule 144) has agreed in writing to be bound by
the terms of this Agreement, such Principal Stockholder shall have notified
Parent of the proposed disposition and shall have furnished Parent with a
detailed statement of the circumstances surrounding the proposed disposition and
if reasonably requested by Parent, such Principal Stockholder shall have
furnished Parent with an opinion of counsel, reasonably satisfactory to Parent,
that such disposition will not require registration of such shares under the
Securities Act. Notwithstanding the provisions of clauses (i) and (ii) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by such Principal Stockholder to a Family Member of such Principal
Stockholder or trust for the benefit of such Principal Stockholder or a Family
Member or to such Principal Stockholder's partners or members or other
beneficial owners; provided, however, that in each case the transferee will be
subject to the terms of this Agreement to the same extent as if he, she or it
were an original Principal Stockholder hereunder.
5.5 NOTIFICATION OF CHANGE. Such Principal Stockholder hereby agrees to
immediately notify Parent if any of the representations and warranties made by
such Principal Stockholder in this Article V are changed or altered prior to the
Effective Time.
5.6 PROXY. Such Principal Stockholder hereby agrees that he or it will
take no action to challenge the validity, force or effect of the Proxy delivered
by such Principal Stockholder.
ARTICLE VI
COVENANTS
6.1 PROXY; ELECTION OF DIRECTORS. Pursuant to the terms of the Proxy,
each of the Principal Stockholders will grant to Parent an irrevocable proxy
giving Parent or its designee the right to control the business and affairs of
the Company on or subsequent to the Effective Date, including, without
limitation, election of all directors of the Company, in Parent's sole an
absolute discretion, subject solely to the terms of this Agreement. Parent
agrees to direct the
44
directors and officers of the Company to use reasonable and diligent efforts to
satisfy the covenants contained in this Article VI on a timely basis.
6.2 NO SOLICITATION OR NEGOTIATION. Between the date hereof and the
earlier of the termination of this Agreement and March 31, 2002, the Company
will not (nor will the Company permit any of the Company's officers, directors,
employees, agents, representatives or affiliates to) directly or indirectly,
take any of the following actions with any person other than Parent and
Acquisition Co.: (i) solicit, initiate, entertain or encourage any proposals or
offers from, or conduct discussions with or engage in negotiations with any
person relating to any possible acquisition of the Company or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its or their capital stock or
assets or any equity interest in the Company; (ii) provide information with
respect to it or any of its subsidiaries to any person, other than Parent and
Acquisition Co., relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any portion of its or their capital stock or
assets or any equity interest in the Company; or (iii) enter into any agreement
with any person providing for the possible acquisition of the Company or any of
its subsidiaries (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise), any portion of its or their capital stock or assets or
any equity interest in the Company. In addition, the Company also agrees that,
unless and until this Agreement is terminated in accordance with its terms, it
will not commence, be involved in, or take any actions in furtherance of, the
process of becoming a public company through an initial public offering.
6.3 PUBLIC ANNOUNCEMENTS; COMPANY LITERATURE. None of Parent,
Acquisition Co. or the Company shall issue any press release or otherwise make
any public statements with respect to the transactions contemplated by this
Agreement, including the Merger, without the prior consent of Parent and
Acquisition Co. (in the case of the Company) or the Company (in the case of
Parent or Acquisition Co.), except as may be required by applicable law,
including any determination by Parent that a press release or other public
statement is required under applicable securities or regulatory rules. If any
party determines, with the advice of counsel, that it is required by applicable
law to make this Agreement or any terms thereof public, it shall consult with
the other parties regarding such disclosure and seek confidential treatment for
such terms or portions of this Agreement as may be requested by the other
parties. The parties agree there shall be no public announcement of this
Agreement or the consummation of the Merger except as may be required by
applicable law. The parties agree to announce this Agreement or the consummation
of the Merger to the Company's employees, customers, vendors and strategic
partners at such time and in such form as is mutually agreed upon by all parties
to this Agreement.
6.4 FEES AND EXPENSES. Whether or not the Merger is consummated, all
fees, costs and expenses incurred in connection with the Merger, this Agreement
and the other agreements and transactions contemplated hereby and thereby,
including all legal, accounting, financial advisory, broker's consulting and
other fees and expenses of third parties incurred by a party in connection with
the negotiation, documentation and effectuation of the terms and conditions of
the Merger, this Agreement and the other agreements and transactions
contemplated hereby and
45
thereby ("Third Party Expenses"), shall be the obligation of the respective
party incurring such Third Party Expenses.
6.5 CONFIDENTIALITY. The parties hereto will maintain in confidence, and
will its directors, officers, employees, agents, Affiliates and advisors to
maintain in confidence any written, oral or other information furnished by
another party to this Agreement in connection with the transactions contemplated
by this Agreement, unless (a) such information is already known to such party or
to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party , (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the transactions
contemplated by this Agreement, or (c) the furnishing or use of such information
is required by law. If the Merger is not consummated, each party will return or,
at the request of the party supplying the information, destroy as much of such
written information as the other party may reasonably request.
6.6 STOCK OPTIONS.
(a) Immediately following the Effective Date, the Company shall give
notice to each holder of Company 1999 Options that (i) such options will not be
assumed by Parent, (ii) all such 1999 Options shall be immediately exercisable
in full, and (iii) such 1999 Options shall terminate as of the Effective Time to
the extent they have not been exercised prior to the Effective Time.
(b) At the Effective Time, each Company 2001 Option will be assumed
by Parent. Each Company 2001 Option so assumed by Parent under this Agreement
shall continue to have, and be subject to, the same terms and conditions set
forth in the Company 2001 Option Plan immediately prior to the Effective Time,
except that (i) such Company 2001 Option shall be exercisable (when vested) for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company 2001 Option immediately prior to the Effective Time multiplied by
0.12852, rounded to the nearest whole number of share of Parent Common Stock,
and (ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company 2001 Option shall be equal to the
exercise price that Parent and the Company agree is required to maintain the
incentive stock option qualification of all applicable Company Stock Options,
rounded down to the nearest whole cent. The terms and conditions of the Company
2001 Options so assumed by Parent under this Agreement are set forth in the
Option Assumption Agreement in the form of Exhibit P attached hereto (the
"Option Assumption Agreement"). Section 3.2(b) of the Company Disclosure
Schedule sets forth the number of shares for which each Company 2001 Option is
exercisable and the per share exercise price for each Company 2001 Option.
(c) The Company shall use its best effects to deliver or cause to be
delivered to Parent and/or Acquisition Co., as the case may be, on or before the
Effective Time, the Option Assumption Agreement duly executed by each holder of
Company 2001 Options.
(d) On the Effective Date, the Company shall give notice to each
holder of Company 1997 Options that such options will not be assumed by Parent.
On or prior to the
46
Effective Time, the Company shall obtain option termination agreements duly
executed by each holder of outstanding Company 1997 Options, in the form
attached hereto as Exhibit Q (the "Option Termination Agreement"), and shall
deliver or cause to be delivered to Parent such duly executed Option Termination
Agreements.
(e) It is the intention of the parties that the Company 2001 Options
assumed by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent the Company 2001
Options qualified as incentive stock options immediately prior to the Effective
Time. Thus, the following three conditions must be satisfied: (i) the excess of
the aggregate fair market value of the shares of Parent Common Stock (that are
subject to the Company 2001 Option) immediately after the Effective Time over
the aggregate exercise price of such shares must not exceed the excess of the
aggregate fair market value of all Company Shares that were subject to the
Company 2001 Option immediately before the Effective Time over the aggregate
exercise price of such shares, (ii) the assumed Company 2001 Option must not
give the employee additional benefits which the employee did not have under the
Company 2001 Option, and (iii) the ratio of the exercise price to the fair
market value of the Parent Common Stock subject to the Assumed Option
immediately after the Effective Time must not be more favorable to the optionee
than the ratio of the exercise price to the fair market value of the Company
Shares subject to the Company 2001 Option before the Effective Time.
(f) The Company shall deliver or cause to be delivered to Parent, on
or before the Effective Time, stock option agreements evidencing the grant of
the Company 2001 Options, duly executed by the Company and each holder of
Company 2001 Options, in the same form as previously provided by the Company to
Parent.
(g) As soon as practicable after the Closing Date, Parent shall file
a Registration Statement on Form S-8 (or any successor form) under the
Securities Act with respect to all shares of Parent Common Stock subject to such
Company 2001 Options that may be registered on a Form S-8, and shall use its
reasonable efforts to maintain the effectiveness of such Registration Statement
for so long as such Company 2001 Options remain outstanding.
6.7 ARGOMED AGREEMENT. The Company shall use its best efforts to comply
with the provisions of Section 10.2 of that certain Distribution Agreement
between the Company and Argomed, Inc. dated May 1, 2001 (the "Argomed
Distribution Agreement"), including without limitation the delivery on the
Effective Date of written notice to Argomed, Inc. of the Company's intent to
assign the Argomed Distribution Agreement pursuant to the terms of this
Agreement.
6.8 CONSENTS. The Company shall obtain, on or prior to the Effective
Time, the consents specified on Section 3.34 of the Company Disclosure Schedule
and any other material third party consents necessary to consummate the
transactions contemplated hereby.
6.9 TAIL POLICY. Prior to the Effective Time, the Company shall purchase
a "tail" directors and officers insurance policy covering a three year period
following the Effective Time on the same terms and conditions as the Company's
existing coverage (unless Parent's directors and officers insurance policy
provides equal or better coverage to the Company's directors and
47
officers, in which case Parent shall maintain such equal or better coverage for
a period of three years following the Effective Time).
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following condition:
no statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or enforced by any United States
federal or state court or United States federal or state Governmental or
Regulatory Authority that prohibits, restrains, enjoins or restricts the
consummation of the Merger and any such applicable order, decree, ruling or
other action shall have become final or non-appealable.
ARTICLE VIII
TERMINATION
8.1 TERMINATION. (a) This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time by Parent or Acquisition
Co. or the Stockholder Representatives if the condition set forth in Section 7.1
is not satisfied.
8.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1 above, no party to this
Agreement shall have any liability to any other liability as a result of such
termination.
ARTICLE IX
STOCKHOLDER REPRESENTATIVES
By virtue of the execution of this Agreement, each of the Company and
the Principal Stockholders agree:
9.1 AUTHORIZATION OF THE STOCKHOLDER REPRESENTATIVES. The Stockholder
Representatives (and each successor appointed in accordance with Section 9.3
below) hereby are appointed, authorized and empowered to act, by decision of
both of the Stockholder Representatives, as the Stockholder Representatives, on
behalf of the Company Stockholders, in connection with and to facilitate the
consummation of the transactions contemplated by this Agreement, for the
purposes and with the powers and authority hereinafter set forth in this Article
IX, which shall include the power and authority:
(a) to deliver all certificates representing the Company Shares
tendered therewith to Parent and to collect and receive all Merger Consideration
payable to the Company Stockholders to disburse and pay the same to each of the
Company Stockholders in accordance with the terms of this Agreement;
(b) to negotiate, agree to, enter into settlements and compromises
of and comply with orders of courts and awards of arbitrators with respect to
indemnification claims under this Agreement;
48
(c) to resolve any indemnification claims under this Agreement; and
(d) to make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the
Stockholder Representatives, in their sole and absolute discretion, may consider
necessary or proper or convenient in connection with the consummation of the
transactions contemplated by this Agreement.
Accordingly, the Stockholder Representatives have unlimited authority
and power to act on behalf of each Company Stockholder with respect to this
Agreement and the disposition, settlement or other handling of all
indemnification claims, rights or obligations arising from and taken pursuant to
this Agreement. The Company Stockholders will be bound by all actions taken by
the Stockholder Representatives in connection with this Agreement.
The grant of authority provided for in this Section 9.1: (i) is coupled
with an interest and is being granted, in part, as an inducement to Parent and
Acquisition Co. to enter into this Agreement, and shall be irrevocable and
survive the death, incompetency, bankruptcy or liquidation of any Company
Stockholder and shall be binding on any successor thereto; and (ii) subject to
the provisions of Section 9.3 below, may be exercised by any of the Stockholder
Representatives acting by signing as a Stockholder Representative of each of the
Company Stockholders.
9.2 EXCULPATION; INDEMNITY. In dealing with this Agreement and any
instruments, agreements or documents relating thereto, and in exercising or
failing to exercise all or any of the powers conferred upon the Stockholder
Representatives hereunder, (i) the Stockholder Representatives shall not assume
any, and shall incur no, responsibility whatsoever to any Stockholder by reason
of any error in judgment or other act or omission performed or omitted hereunder
or in connection with this Agreement or any such other agreement, instrument or
document and (ii) the Stockholder Representatives shall be entitled to rely on
the advice of counsel, public accountants or other independent experts
experienced in the matter at issue, and any error in judgment or other act or
omission of the Stockholder Representatives pursuant to such advice shall in no
event subject the Stockholder Representatives to liability to any Stockholder.
(b) Each Principal Stockholder, jointly and severally, shall
indemnify the Stockholder Representatives up to, but not exceeding, an amount
equal to the aggregate Merger Consideration received by such Principal
Stockholder hereunder against any and all damages, liabilities, claims,
obligations, costs and expenses, including reasonable attorneys, accountants and
other experts fees in the amount of any judgment against them, of any nature
whatsoever, arising out of or in connection with any claim, investigation,
challenge, action or proceeding or in connection with the appeal thereof,
relating to the acts or omissions of the Stockholder Representatives hereunder.
All of the exculpations, indemnities, immunities and powers granted to the
Stockholder Representatives under this Agreement shall survive (i) the Closing
and/or any termination of this Agreement, and (ii) shall in no way limit or
affect any exculpations, indemnities, immunities or powers to which such
individuals are entitled to, acting in their capacity as directors and/or
officers of the Company, whether pursuant to contracts, the
49
Company's organizational documents, the DGCL or policy or policies of insurance
maintained or obtained by the Company.
(c) Parent, Acquisition Co. and the Surviving Corporation shall have
the right to rely upon all actions taken or omitted to be taken by the
Stockholder Representatives pursuant to this Agreement or any applicable
ancillary document, and notwithstanding anything herein to the contrary, Parent,
Acquisition Co., and the Surviving Corporation shall not have any responsibility
or obligation whatsoever to any Company Stockholder or to any other party with
respect to or arising out of any actions taken or any inaction by the
Stockholder Representatives.
9.3 REPLACEMENT OF A STOCKHOLDER REPRESENTATIVE; SUCCESSOR STOCKHOLDER
REPRESENTATIVES. If one of the Stockholder Representatives is unable or
unavailable to perform his duties hereunder, the remaining Stockholder
Representative shall have the power to act until the appointment of a successor
Stockholder Representatives in accordance with this Section 9.3. A successor
Stockholder Representative(s) shall be appointed by the Escrow Stockholders;
provided that there shall always be one Stockholder Representative appointed by
FFT Partners I, LP and one Stockholder Representative appointed by Xxxxxx X.
Xxxx.
(b) Any successor Stockholder Representative shall have all of the
authority and responsibilities conferred upon or delegated to a Stockholder
Representative pursuant to this Article IX.
ARTICLE X
ACTIONS BY THE PARTIES AFTER THE CLOSING
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC. The representations,
warranties and covenants contained in or made pursuant to this Agreement or any
certificate, document or instrument delivered pursuant to or in connection with
this Agreement in the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the Closing hereunder
(notwithstanding any investigation, analysis or evaluation by any party hereto
or their designees of the Assets and Properties, business, operations or
condition (financial or otherwise) of the other party), and thereafter the
representations, warranties and covenants of the parties herein shall continue
to survive in full force and effect for a period ending six months after the
Effective Date (the "Survival Period") and, thereafter, to the extent a claim is
made prior to the expiration of the Survival Period with respect to any Breach
of such representation, warranty or covenant, until such claim is finally
determined or settled, whereupon such representation, warranties and covenants
will expire; provided, however, that the representations, warranties and
covenants set forth in Sections 3.2, 3.4, 5.1, 5.2, 5.3, 5.4, 5.5 and 5.6 shall
survive until the expiration of the statue of limitations, plus one year and all
representations, warranties and covenants herein shall survive indefinitely with
respect to any intentional or fraudulent Breach thereof.
10.2 INDEMNIFICATION.
(a) By the Escrow Stockholders. Subject to the limitations set forth
in Section 10.1 and Section 10.2(d) and (e), the Escrow Stockholders shall,
jointly and severally, indemnify, defend and hold harmless Parent, Acquisition
Co., the Surviving Corporation and
50
their respective officers, directors, employees, affiliates, agents, successors,
subsidiaries and assigns (collectively the "Parent Group") from and against any
and all costs, losses, liabilities, damages, lawsuits, deficiencies, claims and
expenses, including without limitation, interest, penalties, costs of
mitigation, attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, the "Damages"), incurred in
connection with, arising out of, resulting from or incident to any Breach of the
covenants set forth in Section 6.6(d) and Section 6.8, or the Breach of any
representation or warranty made by the Company in or pursuant to this Agreement,
or in the other documents delivered in connection with the transactions
contemplated in this Agreement.
(b) By the Principal Stockholders. Each Principal Stockholder shall
indemnify, defend and hold harmless the Parent Group for any Damages incurred in
connection with or resulting from or incident to any and all Breaches of any
representation or warranty made by such Principal Stockholder in Article V of
this Agreement.
(c) By Parent. Subject to the limitations set forth in Section 10.1
and Section 10.2(d) and (e), Parent and Acquisition Co. shall, jointly and
severally, indemnify, defend and hold harmless the Escrow Stockholders and their
respective officers, employees, agents, successors and assigns from and against
any and all Damages incurred in connection with, arising out of, resulting from
or incident to any Breach of any representation or warranty made by Parent in or
pursuant to this Agreement, or in any other documents delivered in connection
with the transactions contemplated in this Agreement solely to the extent a
claim for Damages is made by the Escrow Stockholders within the Survival Period.
Parent shall have the option, exercisable in its sole discretion, to pay the
amount of any Damages ultimately determined to be due to the Escrow Stockholders
pursuant to this Article X in Parent Common Stock valued at its Fair Market
Value as of the date of issuance.
(d) Threshold Amount. No indemnifying party shall have any liability
with respect to the matters described in Sections 10.2(a) and (c) above unless
and until the aggregate amount of Damages equals or exceeds $200,000 (the
"Threshold Amount"). At such time as the aggregate amount of Damages exceeds the
Threshold Amount, the applicable indemnified party or parties shall be
indemnified to the full extent of all such Damages (including Damages counted in
determining whether the aggregate amount of Damages equals or exceeds the
Threshold Amount); provided, however, that this subsection (d) shall not apply
to (i) any intentional or fraudulent Breach by the Company, on one hand or
Parent and Acquisition Co., on the other hand, of any representation, warranty,
covenant or obligation; or (ii) any Breach by the Company of the representations
or warranties set forth in Sections 3.2 and 3.4.
(e) Limitations of Liability. Except as set forth in Section
10.2(a), Section 10.2(b) and this Section 10.2(e), (i) the liability of the
Escrow Stockholders for indemnification under Section 10.2(a) shall in any event
be limited to his or its ratable portion of the Escrow Fund, and (ii) no Escrow
Stockholder's ratable portion of the Escrow Fund shall be subject to claims for
any Breach of any representation or warranty under Article V by any Principal
Stockholder other than such Escrow Stockholder. The liability of Parent for
indemnification under this Article X shall in any event be limited to
$1,000,000. The limitations of liability set forth above in this Section 10.2(e)
shall not apply to any (i) any intentional or fraudulent Breach
51
by any party of any representation, warranty, covenant or obligation; or (ii)
any Breach by the Company of the representations, warranties and covenants set
forth in Sections 3.2 and 3.4.
(f) Third Party Claims; Defense of Claims. If any Action or
Proceeding is filed or initiated against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within ten days after the
service of the citation or summons); provided, however, that the failure of any
indemnified party to give timely notice shall not affect rights to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such Action or Proceeding, then the indemnifying
party shall be entitled, if it so elects, to take control of the defense and
investigation of such Action or Proceeding and to employ and engage attorneys of
its own choice to handle and defend the same, such attorneys to be reasonably
satisfactory to the indemnified party, at the indemnifying party's cost, risk
and expense (unless (i) the indemnifying party has failed to assume the defense
of such Action or Proceeding or (ii) the named parties to such Action or
Proceeding include both of the indemnifying party and the indemnified party, and
the indemnified party and its counsel determine in good faith that there may be
one or more legal defenses available to such indemnified party that are
different from or additional to those available to the indemnifying party and
that joint representation would be inappropriate), and to compromise or settle
such Action or Proceeding, which compromise or settlement shall be made only
with the written consent of the indemnified party, such consent not to be
unreasonably withheld. The indemnified party may withhold such consent if such
compromise or settlement would adversely affect the conduct of business or
requires less than an unconditional release to be obtained. If (i) the
indemnifying party fails to assume the defense of such Action or Proceeding
within 15 days after receipt of notice thereof pursuant to this Section 10.2, or
(ii) the named parties to such Action or Proceeding include both the
indemnifying party and the indemnified party and the indemnified party and its
counsel determine in good faith that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party and that joint representation would be
inappropriate, the indemnified party against which such Action or Proceeding has
been filed or initiated will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such Action or
Proceeding on behalf of and for the account and risk of the indemnifying party;
provided, however, that such Action or Proceeding shall not be compromised or
settled without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld. In the event the indemnified party assumes
defense of the Action or Proceeding, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement and will consult with, when appropriate, and consider
any reasonable advice from, the indemnifying party of any such defense,
compromise or settlement. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 10.2 and for any final judgment (subject to any right of appeal), and
the indemnifying party agrees to indemnify and hold harmless the indemnified
party from and against any Damages by reason of such settlement or judgment.
52
Regardless of whether the indemnifying party or the indemnified party
takes up the defense, the indemnifying party will pay reasonable costs and
expenses in connection with the defense, compromise or settlement for any Action
or Proceeding under this Section 10.2 as they come due, subject to the
limitations set forth in this Section 10.2.
The indemnified party shall cooperate in all reasonable respects with
the indemnifying party and such attorneys in the investigation, trial and
defense of such Action or Proceeding and any appeal arising therefrom; provided,
however, that the indemnified party may, at its own cost, participate in the
investigation, trial and defense of such Action or Proceeding and any appeal
arising therefrom. In the event the indemnifying party does not pay all expenses
due under this Section 10.2 when due, the indemnified party shall be entitled to
settle any Action or Proceeding under this Section 10.2 without the consent of
the indemnifying party and without waiving any rights the indemnified party may
have against the indemnifying party.
(g) Indemnity Claims. A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from whom
indemnification is sought.
10.3 INDEMNITY ESCROW ACCOUNT. The Indemnity Escrow Shares shall be
maintained in the escrow account established pursuant to the Escrow Agreement
until the date which is six months following the Effective Date (the "Escrow
Period") for the purpose of satisfying claims by Parent and the Parent Group for
indemnification by the Escrow Stockholders under Section 10.2(a) under this
Article X. Upon expiration of the Escrow Period, and subject to the terms of
this Section 10.3 and the Escrow Agreement, the Escrow Agent shall deliver or
cause to be delivered to the Stockholder Representatives the balance of the
Indemnity Escrow Shares, if any, remaining in the escrow account. If, upon
expiration of the Escrow Period, Parent or any member of the Parent Group shall
have asserted a claim for indemnity in accordance with this Article X and such
claim is pending or unresolved at the time of such expiration, the Escrow Agent
shall retain in escrow that number of Indemnity Escrow Shares having an
aggregate Fair Market Value equal to the asserted claim until such matter is
resolved. In the event that Parent or any member of the Parent Group is entitled
to indemnification from the Escrow Stockholders under Section 10.2(a), Parent or
any member of the Parent Group's first recourse for indemnification shall be the
Indemnity Escrow Shares (with such shares to be valued at the Fair Market Value)
pursuant to the terms of this Agreement and the Escrow Agreement.
10.4 EXCLUSIVITY. The parties hereto acknowledge and agree that the
indemnity obligations set forth above shall be the exclusive remedy of the
indemnified parties with respect to Damages arising out of a Breach of this
Agreement, but the indemnified parties reserve the right to assert claims or
pursue all available remedies arising out of or relating to fraud or willful
misconduct of any Person.
ARTICLE XI
MISCELLANEOUS
11.1 RESTRICTION ON TRANSFERABILITY OF THE PARENT COMMON SHARES. The
certificates representing the Parent Common Stock (if and when issued pursuant
to this Agreement) shall
53
bear the following legend restricting transfer, and such other legends as may be
required by any applicable state securities law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF THAT CERTAIN AGREEMENT AND PLAN OF
REORGANIZATION (THE "AGREEMENT") DATED FEBRUARY 21, 2002 BY AND AMONG
ENDOCARE, INC., TMT ACQUISITION CORPORATION, XXXX MEDICAL TECHNOLOGIES,
INC. ("XXXX MEDICAL"), AND CERTAIN STOCKHOLDERS OF XXXX MEDICAL.
The Parent Common Stock issued pursuant to this Agreement shall not be
transferable in the absence of an effective registration statement under the
Securities Act and applicable state securities laws or an exemption therefrom or
in the absence of compliance with any term of this Agreement. In the absence of
an effective registration statement under the Securities Act and applicable
state securities laws, neither the Parent Common Stock nor any interest therein
shall be sold, transferred, assigned or otherwise disposed of, unless Parent
shall have previously received an opinion of counsel knowledgeable in federal
and state securities law, in form and substance reasonably satisfactory to
Parent and accompanied by such supporting documents as Parent may reasonably
request, to the effect that registration under the Securities Act and applicable
state securities laws is not required in connection with such disposition.
Parent shall be entitled to impose stop transfer instructions with respect to
the Parent Common Stock in order to enforce the foregoing restrictions.
11.2 FURTHER ASSURANCES. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
party reasonably may request, all the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article X).
11.3 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail, return
receipt requested) or by overnight courier to the parties at the following
addresses or facsimile numbers:
If to Company and/or Stockholder Representatives, to:
54
Xxxxx X. Xxxxxxx
c/o Xxxxxx Xxxxxxx & Xxxxxxxx
The Mill
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Xxxxxx X. Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
with a copy to:
Xxxxxx & Xxxxxxx LLP
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
If to Parent or Surviving Corporation:
Endocare, Inc.
0 Xxxxxxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 11.3, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 11.3, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section 11.3, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section 11.3). Any party from time to time may change
its address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
11.4 ENTIRE AGREEMENT. This Agreement (and all exhibits and schedules
attached hereto, all other documents delivered in connection herewith) supersede
all prior discussions and agreements among the parties with respect to the
subject matter hereof and contains the sole and
55
entire agreement among the parties hereto with respect thereto, including,
without limitation, the binding provision of the letter of intent executed by
certain of the parties on January 18, 2002, as amended.
11.5 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party hereto of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by law or otherwise afforded, will be cumulative
and not alternative.
11.6 AMENDMENT. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
11.7 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article X.
11.8 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void, except that any party's rights to indemnification under
Article X may be freely assigned. This Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
11.9 HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
11.10 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and mutually
acceptable to the parties herein.
11.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
executed and performed in such State, without giving effect to conflicts of laws
principles.
11.12 CONSENT TO JURISDICTION AND FORUM SELECTION. Each of the Parent,
Acquisition Co. and the Company irrevocably agrees that any legal action or
proceeding with respect to this Agreement or Contemplated Transactions,
including without limitation any disputes under or
56
relating to the Escrow Agreement, or for the recognition and enforcement of any
judgment in respect hereof brought by the other party hereto or its successors
or assigns will be brought and determined in the Chancery or other courts of the
State of Delaware, and each of the Parent, Acquisition Co. and the Company
hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect to its property, generally and unconditionally, to the
exclusive jurisdiction of the aforesaid courts. Each of the Parent, Acquisition
Co. and the Company hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgement, execution of judgment or
otherwise), (c) to the fullest extent permitted by applicable law, that (i) the
suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action, or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts and (d) any right to trial by jury.
11.13 CONSTRUCTION. No provision of this Agreement shall be construed in
favor of or against any party on the ground that such party or its counsel
drafted the provision. Any remedies provided for herein are not exclusive of any
other lawful remedies which may be available to either party. This Agreement
shall at all times be construed so as to carry out the purposes stated herein.
11.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by facsimile, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
11.15 ATTORNEYS FEES. In the event any action is brought for enforcement
or interpretation of this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees and costs incurred in said action.
57
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto by a duly authorized officer, as of the date first above
written.
PARENT:
ENDOCARE, INC., a Delaware corporation
By: /s/ Xxxx Xxxxx
----------------------------------------------
Name: Xxxx Xxxxx
Title: CEO
ACQUISITION CO.:
TMT ACQUISITION CORPORATION,
a Delaware Corporation
By: /s/ Xxxx Xxxxx
----------------------------------------------
Name: Xxxx Xxxxx
Title: President & CEO
COMPANY:
XXXX MEDICAL TECHNOLOGIES, INC.,
a Delaware Corporation
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
[COUNTERPART SIGNATURE PAGE TO
AGREEMENT AND PLAN OF REORGANIZATION]
PRINCIPAL STOCKHOLDERS:
FFT PARTNERS I, L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Member, Xxxxxx Xxxxxxx Xxxxxxxx & Co.,
GP of FFT Partners I, L.P.
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
FFT EXECUTIVE PARTNERS I., L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Member, Xxxxxx Xxxxxxx Xxxxxxxx & Co.,
GP of FFT Executive Partners I, L.P.
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
/s/ Xxxxxx X. Xxxx
-------------------------------------------------
Xxxxxx X. Xxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
/s/ Xxxxxx X. Xxxxxx
-------------------------------------------------
Xxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxxx, XX 00000
/s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------------
Xxxxxx X. Xxxxxxxxx
000 Xxxxxx Xxxx
Xxxxxxx, XX 00000
D&W VENTURES I, LLC
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Manager
00 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
[COUNTERPART SIGNATURE PAGE TO
AGREEMENT AND PLAN OF REORGANIZATION]
SCHEDULE 1
KEY EMPLOYEES
Xxxxxx X. Xxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxxxx Xxxxxxx
SCHEDULE 2
MERGER CONSIDERATION
This schedule has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this schedule will be furnished supplementally to the Securities
and Exchange Commission upon request.
COMPANY DISCLOSURE SCHEDULE
This schedule has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this schedule will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT A
CERTIFICATE OF MERGER
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT B
ESCROW AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT C
SPOUSAL CONSENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT D
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT E
LOCK-UP AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT F
PROXY
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT G
COMPANY OFFICER'S AND EACH
PRINCIPAL STOCKHOLDER'S CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT H
COMPANY SECRETARY CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT I
RELEASE
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT J
OPINION OF COUNSEL TO
COMPANY AND COMPANY STOCKHOLDERS
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT K
REGISTRATION RIGHTS AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
February __, 2002 by and among Endocare, Inc., a Delaware corporation (the
"Company"), and the investors listed on Schedule A hereto (individually, an
"Investor" and collectively, the "Investors").
RECITALS
A. The Company, a wholly-owned subsidiary of the Company and Xxxx
Medical Technologies, Inc., a Delaware corporation are parties to an Agreement
and Plan of Reorganization dated February __, 2002 (the "Merger Agreement");
B. The Investors are subject to the terms of a Lock-Up Agreement of even
date herewith with the Company (collectively, the "Lock-Up Agreements"); and
C. In order to induce the parties to the Merger Agreement to consummate
the transactions contemplated thereby, the Investors and the Company hereby
agree that this Agreement, among other things, shall govern the rights of the
Investors to cause the Company to register shares of Common Stock of the Company
issuable to the Investors.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and the Merger Agreement, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.8 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
-1-
(f) The term "Registrable Securities" means (i) the Common
Stock of the Company issued to the Investors as a result of the consummation of
the transactions contemplated by the Merger Agreement and (ii) any Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referenced in (i) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which his rights under this
Section 1 are not assigned pursuant to the terms of this Agreement.
(g) The number of shares of "Registrable Securities then
outstanding" shall be the sum of the number of shares of Registrable Securities
which are (i) then outstanding Common Stock and (ii) Common Stock issuable
pursuant to then outstanding securities that are convertible or exercisable into
Common Stock.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Form S-3 Registration. Subject to compliance with the terms
of the Lock-Up Agreements, the Company will:
(a) within 90 days of the Effective Time (as defined in
the Merger Agreement), effect one registration on Form S-3 and all such
qualifications and compliances as may be reasonably necessary and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.2: (i) if Form S-3 is not available for
such offering by the Holders; (ii) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000; (iii) if the Company shall
furnish to the Holders a certificate signed by the Company's Chief Executive
Officer stating that in the good faith judgment of the Board, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 90 days after receipt of the request of the Holder or
Holders under this Section 1.2; provided, however, that the Company shall not
utilize this right more than twice in any 12 month period; or (iv) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(b) All expenses incurred in connection with a
registration requested pursuant to this Section 1.2, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees (including fees and disbursements of counsel for the Company in its
capacity as counsel to the Holders requesting registration hereunder; solely in
the event that Company counsel does not make itself available for this purpose,
the Company will pay the reasonable fees and disbursements of one counsel for
the Holders requesting registration not to exceed $10,000) shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to this
-2-
Section 1.2 if the registration request is subsequently withdrawn at the request
of the Holders of a majority of the Registrable Securities to be registered (in
which case all participating Holders shall bear such expenses pro rata).
Notwithstanding the foregoing, the fees and expenses of any persons (other than
the fees and expenses of counsel for the Holders as provided for above) retained
by a Holder, the fees and expenses customarily reimbursed or paid by issuers or
selling security holders on behalf of underwriters in underwritten offerings (in
the case of an underwritten offering), and any discounts, commissions or
broker's fees or fees of similar securities industry professionals and any
transfer taxes relating to the distribution of the Registrable Securities by a
Holder, will be payable by such Holder, and the Company will have no obligations
to pay such amounts.
(c) A majority in interest of the Holders shall have the
right, by written notice to the Company on or before the expiration of the 30
day period following the Effective Time, to specify that all Holders intend to
dispose of the Registrable Securities covered by a registration statement
pursuant to this Section 1.2 pursuant to an underwritten offering. The
institution or institutions that shall manage or lead the offering or placement
shall be mutually and reasonably agreed to by a majority in interest of the
Holders and the Company. No Holder shall be entitled to participate in an
underwritten offering unless and until such Holder has entered into an
underwriting or other agreement with such institution or institutions for such
offering in such customary form as the Company and such institution or
institutions shall determine.
1.3 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one year or until
the distribution contemplated in the Registration Statement has been completed;
provided, however, that (i) such one year period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company or the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such one year period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (A) includes any prospectus required by Section 10(a)(3) of the
Act or (B) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (A) and (B)
above to be contained in periodic reports filed pursuant to Section 13 or 15(d)
of the 1934 Act in the registration statement.
-3-
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus and any amendment or supplement
to the prospectus, in conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its commercially reasonable efforts to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) Use its commercially reasonable efforts to furnish, at
the request of any Holder requesting registration of Registrable Securities
pursuant to this Section 1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Section 1, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requested registration of Registrable Securities.
(f) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(g) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading.
-4-
(h) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(j) In the event of the issuance of any stop order
suspending the effectiveness of the registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such registration
statement for sale in any jurisdiction, use its reasonable best effort promptly
to obtain the withdrawal of such order.
(k) Maintain eligibility to use Form S-3 or any similar
short form registration statement by filing with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act.
1.4 Furnish Information.
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required by law to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 if, due to the operation of
subsection 1.4(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 1.2(a)(ii), whichever is applicable.
1.5 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.6 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
-5-
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act or any rule or
regulation promulgated under the Act or the 1934 Act; and the Company will pay
to each such Holder, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.6(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.6(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 1.6(b) exceed the net
proceeds from the offering received by such Holder, unless such liability arises
out of or is based on the willful misconduct or fraud by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate
-6-
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.6, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.6.
(d) If the indemnification provided for in this Section
1.6 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.7 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 25% of the then outstanding shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (c) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of: (i) a partnership who
are partners or retired partners of such partnership; or (ii) a limited
liability company who are members of such limited liability company (including
spouses and ancestors, lineal descendants and siblings of such partners, members
or spouses who acquire Registrable Securities by gift,
-7-
will or intestate succession) shall be aggregated together and with the
partnership or limited liability company; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
2.3 Submission to Jurisdiction; Waivers. Each of the parties
hereto irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for the recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns will be
brought and determined in the Chancery or other courts of the State of Delaware,
and each of the parties hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of
the parties hereto hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgement, execution of judgment or
otherwise), (c) to the fullest extent permitted by applicable law, that (i) the
suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action, or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts and (d) any right to trial by jury.
2.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given:
(a) upon personal delivery to
-8-
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient or, if not sent during normal
business hours, then on the next business day, (c) three days after having been
sent by registered or certified mail, return receipt requested, postage prepaid,
or (d) one day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All
communications shall be sent to the address as set forth on the signature page
hereof or at such other address as such party may designate by 10 days advance
written notice to the other parties hereto.
2.7 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.8 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
2.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
2.10 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
2.11 Entire Agreement; Amendment; Waiver. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ENDOCARE, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FFT PARTNERS I, L.P.
By Xxxxxx Xxxxxxx Xxxxxxxx & Co. LLC,
Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
FFT EXECUTIVE PARTNERS I, L.P.
By Xxxxxx Xxxxxxx Xxxxxxxx & Co. LLC,
Its General Partner
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
---------------------------------------------
Xxxxxx X. Xxxx
---------------------------------------------
Xxxxxx X. Xxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxxxxx
D&W VENTURES I, LLC
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
SCHEDULE A
SCHEDULE OF INVESTORS
FFT Partners I, L.P.
FFT Executive Partners I, L.P.
Xxxxxx X. Xxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxxx
D&W Ventures I, LLC
A-1
EXHIBIT L
STOCKHOLDER RIGHTS TERMINATION AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT M
PARENT OFFICER'S CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT N
PARENT SECRETARY CERTIFICATE
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT O
OPINION OF COUNSEL TO PARENT AND ACQUISITION CO.
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT P
OPTION ASSUMPTION AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
EXHIBIT Q
OPTION TERMINATION AGREEMENT
This exhibit has been omitted in accordance with Item 601(b)(2) of Regulation
S-K. A copy of this exhibit will be furnished supplementally to the Securities
and Exchange Commission upon request.
