EXECUTION COPY
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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ORCHID BIOCOMPUTER, INC.
GS ACQUISITION CORP.
AND
GENESCREEN INC.
DATED AS OF DECEMBER 21, 1999
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TABLE OF CONTENTS
ARTICLE I THE MERGER............................................... 1
1.1 The Merger................................................. 1
1.2 Effective Time............................................. 2
1.3 Effect of the Merger....................................... 2
1.4 Certificate of Incorporation and By-Laws of Surviving
Corporation................................................ 2
1.5 Directors and Officers..................................... 2
1.6 Escrow Fund; Merger Consideration; Conversion of Company
Common Shares and Company Preferred Shares................. 2
1.7 Cancellation of Treasury Shares............................ 4
1.8 Stock Options.............................................. 4
1.9 Repurchase Rights.......................................... 5
1.10 Capital Stock of Merger Sub................................ 5
1.11 Fractional Shares.......................................... 5
1.12 Surrender of Certificates.................................. 5
1.13 Further Ownership Rights in Company Common Shares and
Company Preferred Shares................................... 7
1.14 Closing.................................................... 8
1.15 Lost, Stolen or Destroyed Certificates..................... 8
1.16 Dissenters' Rights......................................... 8
1.17 Further Assurances......................................... 9
1.18 Closing of Company Transfer Books.......................... 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........... 9
2.1 Organization and Qualification; Subsidiaries............... 9
2.2 Certificate of Incorporation and By-laws................... 10
2.3 Capitalization............................................. 10
2.4 Authority Relative to this Agreement; Required Vote........ 11
2.5 No Conflict; Required Filings and Consents................. 12
2.6 Material Agreements........................................ 13
2.7 Compliance with Agreements and Law......................... 14
2.8 Financial Statements....................................... 15
2.9 Books and Records.......................................... 15
2.10 Accounts and Notes Receivable.............................. 15
2.11 Customers.................................................. 16
2.12 Absence of Certain Changes or Events....................... 16
2.13 No Undisclosed Liabilities................................. 17
2.14 Absence of Litigation...................................... 17
2.15 Employee Benefit Plans..................................... 18
2.16 Employment and Labor Matters............................... 20
2.17 Absence of Restrictions on Business Activities............. 21
2.18 Title to Assets; Leases.................................... 22
2.19 Taxes...................................................... 22
2.20 Environmental Matters...................................... 24
2.21 Intellectual Property...................................... 25
2.22 Insurance.................................................. 28
2.23 Brokers.................................................... 29
2.24 Certain Business Practices................................. 29
2.25 Interested Party Transactions.............................. 29
2.26 Disclosure................................................. 30
2.27 HSR Filing................................................. 30
2.28 Independent Contractors.................................... 30
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 30
3.1 Organization and Qualification............................. 30
3.2 Capitalization............................................. 31
3.3 Authorization of Agreement................................. 31
3.4 Approvals.................................................. 31
3.5 No Violation............................................... 32
3.6. Financial Statements....................................... 32
3.7 Absence of Certain Changes or Events....................... 33
3.8 Brokers.................................................... 33
3.9 Disclosure................................................. 33
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER.................. 33
4.1 Conduct of Business by the Company Pending the Merger...... 33
4.2 Solicitation of Other Proposals............................ 36
ARTICLE V ADDITIONAL OBLIGATIONS................................... 37
5.1 Consent of Company Stockholders............................ 37
5.2 Access to Information; Confidentiality..................... 38
5.3 All Reasonable Efforts; Further Assurances................. 39
5.4 Stock Options.............................................. 40
5.5 Registration Rights........................................ 40
5.6 Notification of Certain Matters............................ 40
5.7 Public Announcements....................................... 41
5.8 Takeover Laws.............................................. 42
5.9 Stockholder Agreement...................................... 42
5.10 Release Agreements......................................... 42
5.11 Maintenance, Prosecution and Filing Obligations............ 42
5.12 Amendment to 401(k) Plan................................... 42
5.13 Post-Closing ERISA Assessment.............................. 42
ARTICLE VI CONDITIONS OF MERGER.................................... 43
6.1 Conditions to Obligation of Each Party to Effect
the Merger................................................. 43
6.2 Additional Conditions to Obligations of Parent and Merger
Sub........................................................ 44
6.3 Additional Conditions to Obligations of the Company........ 46
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...................... 46
7.1 Termination................................................ 46
7.2 Effect of Termination...................................... 48
7.3 Fees and Expenses.......................................... 48
7.4 Amendment.................................................. 48
7.5 Waiver..................................................... 48
ARTICLE VIII ESCROW; INDEMNIFICATION............................... 48
8.1 Survival................................................... 48
8.2 Indemnification and Waiver................................. 49
8.3 Claims for Indemnification................................. 50
8.4 Threshold for Indemnification.............................. 50
8.6 Limitations of Indemnification............................. 50
8.7 Stockholders' Representative............................... 51
ARTICLE IX GENERAL PROVISIONS...................................... 52
9.1 Notices.................................................... 52
9.2 Disclosure Schedules....................................... 53
9.3 Certain Definitions........................................ 53
9.5 Interpretation............................................. 56
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9.6 Severability............................................... 57
9.7 Entire Agreement........................................... 57
9.8 Assignment................................................. 57
9.9 Parties in Interest........................................ 57
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative...... 57
9.11 Governing Law.............................................. 57
9.12 Counterparts............................................... 58
EXHIBIT A - Form of Stockholder Agreement
EXHIBIT B-1 - Form of Certificate of Merger
EXHIBIT B-2 - Form of Restated Certificate of Incorporation
EXHIBIT C - Form of Release Agreement
EXHIBIT D - Form of Opinion of Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx, L.L.P.
EXHIBIT E - Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
EXHIBIT F - Form of Non-Competition Agreement
EXHIBIT G - Form of Escrow Agreement
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SCHEDULES
COMPANY'S SCHEDULES
1.9 List of Key Employees with Repurchase Rights
2.1(b) Subsidiaries and Affiliated Entities
2.3(a) Stock Appreciation Rights; Other Rights
2.3(b) Capitalization
2.5(a) Conflict; Required Filing
2.5(b) Company Approvals
2.6 Material Agreements
2.7 Compliance with Agreements and Law
2.8 Financial Statements
2.10 Accounts and Notes Receivable
2.11 Customers and Distributors
2.12 Certain Changes or Events
2.14 Litigation
2.15(a) Employee Benefit Plans
2.15(e) Benefits; Acceleration
2.15(g) Medical Benefits
2.15(h) Section 280G Deductibility
2.15(i) Severance Payments
2.15(k) Benefit Plans; Right to Terminate
2.15(l) Holders of Option, Warrant or Other Right to Purchase Capital
Stock
2.16(a) Employment and Consultant Agreements
2.16(b) Employee Controversies
2.17(a) Restrictions of Business Activity
2.17(c) Retired Employees; Benefits
2.18 Real Property
2.19(m) Net Operating Loss; Capital Loss Carry Forwards
2.19(n) Limitations of Net Operating Loss
2.20 Environmental Matters
2.21(a) Intellectual Property: Patents, Trademarks, Copyrights
2.21(b) Intellectual Property: Non-Exclusive Intellectual Property Rights
2.21(c) Maintenance Fees
2.22 Insurance
2.23 Broker Agreements
2.25 Interested Parties
OTHER SCHEDULES
3.7 Absence of Certain Company Changes or Events
4.1(l) Related Party Agreements, Arrangements, Understandings
5.10 Release Agreements
6.1(l) Non-Competition Agreements
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1999 (the
"Agreement") by and among ORCHID BIOCOMPUTER, INC., a Delaware corporation
("Parent"), GS ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and GENESCREEN INC., a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors
of Parent, Merger Sub and the Company have each approved the merger (the
"Merger") of Merger Sub with and into the Company, in accordance with the
General Corporation Law of the State of Delaware (the "DGCL") and subject to the
conditions set forth herein, which Merger will result in, among other things,
the Company becoming a wholly owned subsidiary of Parent, and all of the issued
and outstanding shares of the common stock of the Company, $.01 par value per
share (the "Company Common Shares"), and all of the issued and outstanding
shares of Series A Preferred Stock, $.05 par value per share (the "Company
Series A Stock") and Series B Preferred Stock, $.05 par value per share (the
"Company Series B Stock" and, collectively with the Company Series A Stock, the,
"Company Preferred Shares"; the Company Common Shares and the Company Preferred
Shares are sometimes collectively referred to herein as the "Company Shares"),
of the Company, will be exchanged and converted into shares of Series E
Convertible Preferred Stock, par value $.001 per share (the "Parent Preferred
Stock"), of Parent or cash on the terms described herein and in the Private
Placement Memorandum (as hereafter defined); and
WHEREAS, as a condition to the willingness of, and as an inducement
to, Parent and Merger Sub to enter into this Agreement, contemporaneously with
the execution and delivery of this Agreement, certain holders of Company Common
Shares and Company Preferred Shares are entering into agreements (the
"Stockholder Agreements") in the form of Exhibit A attached hereto, providing
for certain actions relating to the transactions contemplated by this Agreement,
including their agreement to vote their respective Company Common Shares and
Company Preferred Shares in favor of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
provisions of the DGCL, Merger Sub shall be merged with and into the Company,
the separate corporate existence of Merger Sub shall cease and the Company
shall, as the surviving corporation in the Merger, continue its existence
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under the provisions of the DGCL as a wholly owned subsidiary of Parent. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction
or, to the extent permitted hereunder, waiver of the conditions set forth in
Article VI of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing the Certificate of Merger substantially in the form of
Exhibit B-1 (the "Certificate of Merger"), along with a certified copy of this
Agreement, if required, with the Secretary of State of the State of Delaware,
executed in accordance with the relevant provisions of the DGCL and immediate
filing thereafter of the Restated Certificate of Incorporation of the Company
substantially in the form of Exhibit B-2 (the date and time of such filing of
the Certificate of Merger, or such later date and time as may be specified in
the Certificate of Merger by mutual agreement of Parent, Merger Sub and the
Company, being the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in 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 Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION.
Unless otherwise determined by Parent prior to the Effective Time, at the
Effective Time, the Certificate of Incorporation of the Company, as amended by
the Certificate of Merger, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by the DGCL. The by-
laws of the Merger Sub shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by the DGCL.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation of the Surviving Corporation. The officers of the Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and by-laws. Prior to the Effective Time, the Company shall
deliver to Parent resignation letters of each of the directors of the Company to
be effective as of such Effective Time.
1.6 ESCROW FUND; MERGER CONSIDERATION; CONVERSION OF COMPANY COMMON SHARES
AND COMPANY PREFERRED SHARES.
(a) On or prior to the Closing Date (i) Parent, the Company and the
Stockholders' Representative (as defined below) shall enter into an Escrow
Agreement substantially in the form attached hereto as Exhibit G (the "Escrow
Agreement") with State Street Bank and Trust Company, as escrow agent (the
"Escrow Agent"). At the Closing, portions of the Parent Preferred Shares and
Aggregate Merger Cash Consideration ( as defined below in Section 1.6(b))
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as specified in the Escrow Agreement shall be deposited by Parent in an escrow
fund (the "Escrow Fund") to the Escrow Agent which shall be held by the Escrow
Agent in such capacity. Such Parent Preferred Shares held in the Escrow Fund
shall be beneficially owned by the holders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate Parent as
provided in Article VIII and in the Escrow Agreement.
(b) The aggregate amount of cash and securities to be paid to the
stockholders of the Company (each, a "Company Stockholder" and collectively, the
"Company Stockholders") upon the conversion of, and as consideration for, all of
the issued and outstanding Company Shares at the Effective Time shall equal
$18,000,000 (the "Aggregate Merger Consideration"). The Aggregate Merger
Consideration shall be comprised of 4,000,000 shares of Parent Preferred Stock
having the rights, preferences and terms set forth in that certain private
placement offering (the "Offering") of Parent pursuant to Parent's Confidential
Private Placement Memorandum dated as of May 5, 1999, as amended and
supplemented to date (the "Private Placement Memorandum") ( a copy of which will
be delivered to each such Company Stockholder prior to the Effective Time) and
in Section 1.6 of the Parent Disclosure Schedule. Each Company Stockholder
shall be entitled to that portion of the aggregate Merger Stock Consideration
(as defined in Section 1.6(c)(i)) as determined in accordance with the rights
and preferences of each class and series of capital stock of the Company as set
forth in the Company's Certificate of Incorporation and described in Section
1.6(b) of the Parent Disclosure Schedule. Notwithstanding the foregoing, if
Parent determines that Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"), does not permit it to issue shares of
Parent Preferred Stock to any Company Stockholder which is not an "accredited
investor" as such term is defined in the Securities Act, such Company
Stockholder (an "Unaccredited Company Stockholder") shall be issued, at Parent's
discretion, cash in the amount of $4.50 for each share of Parent Preferred Stock
to which the Unaccredited Company Stockholder would have been entitled in lieu
of shares of such Parent Preferred Stock (the "Merger Cash Consideration", the
aggregate Merger Cash Consideration paid to all of the Unaccredited Company
Stockholders, hereinafter referred to as the "Aggregate Merger Cash
Consideration").
(c) At the Effective Time, by virtue of the Merger and without any action
on the part of the parties hereto or the holders of the following securities:
(i) Subject to the other provisions of this Article I, each Company
Share issued and outstanding immediately prior to the Effective Time (other than
any Company Shares to be canceled pursuant to Section 1.7 and any Dissenting
Shares (as defined in Section 1.17)) shall be converted automatically into the
right to receive (i) the Exchange Ratio Fraction of a fully paid and
nonassessable share of Parent Preferred Stock, together with cash, if any, in
lieu of any fraction of a share of Parent Preferred Stock, pursuant to Section
1.11 (collectively, the "Merger Stock Consideration"), less such Company
Stockholder's share of the Escrow Fund, and (ii) if such Company Share is held
by an Unaccredited Company Shareholder, such stockholder's portion of the
Aggregate Merger Cash Consideration.
(ii) For purposes of this Agreement, the "Exchange Ratio Fraction"
shall mean the quotient (calculated to the nearest five (5) decimal places)
obtained by dividing (x) the result obtained from subtracting the Xxxxxxxxx
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Xxxxxx Xxxx Consideration from the Aggregate Merger Consideration by (y) $4.50,
and by dividing the quotient computed thereby by the Company Number Shares (as
defined below). As used herein, the "Company Number Shares" means the sum of
(A) (i) all Company Common Shares outstanding immediately prior to the Effective
Time (including all Company Common Shares issued upon the exercise or
cancellation of any options to purchase Company Common Shares or any warrants to
purchase Company Common Shares or upon the conversion or exchange of any Company
Preferred Shares), minus (ii) Company Common Shares to be canceled pursuant to
Section 1.7 and any Dissenting Shares (as defined in Section 1.16).
(iii) As of the Effective Time, all Company Common Shares and all
Company Preferred Shares issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and all Company Common Shares and
all Company Preferred Shares shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Company Common Shares and all Company Preferred Shares shall cease to have any
rights with respect thereto, except the right to receive its portion of the
Merger Stock Consideration and any cash in lieu of fractional shares of Parent
Preferred Stock to be issued or portion of the Aggregate Merger Cash
Consideration paid in consideration therefor upon surrender of such certificate
in accordance with Section 1.12 hereof, without interest (less, in each case,
the Parent Preferred Stock and the portion of Aggregate Merger Cash
Consideration representing the Escrow Fund).
1.7 CANCELLATION OF TREASURY SHARES. Each share of Company Common
Shares or Company Preferred Shares held in the treasury of the Company and each
share of Company Common Shares or Company Preferred Shares, if any, owned by
Merger Sub or Parent, immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof.
1.8 STOCK OPTIONS. Under the terms of the Company's Amended and
Restated 1991 Stock Option Plan (the "Company Stock Plan"), all outstanding
employee and consultant stock options and all non-employee director stock
options, including without limitation, the incentive stock options and non-
qualified stock options issued pursuant to the Company Stock Plan (collectively
the "Company Options") outstanding at the Effective Time shall be deemed to be
exercised immediately prior to the Effective Time for the number of additional
shares of Company Common Stock as provided in the Company Stock Plan (the
"Deemed Exercised Shares"). The Company shall take all actions necessary or
reasonably requested by Parent to ensure that following the Effective Time no
holder of any Company Options or rights pursuant to, nor any participant in, the
Company Stock Plan, or any other plan, program or arrangement providing for the
issuance or grant of any interest in respect of the capital stock of the Company
and any of its Subsidiaries or Affiliated Entities will have any right
thereunder to acquire equity securities, or any right to payment in respect of
the equity securities, of the Company, any of its Subsidiaries or Affiliated
Entities or the Surviving Corporation, except as provided in Section 1.9 below.
1.9 REPURCHASE RIGHTS. In order to provide incentive to certain
employees of the Company to remain in the employ of the Parent during a
transition period following the Effective Time, each employee listed on Section
1.9 of the Company Disclosure Schedule hereto (each, a "Key Employee") shall
have the right to require Parent to repurchase at a price of $4.50 per share
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the Parent Preferred Stock received by such Key Employee in connection with the
Merger in such number and at such intervals as is set forth on Section 1.9 of
the Company Disclosure Schedule (the "Repurchase Right"). In order to exercise,
and as a condition precedent to the exercise of, the Repurchase Right and to
receive cash in exchange for such Key Employee's shares of Parent Preferred
Stock, the Key Employee must be employed by Company, Parent or any of the
Subsidiaries of Parent on the respective dates set forth on Section 1.9 of the
Company Disclosure Schedule corresponding with the date on which a Repurchase
Right matures; provided, that, each of Xxxxx Xxxxx and Xxxxxxx Xxxxxx shall be
entitled to exercise his respective Repurchase Right whether or not they
continue to be employed by or associated with the Parent. If a Key Employee is
not so employed by Parent on the date a Repurchase Right of such Key Employee
matures, such Key Employee shall be entitled to retain the Parent Preferred
Stock covered by such Repurchase Right. If a Key Employee is terminated by
Parent for any reason other than Cause (as defined below), all unaccrued
Repurchase Rights shall be accelerated and exercisable immediately upon
termination. Notwithstanding anything to the contrary contained herein, no
Repurchase Right shall be exercisable prior to the expiration of thirty (30)
days from the Effective Time and all Repurchase Rights shall terminate upon the
consummation by Parent of a Qualified IPO (as defined).
The purchase price for any Parent Preferred Stock purchased under a
Repurchase Right shall be subject to appropriate adjustment for any stock split,
reverse stock split, recapitalization or other change in the capitalization of
Parent.
1.10 CAPITAL STOCK OF MERGER SUB. Each share of common stock, par value
$.001 per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any Merger Sub Common Stock
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.11 FRACTIONAL SHARES. No fraction of a share of Parent Preferred
Stock will be issued hereunder, but in lieu thereof each holder of Company
Shares who would otherwise be entitled to a fraction of a share of Parent
Preferred Stock (after aggregating all fractional shares of Parent Preferred
Stocks to be received by such holder) shall receive from Parent an amount of
cash (rounded up or down, as the case may be, to the nearest whole cent) equal
to the product of such fraction multiplied by the $4.50.
1.12 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate Xxxxxxx, Xxxxxxxx & Woodridge, L.L.P to act as Exchange Agent
hereunder.
(b) PARENT TO PROVIDE PARENT PREFERRED STOCK. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, through such reasonable procedures as Parent
may adopt, the shares of Parent Preferred Stock issuable pursuant to Section 1.6
in exchange for outstanding Company Common Shares and outstanding Company
Preferred Shares, together with an estimated amount of cash to be
5
paid pursuant to Section 1.6 as Aggregate Merger Cash Consideration and pursuant
to Section 1.11 in lieu of fractional shares.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding Company Common Shares and
Company Preferred Shares whose shares were converted into the right to receive
shares of Parent Preferred Stock and/or a portion of the Aggregate Merger Cash
Consideration pursuant to Section 1.6, a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Preferred Stock, (ii) the portion of Aggregate Merger Cash Consideration, if
any, to which such holder is entitled pursuant to Section 1.6 hereof and/or
(iii) cash in lieu of the fraction of a share of Parent Preferred Stock, if any,
pursuant to Section 1.11 hereof. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange
therefor, (i) a certificate representing the number of whole shares of Parent
Preferred Stock (less the shares of Parent Preferred Stock representing the
Escrow Fund), (ii) the portion of the Merger Cash Consideration, if any,
applicable to such holder (less any cash representing a portion of the Escrow
Fund) and/or (iii) payment in lieu of fractional shares which such holder has
the right to receive pursuant to Section 1.11, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented Company Common Shares
or Company Preferred Shares will be deemed from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Parent Preferred Stock into which such
Company Common Shares and Company Preferred Shares shall have been so converted
and/or the right to receive such portion of the Merger Cash Consideration and/or
the right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.11. Any portion of the shares of Parent
Preferred Stock or Merger Cash Consideration deposited with the Exchange Agent
pursuant to this Section 1.12(c) which remains undistributed to the holders of
the Certificates representing Company Common Shares or Company Preferred Shares
for twelve (12) months after the Effective Time shall be delivered to Parent,
upon demand, and any holders of Company Common Shares or Company Preferred
Shares who have not theretofore complied with this Article I shall thereafter
look only to Parent for Parent Preferred Stock, such portion, if any, of the
Merger Cash Consideration and/or any cash in lieu of fractional shares of Parent
Preferred Stock and any dividends or distributions with respect to Parent
Preferred Stock to which such holders may be entitled.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Preferred Stock with a record date after the Effective Time will be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Parent Preferred Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable escheat
Law, following surrender of any such Certificate, there shall be paid to the
record holder
6
of the certificates representing whole shares of Parent Preferred Stock issued
in exchange therefor, without interest, at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Preferred Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Preferred Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to Parent, or any agent designated by
it, any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Preferred Stock in any name other than that of
the registered holder of the certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Agreement, none of the Exchange Agent, Parent, Merger Sub or the Surviving
Corporation shall be liable to a holder of Company Common Shares or Company
Preferred Shares for any Parent Preferred Stock or any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
(g) WITHHOLDING OF TAX. Parent or the Exchange Agent will be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Shares or any holder of Company
Preferred Shares, as the case may be, such amounts as Parent (or any Affiliate
thereof) or the Exchange Agent are required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of federal,
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the Company
Common Shares or Company Preferred Shares, as the case may be, in respect of
whom such deduction and withholding were made by Parent.
1.13 FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON SHARES AND COMPANY
PREFERRED SHARES. All shares of Parent Preferred Stock issued upon the
surrender for exchange of Company Common Shares and Company Preferred Shares in
accordance with the terms of this Article I (including any cash paid as a
portion of the Aggregate Merger Cash Consideration and/or for fractional shares
paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Company Common Shares and Company
Preferred Shares under this Article I, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Company
Common Shares or Company Preferred Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article I.
1.14 CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article VII, and subject to the provisions of Article VI, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (Eastern time)
7
on a date (the "Closing Date") to be mutually agreed upon by the parties, which
date shall be not later than the third Business Day after all the conditions set
forth in Article VI shall have been satisfied (or waived in accordance with
Section 7.5, to the extent the same may be waived), unless another time and/or
date is agreed to in writing by the parties. The Closing shall take place at the
offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial
Center, Boston, Massachusetts, unless another place is agreed to in writing by
the parties.
1.15 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Preferred Stock and/or cash (whether as a portion of the Aggregate Merger Cash
Consideration and/or for fractional shares, if any), as may be required pursuant
to Sections 1.6 or 1.11; provided, however, that Parent may, as a condition
precedent to the issuance or payment thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
1.16 DISSENTERS' RIGHTS. All Persons who have executed and delivered a
Stockholder Agreement shall have consented to the Merger and shall have
delivered their stock certificates in accordance with the terms hereof.
Notwithstanding anything in this Agreement to the contrary, any Company Common
Shares or Company Preferred Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
delivered a valid, unrevoked proxy in favor of the Merger, or consented thereto
in writing and who has delivered written notice to the Company objecting to the
Merger and demanding payment for his shares as required in accordance, and has
otherwise complied, with the applicable provisions of the DGCL ("Dissenting
Shares"), shall not be converted into the right to receive the Parent Preferred
Stock or such holder's portion of the Aggregate Merger Cash Consideration,
unless and until such holder fails to elect to dissent from the Merger or
effectively withdraws or otherwise loses his right to payment of the fair value
of his shares under the provisions of the DGCL. If, after the Effective Time,
any such holder fails to perfect or effectively withdraws or loses his right to
such payment, such Dissenting Shares shall thereupon be treated as if they had
been converted as of the Effective Time into the right to receive Parent
Preferred Stock to which such holder is entitled or such holder's portion of the
Aggregate Merger Cash Consideration, without interest or dividends thereon. Any
amounts paid to holders of Dissenting Shares in an appraisal proceeding will be
paid by the Surviving Corporation out of its own funds and will not be paid by
Parent or Merger Sub. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to any such demands or offer to
settle or settle any such demands.
1.17 FURTHER ASSURANCES. If at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, immunities, powers, purposes, franchises, properties or
assets of the Company or Merger Sub, or (b) otherwise to carry out the purposes
of this Agreement, the
8
Surviving Corporation and its proper officers and directors or their designees
shall be authorized to solicit in the name of the Company or Merger Sub any
third party consents or other documents required to be delivered by any third
party, to execute and deliver, in the name and on behalf of the Company or
Merger Sub, all such deeds, bills of sale, assignments and assurances and do, in
the name and on behalf of the Company or Merger Sub, all such other acts and
things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, immunities,
powers, purposes, franchises, properties or assets of the Company or Merger Sub
and otherwise to carry out the purposes of this Agreement.
1.18 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Common
Shares or Company Preferred Shares shall thereafter be made. If, after the
Effective Time, certificates representing shares of Company Common Shares or
Company Preferred Shares are presented to the Surviving Corporation, they shall
be canceled and presented to the Exchange Agent in accordance with Section 1.12.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that
the statements contained in this Article II are correct and complete as of the
date of this Agreement and will be correct and complete in all material respects
on the Closing Date, except as disclosed in the disclosure schedule dated the
date hereof, certified by the President and Chief Executive Officer of the
Company and delivered by the Company to Parent and Merger Sub simultaneously
herewith (which disclosure schedule shall contain specific references to the
representations and warranties to which the disclosures contained therein relate
and an item on such disclosure schedule shall be deemed to qualify only the
particular subsection or subsections specified for such item) (the "Company
Disclosure Schedule") as follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation. The
Company has all the requisite corporate power and authority and is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and Orders ("Company Approvals") necessary to
own, lease and operate its properties and to carry on its business as it is now
being conducted. The Company is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary.
(b) Section 2.1(b) of the Company Disclosure Schedule sets forth, as
of the date hereof, a true and complete list of all of the Company's directly
and indirectly owned Subsidiaries and Affiliated Entities, together with the
jurisdiction of incorporation or organization of each Subsidiary and Affiliated
Entity and the percentage of each Subsidiary's and Affiliated Entity's
outstanding capital stock or other equity or other interest owned by the
9
Company or another direct or indirect Subsidiary or Affiliated Entity of the
Company. Except as set forth in Section 2.1(b) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries and Affiliated
Entities owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, directly or indirectly, any equity or
similar interest in, any Person.
(c) Each Subsidiary and Affiliated Entity of the Company is a legal
entity, duly organized, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation or organization and has all the
requisite power and authority, and is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and Orders (with respect to each such Subsidiary or Affiliated Entity,
"Subsidiary/Affiliated Entity Approvals") necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted. Each
Subsidiary/Affiliated Entity is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary.
2.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has heretofore
furnished to Parent a complete and correct copy of each of its and each of its
Subsidiaries' and Affiliated Entities' Certificates of Incorporation and by-laws
or equivalent organizational documents, as amended or restated to the date
hereof. Such Certificates of Incorporation and by-laws, as amended, and
equivalent organizational documents of the Company and each of its Subsidiaries
and Affiliated Entities are in full force and effect. Neither the Company nor
any of its Subsidiaries or Affiliated Entities is in violation of any of the
provisions of its Certificate of Incorporation or by-laws or equivalent
organizational documents.
2.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 15,000,000
shares divided into 10,000,000 Company Common Shares and 5,000,000 shares of
Company Preferred Shares, of which 350,000 shares have been designated Company
Series A Stock and 700,000 shares have been designated Company Series B Stock.
As of the date hereof, (i) 2,804,239 Company Common Shares, 350,000 Company
Series A Preferred Shares and 691,723 Company Series B Preferred Shares were
issued and outstanding; (ii) no Company Common Shares were held in the treasury
of the Company; (iii) 524,447 Company Common Shares were duly reserved for
future issuance pursuant to stock options granted and outstanding pursuant to
the Company Stock Plan; and (iv) no Company Common Shares were duly reserved for
future issuance pursuant to issued and outstanding warrants to purchase Company
Common Shares. There are no outstanding warrants to purchase any shares of the
capital stock of the Company. Except as set forth above, as of the date hereof,
no shares of voting or non-voting capital stock, other equity interests, or
other voting securities of the Company were issued, reserved for issuance or
outstanding. All options to purchase Company Common Shares were granted under
the Company Stock Plan. Except as set forth in Section 2.3(a) of the Company
Disclosure Schedule, there are no outstanding stock appreciation rights of the
Company and no outstanding limited stock appreciation rights or other rights to
redeem for cash options or warrants of Company. All outstanding shares of
capital stock of the Company are, and all shares which may be issued upon the
exercise of stock options will be, when issued, duly authorized, validly issued,
fully paid and
10
nonassessable and not subject to preemptive rights. None of the outstanding
equity securities or other securities of the Company was issued in violation of
the Securities Act or any other Law, Regulation or Order. There are no bonds,
debentures, notes or other indebtedness of the Company with voting rights (or
convertible into, or exchangeable for, securities with voting rights) on any
matters on which stockholders of the Company may vote. The Company Shares being
acquired pursuant to this Agreement represent one hundred percent (100%) of the
outstanding capital stock of the Company of all classes.
(b) Section 2.3(b) of the Company Disclosure Schedule sets forth the
number of authorized and outstanding shares of capital stock and the names of
the beneficial owners of such capital stock of each of the Company's
Subsidiaries and Affiliated Entities as of December 20, 1999. Except as set
forth in Section 2.3(b) of the Company Disclosure Schedule, as of the date
hereof, there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind (contingent or
otherwise) to which the Company or any of its Subsidiaries or Affiliated
Entities is a party or by which any of them is bound obligating the Company or
any of its Subsidiaries or Affiliated Entities to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or of any of its Subsidiaries or
Affiliated Entities or obligating the Company or any of its Subsidiaries or
Affiliated Entities to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations of the Company or any of its
Subsidiaries or Affiliated Entities to repurchase, redeem or otherwise acquire
any shares of capital stock (or options to acquire any such shares) of the
Company or its Subsidiaries or Affiliated Entities. There are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any person is or may be entitled or to cause the Company or any of its
Subsidiaries to file a registration statement under the Securities Act or which
otherwise relate to the registration of any securities of the Company, except as
disclosed in Section 2.3(b) of the Company Disclosure Schedule.
(c) There are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Company or any of
its Subsidiaries or Affiliated Entities is a party or by which the Company or
any of its Subsidiaries or Affiliated Entities is bound with respect to the
voting of any shares of capital stock of the Company or any of its Subsidiaries
or Affiliated Entities, except for the Stockholder Agreements.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT; REQUIRED VOTE.
(a) Subject to the approval of this Agreement by the Company
Stockholders, the Company has all necessary corporate power and authority to
execute and deliver this Agreement, and each instrument required to be executed
and delivered by it at the Closing, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by the Company of this Agreement, the performance of
its obligations hereunder, and the consummation by the Company of the
transactions contemplated hereby, have been duly and validly authorized by all
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the approval and
authorization of this Agreement by the Company
11
Stockholders in accordance with the applicable provisions of the DGCL and the
Company's Certificate of Incorporation and by-laws). This Agreement has been
duly and validly executed and delivered by the Company and, constitutes the
legal, valid and binding obligation of the Company, subject to the approval of
the Company Stockholders in each case except to the extent the enforcement
thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium
or other similar law now or hereafter in effect relating to creditor's rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(b) The Board of Directors of the Company has directed that this
Agreement be submitted to the stockholders of the Company for their approval and
authorization. The affirmative votes of holders of at least a majority of all
outstanding Company Common Shares and Company Preferred Shares (voting together
as one class) are the only votes of the holders of any class or series of
capital stock of the Company necessary to approve and authorize this Agreement,
the Merger, the Related Agreements and the other transactions contemplated
hereby and thereby. The holders of the Company Common Shares and Company
Preferred Shares that are parties to the Stockholder Agreements (to be delivered
to Parent as soon as reasonably practicable following the execution of this
Agreement) beneficially own and have the right to vote, in the aggregate, no
less than approximately 66 2/3% of the total issued and outstanding Company
Common Shares and Company Preferred Shares (taken together as a single class).
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery by the Company of this Agreement or any
instrument required by this Agreement to be executed and delivered by the
Company or any of its Subsidiaries and Affiliated Entities at the Closing do
not, and the performance by the Company or any of its Subsidiaries and
Affiliated Entities of their obligations under this Agreement or any instrument
required by this Agreement to be executed and delivered by the Company or any of
its Subsidiaries and Affiliated Entities at the Closing, shall not (i) conflict
with or violate the Certificate of Incorporation or by-laws or equivalent
organizational documents of the Company or any of its Subsidiaries and
Affiliated Entities, (ii) conflict with or violate any Law, Regulation or Order
in each case applicable to the Company or any of its Subsidiaries and Affiliated
Entities or by which its or any of their respective properties is bound or
affected, (iii) result in any breach or violation of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair the Company's or any of its Subsidiaries' or Affiliated
Entities' rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien or encumbrance on any of
the properties or assets of the Company or any of its Subsidiaries or Affiliated
Entities pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries or Affiliated Entities is a party or by which
the Company or any of its Subsidiaries or Affiliated Entities or its or any of
their respective properties is bound or affected, (iv) cause the Parent, the
Merger Sub or the Company to become subject to, or to become liable for the
payment of, any Tax, or (v) cause any of the assets owned by the Company to be
reassessed or revalued by any Tax authority except, in each case, as set forth
in Section 2.5(a) of the Company Disclosure Schedule.
12
(b) The execution and delivery by the Company of this Agreement or any
instrument required by this Agreement to be executed and delivered by the
Company or any of its Subsidiaries or Affiliated Entities at Closing do not, and
the performance by the Company or any of its Subsidiaries or Affiliated Entities
of their obligations under this Agreement and any instrument required by this
Agreement to be executed and delivered by the Company or any of its Subsidiaries
or Affiliated Entities at Closing, shall not, require the Company or any of its
Subsidiaries or Affiliated Entities to obtain any consent or waiver of any
Person or the consent, approval, authorization or action by, license, waiver,
qualification, Order or Permit, observe any waiting period imposed by, or make
any filing with or notification to, any Court or Governmental Authority,
domestic or foreign, except for (A) valid approval of the Agreement by the
Company Stockholders, which approval has or will be obtained prior to the
Effective Time, (B) compliance with applicable requirements, if any, of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), state securities laws ("Blue Sky Laws"), or (C) such other third party
consents, approvals, authorization, licenses, waivers, qualifications, Orders or
Permits set forth in Section 2.5(b) of the Company Disclosure Schedule.
2.6 MATERIAL AGREEMENTS. Section 2.6 of the Company Disclosure
Schedule sets forth a true and complete list of all contracts, licenses,
agreements, permits and instruments to which the Company or any of its
Subsidiary or Affiliated Entities is a party or by which any of them or any of
their properties or assets may be bound, which is material to the Company and/or
its Subsidiaries or Affiliated Entities (collectively, the "Material
Agreements"), including without limitation (i) each agreement pursuant to which
the Company or any of its Subsidiaries or Affiliated Entities has granted
exclusive rights or have noncancelable terms of one year or longer, (ii) each
agreement which includes the performance of services or delivery of goods of
materials in an amount in excess of $100,000; (iii) each lease, rental or
occupancy agreement, license, installment and conditional sale agreement
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any assets of the Company (except personal property leases
and installment and conditional sales agreements having a value per item or
aggregate payments of less than $100,000 and with terms of less than one year);
(iv) each agreement with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current employees, consultants,
or contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Rights; (v) each collective bargaining agreement and other
agreement with any labor union or other employee representative of a group of
employees; (vi) each joint venture, partnership, and other agreement (however
named) involving a sharing of profits, losses, costs, or liabilities by the
Company with any other Person; (vii) each agreement containing covenants that in
any way purport to restrict the business activity of the Company or materially
limit the freedom of the Company to engage in any line of business or to compete
with any Person; (viii) each agreement providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods having a value in excess of $100,000; (ix) each agreement for capital
expenditures in excess of $100,000; (x) each written warranty, guaranty, and/or
other similar undertaking with respect to contractual performance extended by
the Company other than in the ordinary course of business; and (xi) each written
complaint received by the Company from a customer during the twelve (12) month
period preceding the date hereof, the net affect of which would be the likely
cancellation or termination of an agreement having a value in excess of
$100,000. Complete copies of all Material Agreements have been provided by the
Company to Parent and no oral Material Agreements exist. Each such Material
Agreement is in full force and effect, is a valid and
13
binding obligation of the Company or such Subsidiary or Affiliated Entity and is
enforceable against the Company or such Subsidiary or Affiliated Entity in
accordance with its terms and the Company does not have Knowledge that any
Material Agreement is not a valid and binding agreement of the other parties
thereto. Except as set forth in Section 2.6 of the Company Disclosure Schedule,
each Material Agreement is enforceable in each case except to the extent the
enforcement thereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar law now or hereafter in effect
relating to creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law). Except as set forth on Section 2.6 of the Company Disclosure Schedule,
(i) no condition exists or, to the Company's Knowledge, event has occurred which
(whether with or without notice or lapse of time or both, or the happening or
occurrence of any other event) would result in a loss of rights or an
acceleration of an obligation or result in the creation of any Lien thereunder
or pursuant thereto, or would constitute a default by the Company or any of its
Subsidiary or Affiliated Entities or, to the Company's Knowledge, any other
party thereto under, or result in a right in termination of, any Material
Agreement. The Company and its Subsidiary and Affiliated Entities are in
compliance in all material respects with the terms of the Company Approvals,
except as set forth in Section 2.6 of the Company Disclosure Schedule. The
continuation, validity, enforceability and effectiveness of each Material
Agreement will not be affected by the consummation of the transactions
contemplated by this Agreement, except as set forth on Section 2.5(a) of the
Company Disclosure Schedule. Furthermore, no party to a Material Agreement has
repudiated any provision thereof and communicated such repudiation to the
Company, and there are no negotiations pending or in progress to revise any
material terms of any Material Agreement.
2.7 COMPLIANCE WITH AGREEMENTS AND LAW. Neither the Company nor any
of its Subsidiaries or Affiliated Entities is in conflict with, or in default or
violation of, any Law, Regulation or Order applicable to the Company or such
Subsidiary or by which its or any of their respective properties is bound or
affected. The Company has all requisite licenses, permits, certificates,
authorizations and approvals including environmental, health and safety and
employee health and safety permits, from foreign, federal, state and local
authorities necessary to conduct the business as currently conducted
(collectively, the "Permits"), all of which Permits are set forth in Section 2.7
of the Company Disclosure Schedule. All of the Permits identified in Section 2.7
of the Company Disclosure Schedule are in full force and effect, and to the
Company's Knowledge, no party thereto is in default under any of such Permits
and no event has occurred and no condition exists which, with the giving of
notice, the passage of time, or both, would constitute a default thereunder. No
action or claim is pending or, to the Company's Knowledge, threatened, to revoke
or terminate any Permit identified in Section 2.7 of the Company Disclosure
Schedule. Except as set forth in Section 2.7 of the Company Disclosure Schedule,
the Company is not nor has it been in violation of any Law, rule, Regulation,
ordinance or court or administrative order (including, without limitation, those
relating to building, zoning, environmental, disposal or hazardous substances,
land use, health and safety and employee health and safety matters). Except as
set forth on Section 2.7 of the Company Disclosure Schedule, neither the Company
nor its Subsidiaries or Affiliated Entities has received any notice or
communication from any foreign, federal, state or local governmental or
regulatory authority or otherwise of any such violation and, to the Company's
Knowledge, no such notice or communication is threatened.
14
2.8 FINANCIAL STATEMENTS. The Company has delivered to the Parent
and attached hereto on Section 2.8 of the Company Disclosure Schedule are: (a)
audited balance sheets of the Company as at December 31 in each of the years
1996 through 1998, and the related audited consolidated statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended, together with the report thereon of Deloitte & Touche LLP, independent
certified public accountants (the most recent of which, the "Company Balance
Sheet"), and (b) unaudited balance sheets of the Company as at March 31, 1999,
June 30, 1999 and September 30, 1999 and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the
three, six and nine months then ended, including in each case the notes thereto.
Such financial statements and notes (collectively, the "Company Financial
Statements"), are true, correct and complete and fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Company in all material respects as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the Company
Balance Sheet). Except as disclosed therein, the Company Financial Statements
reflect the consistent application of such accounting principles throughout the
periods involved. No financial statements of any Person other than the Company,
the Subsidiary and the Affiliated Entities are required by GAAP to be included
in the Company Financial Statements of the Company.
2.9 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct in all material respects, and
reflect the maintenance of an adequate system of internal controls. The minute
book of the Company contains accurate and complete records of all meetings held
of, and corporate action taken by, the stockholders, the Boards of Directors,
and committees of the Board of Directors of the Company, and no meeting of any
such stockholders, Board of Directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books.
2.10 ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes
receivable reflected in the Financial Statements and all accounts receivable
arising after September 30, 1999 (collectively, the "Company Accounts
Receivable") have arisen in the ordinary course of business of the Company,
represent valid and enforceable obligations due to the Company (except as set
forth in Section 2.10 of the Company Disclosure Schedule), and are not subject
to any discount, set-off or counter-claim (except as set forth in Section 2.10
of the Company Disclosure Schedule). All such Accounts Receivable have been
collected or, to the Knowledge of the Company, are fully collectible in the
ordinary course of business of the Company in the aggregate amounts hereof in
accordance with their terms.
2.11 CUSTOMERS AND SUPPLIERS. Section 2.11 of the Company
Disclosure Schedule sets forth the ten (10) customers who account for the
largest sales of the Company (collectively, the "Customers") and the ten (10)
largest suppliers to the Company (the "Suppliers"), together with the amount of
sales and purchases attributable to such customers and suppliers expressed in
dollars and as a percentage of total sales or purchases. To the Knowledge of
the Company, the
15
relationships of the Company with its Customers and its Suppliers are generally
good commercial working relationships. Except as provided in Section 2.11 of the
Company Disclosure Schedule, there is no plan or intention of any such Customer
or Supplier, and the Company has not received any written or oral threat from
any Customer, or Supplier, to terminate, cancel or otherwise adversely modify
its relationship with the Company or to decrease materially or limit its
services, supplies or materials to the Company or its usage, purchase or
distribution of the services or products of the Company.
2.12 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since September 30, 1999, the Company and its Subsidiaries and
Affiliated Entities have conducted their businesses only in the ordinary and
usual course and in a manner consistent with past practice and, since such date,
except as set forth on Section 2.12 of the Company Disclosure Schedule, there
has not been any (a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; purchase,
redemption, retirement, or other acquisition by the Stockholders of any shares
of any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock; (b) amendment to
the Certificate of Incorporation or by-laws of the Company; (c) payment or
increase by the Company of any bonuses, salaries, or other compensation to any
stockholder, director, officer, or (except in the ordinary course of business)
employee or entry into any employment, severance, or similar Contract with any
director, officer, or employee; (d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company; (e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, that is reasonably
likely to have a Material Adverse Effect; (f) entry into, termination of, or
receipt of notice of termination of (i) any license, distributorship, dealer,
sales representative, joint venture, credit, or similar agreement, or (ii) any
Material Agreement or transaction involving a total remaining commitment by or
to the Company of at lease $100,000; (g) sale (other than sales of inventory in
the ordinary course of business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any Lien on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the Intellectual Property Rights; (h) cancellation or
waiver of any claims or rights with a value to the Company in excess of
$100,000; (i) material change in the accounting methods used by the Company; (j)
sale or pledge, or agreement to sell or pledge, any capital stock owned by the
Company; (k) split, combination or reclassification of the Company's outstanding
stock or issuance or authorization or proposed issuance of any other securities
with respect to, in lieu of or in substitution for the Company Stock; (l)
incurrence of any indebtedness for borrowed money or capital lease obligations
outside the ordinary course of business; (m) guaranty of any indebtedness of
another Person; (n) acquisition by merger or consolidation with, or by
purchasing a substantial equity interest in, or by any other manner, any
business or any Person; (o) acceleration, termination (other than end-of-term
expirations), modification, cancellation, declaration of a default under or
indication of an intent to terminate any Material Agreement (or series of
related Material Agreements) involving more than $100,000 to which the Company
is a party or by which it is bound; (p) any capital expenditure (or series of
related capital expenditures) either involving more than $100,000 or outside the
ordinary course of business; (q) delay or postponement of the
16
collection of accounts receivable or the payment of accounts payable and other
liabilities outside the ordinary course of business; (r) loan to, or, except in
ordinary course of business, entry into any other transaction with, any of its
directors, officers and employees; (s) entry into any transaction other than in
the ordinary course of business; (t) agreement, whether oral or written, by the
Company to do any of the foregoing; and (u) any other change, event, development
or circumstance affecting the Company or any of its Subsidiaries or Affiliated
Entities which, individually or in the aggregate, has, or is reasonably likely
to have, a Material Adverse Effect.
(b) Since December 31, 1998, there has not been any change by the
Company in its accounting methods, principles or practices, any revaluation by
the Company of any of its assets, including, writing down the value of inventory
or writing off notes or accounts receivable other than in the ordinary course of
business, and there has not been any other action or event, and neither the
Company nor any of its Subsidiaries or Affiliated Entities has agreed in writing
or otherwise to take any other action, that would have required the consent of
Parent pursuant to Section 4.1 had such action or event occurred after the date
hereof and prior to the Effective Time, or any condition, event or occurrence
which could reasonably be expected to prevent, hinder or materially delay the
ability of the Company to consummate the transactions contemplated by this
Agreement.
2.13 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries or Affiliated Entities has any liabilities or obligations of any
nature (whether absolute, accrued, fixed, contingent or otherwise), except (a)
liabilities or obligations reflected in the Company Balance Sheet, (b)
liabilities or obligations incurred in the ordinary course of business
consistent with past practice since September 30, 1999 which are not, and will
not have, individually or in the aggregate, a Material Adverse Effect on the
Company and (c) liabilities or obligations which are not and will not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
2.14 ABSENCE OF LITIGATION. Except as described in Section 2.14 of the
Company Disclosure Schedule, there is no Litigation pending or, to the Company's
Knowledge, threatened against the Company or any Subsidiary or Affiliated Entity
of the Company, that would be or have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries or Affiliated Entities is
subject to any outstanding Claim or Order which, individually or in the
aggregate, has, or in the future might have, a Material Adverse Effect or would
prevent, hinder or delay the Company from consummating the transactions
contemplated by this Agreement.
2.15 EMPLOYEE BENEFIT PLANS.
(a) Section 2.15(a) of the Company Disclosure Schedule contains a true
and complete list of each deferred compensation, incentive compensation, stock
purchase, restricted stock option and other equity compensation plan, "welfare"
plan, fund or program (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); each "pension"
plan, fund or program (within the meaning of Section 3(2) of ERISA); and each
other material employee benefit plan, fund, program, agreement or arrangement,
including but not limited to vacation plans, cafeteria plans, educational
assistance or reimbursement plans, spending account plans (for medical expenses,
dependent care expenses,
17
or other expenses), severance, golden parachute, termination, supplemental
unemployment, plant closing or similar benefits, active health or life or other
post-employment welfare or insurance plans, bonus or performance based
compensation plans or arrangements, supplemental executive retirement plans or
other supplemental or excess benefit plans in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the Company or
any entity, or any of its Subsidiaries, any trade or business (whether or not
incorporated) which is a member of a controlled group or which is under common
control with the Company within the meaning of Section 414 of the Code or which
could be deemed a "single employer" within the meaning of Section 4001(b) of
ERISA (an "ERISA Affiliate"), or to which the Company or an ERISA Affiliate is a
party, whether written or oral, for the benefit of any officer, director,
employee or former employee of the Company or any of its ERISA Affiliates,
whether or not such plan has been terminated (the "Company Benefit Plans").
Except as set forth in Section 2.15(a) of the Company Disclosure Schedule, there
are no restrictions on the ability of the Company, its Subsidiaries or
Affiliated Entities or any of its ERISA Affiliates to amend, modify or terminate
any Company Benefit Plan and each Company Benefit Plan may be assumed by the
Parent or the Merger Sub.
(b) With respect to each Company Benefit Plan, the Company has
heretofore made available to Parent true and complete copies of the Company
Benefit Plan and any amendments thereto (or if the Company Benefit Plan is not a
written Company Benefit Plan, a description thereof), any related trust or other
funding vehicle, the summary plan description and any summaries of material
modifications, the three (3) most recent annual reports (with all schedules) or
summaries required under ERISA or the Code, the most recent audited financial
statements and most recent determination letter received from the Internal
Revenue Service with respect to each Company Benefit Plan intended to qualify
under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a risk to the Company or any ERISA
Affiliate of incurring any such liability.
(d) No Company Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code, nor is any Company Benefit Plan a "multiemployer pension plan",
as defined in Section 3(37) of ERISA, or subject to Section 302 of ERISA. No
Company Benefit Plan is a "single-employer plan under multiple controlled
groups" as described in Section 4063 of ERISA.
(e) Each Company Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable law, including
ERISA and the Code. There has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any
Company Benefit Plan; there are no claims pending (other than routine claims for
benefits) or, to the Company's Knowledge, threatened against any Company Benefit
Plan or against the assets of any Company Benefit Plan, nor are there any
current or, to the Company's Knowledge, threatened Liens on the assets of any
Company Benefit Plan or on the assets of the Company under any provision of
ERISA. The Company and its ERISA Affiliates have, in all material respects,
performed all obligations required to be performed by them (other than
obligations required which have been delegated to third party administrators of
any Company Benefit Plan, all of which are listed in Section 2.15(e) of the
Company Disclosure Schedule) under, and have no Knowledge of any
18
default or violation by any other party with respect to, any of the Company
Benefit Plans. All contributions required to be made to any Company Benefit Plan
under applicable law or the terms of the respective Company Benefit Plan have
been made on or before their due dates and a reasonable amount has been accrued
for contributions to each Company Benefit Plan for the current plan years.
Except as disclosed on Section 2.15(e) of the Company Disclosure Schedule, or
otherwise required under the applicable law, the transaction contemplated herein
will not result in an increase of benefits, acceleration of vesting or
acceleration of timing for payment of any benefit to any participant or
beneficiary under any Company Benefit Plan.
(f) Each Company Benefit Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code and the trusts maintained thereunder that
are intended to be exempt from taxation under Section 501(a) of the Code have
received a favorable determination or opinion letter indicating that they are so
qualified, and, to the Company's Knowledge, no event has occurred since the date
of said letter(s) that will adversely affect the qualification of such Company
Benefit Plan.
(g) Except as set forth in Section 2.15(g) of the Company Disclosure
Schedule, no Company Benefit Plan or written or oral agreement provides medical,
surgical, hospitalization, death or similar benefits (whether or not insured)
for directors, employees or former employees of the Company or any of its
Subsidiaries or Affiliated Entities or ERISA Affiliates for periods extending
beyond their retirement or other termination of service, other than (i) coverage
mandated by applicable Law, (ii) death benefits under any "pension plan" or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary).
(h) No amounts payable under any Company Benefit Plan will fail to be
deductible for federal income Tax purposes by virtue of Section 280G of the
Code.
(i) Except as set forth in Section 2.15(i) of the Company Disclosure
Schedule, the execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement, or the Stockholder Agreements will
not entitle any current or former employee or officer of the Company or any
ERISA Affiliate to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement.
(j) Except as would not be material in any respect to the Company,
there are no pending or, to the Company's Knowledge, threatened or anticipated
claims by or on behalf of any Company Benefit Plan, by any employee or
beneficiary covered under any such Company Benefit Plan or otherwise involving
any such Company Benefit Plan (other than routine claims for benefits).
(k) Except as set forth in Section 2.15(k) of the Company Disclosure
Schedule, each Company Benefit Plan can be terminated within thirty days,
without payment of any additional contribution or amount and, except with
respect to Qualified Plans, without the vesting or acceleration of any benefits
promised by such Plan.
19
(l) Section 2.15(l) of the Company Disclosure Schedule sets forth a
true and complete list of each current or former employee, officer, director or
investor of the Company or any of its Subsidiaries or Affiliated Entities who
holds, as of the date hereof, any option, warrant or other right to purchase
Company Common Shares or Company Preferred Shares, if any, together with the
number of Company Common Shares or Company Preferred Shares, if any, subject to
such option, warrant or right, the date of grant or issuance of such option,
warrant or right, the extent to which such option, warrant or right is vested
and/or exercisable, the exercise price of such option, warrant or right, whether
such option is intended to qualify as an incentive stock option within the
meaning of Section 422(b) of the Code, and the expiration date of each such
option, warrant and right. Section 2.15(l) of the Company Disclosure Schedule
also sets forth the total number of such options, warrants and rights. True and
complete copies of each agreement (including all amendments and modifications
thereto) between the Company and each holder of such options, warrants and
rights relating to the same have been furnished to Parent and are listed in
Section 2.15(l) of the Company Disclosure Schedule.
2.16 EMPLOYMENT AND LABOR MATTERS.
(a) Section 2.16(a) of the Company Disclosure Schedule identifies all
employees and consultants employed or engaged by the Company and sets forth each
such individual's rate of pay or annual compensation (and the portions thereof
attributable to salary and bonuses, respectively), job title and date of hire.
Except as set forth in Section 2.16(a) of the Company Disclosure Schedule, there
are no employment, consulting, severance pay, continuation pay, termination or
indemnification agreement or other similar agreements of any nature (whether in
writing or not) between the Company or any Subsidiary and any current or former
stockholder, officer, director, employee, or any consultant. Except as set
forth in Section 2.16(a) of the Company Disclosure Schedule, no individual will
accrue or receive additional benefits, service or accelerated rights to payments
under any Company Benefit Plan or any of the agreements set forth in Section
2.16(a) of the Company Disclosure Schedule, including the right to receive any
parachute payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a result of the
transaction contemplated herein that could result in the payment of any such
benefits or payments. Neither the Company nor any Subsidiary or Affiliated
Entity is delinquent in payments to any of its employees or consultants for any
wages, salaries, commissions, bonuses or other compensation for any services.
None of the Company's or any Subsidiary's or Affiliated Entities' employment
policies or practices is currently being audited or investigated by any
Governmental Authority. There are no pending, or to the Company's Knowledge,
threatened, claims, charges, actions, lawsuits or proceedings alleging claims
against the Company or any Subsidiary or Affiliated Entity brought by or on
behalf of any employee or other individual or any Governmental Authority with
respect to employment practices, and to the Company's Knowledge, no facts or
circumstances exist that could give rise to any valid claims, charges, actions,
lawsuits or proceedings of such nature.
(b) Except as set forth in Section 2.16(b) of the Company Disclosure
Schedule, there are no controversies pending or, to the Company's Knowledge,
threatened, between the Company or any of its Subsidiaries or Affiliated
Entities and any of their respective employees and employee relations are, in
general, considered to be good; neither the Company nor any of its Subsidiaries
or Affiliated Entities is a party to any collective bargaining agreement
20
or other labor union contract applicable to persons employed by the Company or
its Subsidiaries or Affiliated Entities nor are there any activities or
proceedings of any labor union or by any employees to organize any such
employees of the Company or any of its Subsidiaries or Affiliated Entities;
during the past five years there have been no strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or any of its Subsidiaries or Affiliated Entities. The Company does
not have nor at the Closing will the Company have any obligation under the
Worker Adjustment and Retraining Notification Act (the "WARN Act"). The Company
and each of its Subsidiaries and Affiliated Entities is in material compliance
with all applicable provisions of applicable state, local, federal and foreign
employment, wage and hour, labor and other applicable laws.
2.17 ABSENCE OF RESTRICTIONS ON BUSINESS ACTIVITIES.
(a) Except as set forth in Section 2.17(a) of the Company Disclosure
Schedule or as set forth in this Agreement, there is no Material Agreement or
Order binding upon the Company or any of its Subsidiaries or Affiliated Entities
or any of their properties which has had or could reasonably be expected to have
the effect of prohibiting or materially impairing any business practice of the
Company or any of its Subsidiaries or Affiliated Entities or the conduct of
business by the Company or any of its Subsidiaries or Affiliated Entities as
currently conducted or as proposed to be conducted by the Company or any of its
Subsidiaries or Affiliated Entities. Neither the Company nor any of its
Subsidiaries or Affiliated Entities is subject to any non-competition or similar
restriction on their respective businesses. Neither the Company nor any of its
Subsidiaries or Affiliated Entities has at any time entered into, or agreed to
enter into, any interest rate swaps, caps, floors or option agreements or any
other interest rate risk management arrangement or foreign exchange contracts.
(b) To the Company's Knowledge, no employee of the Company is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will adversely affect (i) the performance of his or her
duties as an employee of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with the
Company by any such employee. To the Knowledge of the Company, no officer or
other Key Employee intends to terminate his or her employment with the Company.
(c) Section 2.17(c) of the Company Disclosure Schedule contains a
complete and accurate list of the following information for each retired
employee or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
2.18 TITLE TO ASSETS; LEASES.
(a) The Company owns no real property. Section 2.18 of the Company
Disclosure Statement sets forth a true and complete list of all real property
leased by the Company or any of its Subsidiaries or Affiliated Entities, and the
aggregate monthly rental or other fee payable under such lease. All leases
pursuant to which the Company or any of its
21
Subsidiaries or Affiliated Entities lease real or personal property from others
are valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any existing material default or event of
material default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which the Company or such
Subsidiary or Affiliated Entities has not taken adequate steps to prevent such a
default from occurring or to cure such default) by the Company or its
Subsidiaries or Affiliated Entities or, to the Company's Knowledge, any third
party.
(b) The Company or its Subsidiaries or Affiliated Entities,
individually or together, have good and marketable title to or a valid leasehold
interest in all of the properties and assets that are necessary to the conduct
of the business of the Company and its Subsidiaries or Affiliated Entities as it
is currently being conducted, including all of the properties and assets
reflected in the Company's balance sheet as of September 30, 1999, other than
any such properties or assets that have been sold or otherwise disposed of in
the ordinary course of business since September 30, 1999.
(c) The equipment of the Company is structurally sound, is in good
operating condition and repair in all material respects, and is adequate for the
uses to which it is being put, and none of such equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The equipment of the Company is sufficient
for the continued conduct of the Company's business after the Closing in
substantially the same manner as conducted prior to the Closing.
2.19 TAXES. For purposes of this Agreement, "Tax" or "Taxes" shall mean
taxes and governmental impositions of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including but not limited to those on or measured by or referred to as income,
franchise, profits, gross receipts, capital ad valorem, custom duties,
alternative or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and interest, penalties and additions to tax imposed with respect
thereto; and "Tax Returns" shall mean returns, reports and information
statements, including any schedule or attachment thereto, with respect to Taxes
required to be filed with the Internal Revenue Service or any other governmental
or taxing authority or agency, domestic or foreign, including consolidated,
combined and unitary tax returns. Except as set forth in the Company Disclosure
Schedule as specified below:
(a) All federal, state, local and foreign Tax Returns required to be
filed (taking into account extensions) by or on behalf of the Company, each of
its Subsidiaries and Affiliated Entities, and each affiliated, combined,
consolidated or unitary group of which the Company or any of its Subsidiaries
and Affiliated Entities is or has been a member, have been timely filed, and all
such Tax Returns are true, complete and correct, except to the extent that any
failure to file or any inaccuracies in filed Tax Returns would not, individually
or in the aggregate, have a Material Adverse Effect.
22
(b) All Taxes payable by or with respect to the Company and each of
its Subsidiaries or Affiliated Entities have been timely paid, or are adequately
reserved for in accordance with GAAP on the Company Balance Sheet, except to the
extent that such amount would not, individually or in the aggregate, have a
Material Adverse Effect. No deficiencies for any Taxes have been proposed,
asserted or assessed either orally or in writing against the Company or any of
its Subsidiaries or Affiliated Entities that are not adequately reserved for in
accordance with GAAP on the respective Company Balance Sheet. All assessments
for Taxes due and owing by or with respect to the Company and each of its
Subsidiaries or Affiliated Entities with respect to completed and settled
examinations or concluded litigation have been paid. Neither the Company nor
any of its Subsidiaries or Affiliated Entities has incurred a Tax liability from
the date of the Company Balance Sheet other than a Tax liability in the ordinary
course of business.
(c) Neither the Company nor any of its Subsidiaries has requested, or
been granted any waiver of any federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No extension or waiver of time within which to file any Tax Return of,
or applicable to, the Company or any of its Subsidiaries has been granted or
requested.
(d) Other than with respect to its Subsidiaries or Affiliated Entities
the Company is not and has never been (nor does the Company have any liability
for unpaid Taxes because it once was) a member of an affiliated, consolidated,
combined or unitary group, and neither the Company nor any of its Subsidiaries
is a party to any Tax allocation or sharing agreement or is liable for the Taxes
of any other party, as transferee or successor, by contract, or otherwise.
(e) Prior to the date hereof, the Company has provided Parent with
written schedules setting forth the taxable years of the Company for which the
statutes of limitations with respect to foreign, federal and material state
income Taxes have not expired and with respect to foreign, federal and material
state income Taxes, those years for which examinations have been completed and
those years for which examinations are presently being conducted.
(f) The Company is not presently and has not been a "foreign
investment company" as such term is defined in Section 1246(b) of the Code.
(g) The Company is not presently and has not been a "passive foreign
investment company" as such term is defined in Section 1297(a) of the Code.
(h) The Company is not presently and has not been at any time during
the last five years a "controlled foreign corporation" as such term is defined
in Section 957(a) of the Code.
(i) The Company and its Subsidiaries and Affiliated Entities have not
made any payments, are not obligated to make any payments, and are not a party
to any agreements that under any circumstances could obligate any of them to
make any payments that will not be deductible under Section 280G of the Code.
23
(j) No unsatisfied deficiency, delinquency or default for any Tax has
been claimed, proposed or assessed against or with respect to the Company or any
Subsidiary or Affiliated Entities, nor has the Company or any Subsidiary or
Affiliated Entity received notice of any such deficiency, delinquency or default
which, in any such case, may have a Material Adverse Effect.
(k) 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)(1)(A)(ii) of the Code.
(l) The Company and each of its Subsidiaries and Affiliated Entities
have complied with all applicable Laws relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441, 1442 and 3406 of the Code or similar provisions under any foreign
Laws) and have, within the time and in the manner required by Law, withheld from
employee wages and paid over to the proper Governmental Authorities all amounts
required to be so withheld and paid over under all applicable Laws.
(m) Section 2.19(m) of the Company Disclosure Schedule sets forth: (i)
the net operating loss ("NOL") and (ii) capital loss carry forwards for foreign,
federal income Tax purposes of each of the Company and its Subsidiaries and
Affiliated Entities through the taxable year ended December 31, 1998.
(n) Except as described in Section 2.19(n) of the Company Disclosure
Schedule, the NOLs of the Company or any Subsidiary or Affiliated Entity are
not, as of the date hereof, subject to Section 382 or 269 of the Code, Treasury
Regulation Section 1.1502-21(c), or any similar provisions or regulations
otherwise limiting the use of the NOLs of the Company or any of its Subsidiaries
or Affiliated Entities.
(o) No property of the Company or any of its Subsidiaries or
Affiliated Entities is "tax-exempt use property" as such term is defined in
Section 168 of the Code.
(p) Neither the Company nor any of its Subsidiaries or Affiliated
Entities has made an election under Section 341(f) of the Code.
2.20 ENVIRONMENTAL MATTERS. Except as described in Section 2.20 of the
Company Disclosure Schedule:
(a) the Company and its Subsidiaries and Affiliated Entities are and
have been in compliance in all respects with all applicable Environmental Laws;
(b) the Company and its Subsidiaries have obtained all Permits
relating to the business required by any applicable Environmental Law and all
environmental permits relating to the business of the Company and all such
permits are in full force and effect in all respects; the environmental permits
do not materially limit or affect the processes, methods, capacity or operating
hours of the persons carrying on the business of the Company as it is currently
carried on;
24
(c) neither the Company nor any of its Subsidiaries has, and the
Company has no Knowledge of any other Person who has, caused any unlawful or
improper release, threatened release or disposal of any Hazardous Material at
any properties or facilities previously or currently owned, leased or occupied
by the Company or its Subsidiaries or Affiliated Entities;
(d) the Company has no Knowledge that any of its or its Subsidiaries'
or Affiliated Entities' properties or facilities are adversely affected by any
release, threatened release or disposal of a Hazardous Material originating or
emanating from any other property;
(e) neither the Company nor any of its Subsidiaries or Affiliated
Entities (i) has any liability for response or corrective action, natural
resources damage, or any other harm pursuant to any Environmental Law, (ii) is
subject to, has notice or Knowledge of, or is required to give any notice of any
Environmental Claim involving an allegation against the Company or any
Subsidiary or Affiliated Entity or any properties or facilities of the Company
or (iii) has Knowledge of any condition or occurrence which could reasonably be
expected to form the basis of an Environmental Claim against the Company, any of
its Subsidiaries or Affiliated Entities or any of their properties or
facilities;
(f) the Company and its Subsidiaries' and Affiliated Entities'
properties and facilities are not subject to any, and the Company has no
Knowledge of any, imminent restriction on the ownership, occupancy, use or
transferability of their properties and facilities arising from any (i)
Environmental Law or (ii) release, threatened release or disposal of any
Hazardous Material; and
(g) there is no Environmental Claim pending, or, to the Company's
Knowledge, threatened, against the Company or, to the Company's Knowledge,
against any Person whose liability for any Environmental Claim the Company has
or may have retained or assumed either contractually or by operation of law. No
material capital expenditure is currently required for the Company in relation
to environmental matters in order to comply with, extend, renew or obtain any
environmental permit or comply with Environmental Laws. Copies of all
environmental audits and other assessments, reviews and reports have been
previously provided to the Parent.
2.21 INTELLECTUAL PROPERTY.
(a) Section 2.21(a) of the Company Disclosure Schedule sets forth a
true, correct and complete list of all United States and foreign (i) patents and
patent applications, (ii) registered and unregistered trademarks and trademark
applications (including material Internet domain name registrations), (iii)
service marks and service xxxx applications, (iv) trade names, (v) copyright
registrations, and copyright applications, and (vi) licenses presently used by
the Company and/or its Subsidiaries or Affiliated Entities, indicating for each,
the applicable jurisdiction, registration number (or applicable number), and
date issued or filed, as applicable with respect to (i), (ii), (iii), and (v)
above and including the terms of such licenses (all of which, together with
patent rights, trade secrets, confidential business information, formulas,
processes, invention records, procedures, research and development activity
reports, laboratory notebooks, copyrights, license rights and trademark rights
which relate to or are used or held for use in connection with the business of
the Company, are collectively referred to as, the "Intellectual
25
Property Rights"). Copies of such licenses have been previously provided to
Parent. To the Company's Knowledge, the Intellectual Property Rights are
sufficient for the conduct of the Company's business as presently conducted and
as proposed to be conducted.
(b) Section 2.21(b) of the Company Disclosure Schedule sets forth a
true, correct and complete list, and where appropriate, a description of all
Intellectual Property Rights set forth in Section 2.21(a) of the Company
Disclosure Schedule to which neither the Company's nor its Subsidiary's or
Affiliated Entities' rights are exclusive, excluding all Intellectual Property
Rights which the Company has the right to use under a shrinkwrap or similar mass
marketing license. Except as otherwise disclosed in Section 2.21(b) of the
Company Disclosure Schedule and excluding all Intellectual Property Rights
subject to a shrinkwrap or similar mass marketing license, the Company
exclusively owns or has the exclusive right to use all of the Intellectual
Property Rights listed in Section 2.21(a) of the Company Disclosure Schedule.
The Company does not believe it is or will be necessary to utilize any
inventions of any of its employees or consultants (or individuals it currently
intends to hire) made prior to their employment by the Company.
(c) All trademarks, patents and copyrights are currently in compliance
with all legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications with respect to
trademarks, and the payment of filing, examination and maintenance fees and
proof of working or use with respect to patents), are, to the Company's
Knowledge, valid and enforceable. Section 2.21(c) of the Company Disclosure
Schedule sets forth the maintenance fees due on or before December 31, 1999. No
trademark has been or is now involved in any cancellation and, to the Company's
Knowledge, no such action is threatened with respect to any of the trademarks.
Except as disclosed set forth on Section 2.21(c) of the Company Disclosure
Schedule, no patent has been or is now involved in any interference, reissue,
re-examination or opposing proceeding. To the Company's Knowledge, there are no
potentially conflicting trademarks or potentially interfering patents of any
third party. The Company has made available to Parent all opinions, reviews,
assessments or analyses (whether written or oral) of the Company's ability to
use patents whether owned or licensed.
(d) Except as would not be materially adverse to the Company and each
of its Subsidiaries:
(i) The Company owns free and clear of all Liens, all owned
Intellectual Property Rights used in the Company's business, and has a
valid and enforceable right to use in accordance with the applicable
license agreement, if any, all of the Intellectual Property Rights licensed
to the Company and used in the Company's business;
(ii) The Company and each of its Subsidiaries and Affiliated
Entities have taken reasonable steps to protect and preserve the
Intellectual Property Rights which the Company or such Subsidiary owns;
(iii) The conduct of the Company's and its Subsidiaries' and
Affiliated Entities' businesses as currently conducted or contemplated does
not, to the Company's Knowledge, infringe upon any intellectual property
rights owned or controlled by any third party;
26
(iv) There is no Litigation pending or, to the Company's
Knowledge, threatened nor has Company received any written communication
of, and the Company has no Knowledge of any basis for a claim against it
(a) alleging that the Company's activities, products, publications or the
conduct of its businesses or that of any of its Subsidiaries or Affiliated
Entities 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
Rights of the Company or any of its Subsidiaries or Affiliated Entities;
(v) To the Company's Knowledge, no third party is
misappropriating, infringing, diluting, or violating any Intellectual
Property Rights owned by the Company or any of its Subsidiaries or
Affiliated Entities and no such claims have been brought against any third
party by the Company or any of its Subsidiaries or Affiliated Entities, and
the Company has not knowingly misappropriated the trade secrets of any
third party;
(vi) Except as set forth in Section 2.5(a) of the Company
Disclosure Schedule, the execution, delivery and performance by the Company
of this Agreement, and the consummation of the transactions contemplated
hereby will not result in the loss or impairment of or give rise to any
right of any third party to terminate any of the Company's or any of its
Subsidiaries' or Affiliated Entities' right to own any of the Intellectual
Property Rights owned by the Company or any of its Subsidiaries or
Affiliated Entities or to use any Intellectual Property Rights licensed to
the Company or any of its Subsidiaries pursuant to the license agreements,
nor require the consent of any Governmental Authority or third party in
respect of any such Intellectual Property Rights;
(e) All trademarks of the Company and its Subsidiaries have been in
continuous use by the Company or its Subsidiaries or Affiliated Entities. To
the Company's Knowledge (i) there has been no prior use of such trademarks by
any third party which would confer upon said third party superior rights in such
trademarks, and (ii) the registered trademarks have been continuously used in
the form appearing in, and in connection with the goods and services listed in,
their respective registration certificates.
(f) The Company and/or its Subsidiaries have taken all reasonable
steps in accordance with normal industry practice to protect the Company's and
its Subsidiaries' or Affiliated Entities' rights in confidential information and
trade secrets of the Company and/or its Subsidiaries or Affiliated Entities.
Without limiting the foregoing and except as would not be materially adverse to
the Company, the Company and its Subsidiaries and Affiliated Entities have and
enforce a policy of requiring each employee, consultant and contractor to
execute proprietary information, confidentiality and assignment agreements
substantially consistent with the Company's standard forms thereof. Except
under confidentiality obligations, to the Knowledge of the Company, there has
been no material disclosure by the Company or any Subsidiary or Affiliated
Entity of the Company of material confidential information or trade secrets.
27
(g) The Company has undertaken the review and assessment of the
business and operations of itself and its Subsidiaries that could be adversely
affected by its or their failure to be Year 2000 Compliant. The Company has
requested certification from the outside vendors listed in the Company
Disclosure Schedule that the computer system, hardware, software, database,
device and/or equipment purchased from each such vendor and used internally by
the Company, or used by such vendor in the performance of work for the Company,
is or prior to and after January 1, 2000 will be Year 2000 Compliant, and has
provided copies of all such certification received to date to Parent. Based on
its review and assessment, the Company has no reason to believe any material
liability or expense will result from or arise out of failure of any of its or
its Subsidiaries or Affiliated Entities, computer systems, hardware, software,
databases, devices and/or equipment to be Year 2000 Compliant.
2.22 INSURANCE.
(a) Section 2.22 of the Company Disclosure Schedule sets forth a true
and complete list of all insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company and its Subsidiaries and Affiliated Entities including:
(i) a summary of the loss experience under each policy incurred within the last
12 months; (ii) a statement describing each claim incurred within the last 12
months under an insurance policy for an amount in excess of $5,000, which sets
forth: (A) the name of the claimant; (B) a description of the policy by
insurer, type of insurance, and period of coverage; and (C) the amount and a
brief description of the claim; and (iii) a statement describing the loss
experience for all claims that were self-insured, including the number and
aggregate cost of such claims incurred within the last 12 months. There is no
claim by the Company or any of its Subsidiaries and Affiliated Entities pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries and Affiliated Entities are otherwise in full compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage), and the Company shall, and shall
cause its Subsidiaries or Affiliated Entities to, maintain in full force and
effect all such insurance during the period from the date hereof through the
Closing Date. To the Company's Knowledge, such policies of insurance and bonds
are of the type and in amounts customarily carried by Persons conducting
businesses similar to those of the Company and its Subsidiaries or Affiliated
Entities and reasonable in light of the assets of the Company and its
Subsidiaries or Affiliated Entities. As of the date hereof, the Company has not
received notice of any, and to Company's Knowledge there is no threatened,
termination of or material premium increase with respect to any of such policies
or bonds.
(b) Except as set forth on Section 2.22 of the Company Disclosure
Schedule, (i) all policies to which the Company is a party or that provide
coverage to either the Company, or any director or officer of the Company: (A)
are valid, outstanding, and enforceable; (B) are issued by an insurer that is
financially sound and reputable; (C) taken together, provide adequate insurance
coverage for the assets and the operations o the Company for all risks normally
insured against by a Person carrying on the same business as the Company; (D)
are sufficient for compliance with all Laws and Material Agreements to which the
Company is a party or by which it is bound; (E) will continue in full force and
effect following the consummation of the
28
transactions contemplated by this Agreement; and (F) do not provide for any
retrospective premium adjustment or other experienced-based liability on the
part of the Company.
(c) The Company has not received (A) any refusal of coverage from the
issuer of any insurance policy of the Company or any notice that a defense will
be afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will or will not be renewed or that the issuer of any policy is not willing
or able to perform its obligations thereunder.
(d) The Company has paid all premiums due, and has otherwise performed
all of its respective obligations, under each policy to which the Company is a
party or that provides coverage to the Company or a director thereof.
(e) The Company has given notice to the insurer of all claims
that may be insured thereby.
2.23 BROKERS. No broker, financial advisor, finder or investment banker
or other Person (other than Punk Xxxxxx & Company and Xxxxxxxx Xxxx) is entitled
to any broker's, financial advisor's, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has heretofore
furnished to Parent a complete and correct copy of all agreements set forth in
Section 2.23 of the Company Disclosure Schedule between the Company and
financial advisor pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated hereunder.
2.24 CERTAIN BUSINESS PRACTICES. As of the date hereof, neither the
Company nor any of its Subsidiaries or Affiliated Entities nor any director or
officer, nor, to the Company's Knowledge, any employee or agent of the Company
or any of its Subsidiaries or Affiliated Entities has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful payments relating
to political activity, (ii) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic political party or
campaign or violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended, (iii) consummated any transaction, made any payment, entered into
any agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended, or (iv) made any other unlawful
payment.
2.25 INTERESTED PARTY TRANSACTIONS. Except as set forth in Section 2.25
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries or Affiliated Entities is indebted to any director, officer,
employee or agent of the Company or any of its Subsidiaries or Affiliated
Entities (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such Person is indebted to the
Company or any of its Subsidiaries or Affiliated Entities.
2.26 DISCLOSURE. The representations and warranties and statements of
the Company contained in this Agreement (including the Company Disclosure
Schedule) do not contain, and will not contain at the Closing Date, any untrue
statement of a material fact, and do not omit, and will not omit at the Closing
Date, to state any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under which they are
made, not misleading. There is no fact known to the Company that has not been
disclosed to the Parent in this Agreement (including in the Company Disclosure
Schedule) that is reasonably likely to have a Material Adverse Effect on the
Company.
29
2.27 HSR FILING. Assuming that Parent's annual revenues and assets are
each less than $100,000,000, no filing under the Xxxx-Xxxxx-Xxxxxx Act (the "HSR
Act") is required in connection with the Merger, because the Company (i) is not
"engaged in manufacturing" within the meaning of 16 C.F.R. (S)801.1(j) and (ii)
has annual revenues and assets which are each less than $100,000,000.
2.28 INDEPENDENT CONTRACTORS. All individuals who are performing
services and are or were classified by the Company as "independent contractors"
at the Closing Date qualify for such classification. Each of the Company's
independent contractors is set forth in Section 2.28 of the Company Disclosure
Schedule.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that:
3.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation or organization and Parent has
all the requisite corporate power and authority, and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and Orders ("Parent Approvals") necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted. Each of Parent and Merger Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary. Merger Sub is a newly-formed single purpose entity which has been
formed solely for the purposes of the Merger, has carried on no business to date
and will not carry on any business or engage in any activities other than those
necessary to the Merger.
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3.2 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of Parent
consists of (i) 20,000,000 shares of Common Stock, $.001 par value per share
(the "Parent Common Stock"), of which 850,972 shares are issued and outstanding;
1,500,000 shares are reserved for future issuance pursuant to outstanding
employee stock options or other outstanding stock options; and 1,137,592 shares
are reserved for future issuance pursuant to outstanding warrants; and (ii)
13,400,000 shares of preferred stock, par value $.001 per share, of which
1,200,000 shares have been designated as Series A Preferred Stock, 904,200 of
which are issued or outstanding; 300,000 shares have been designated as Series
B Preferred Stock, 103,840 of which are issued and outstanding; 2,493,692 shares
have been designated Series C Preferred Stock, 2,480,176 of which are issued and
outstanding; 367,347 shares have been designated Series D Preferred Stock, none
of which are issued or outstanding; and 17,000,000 shares have been designated
Series E Preferred Stock, none of which are issued or outstanding. All of the
outstanding shares of Parent Preferred Stock are, and all shares to be issued as
part of the Merger Stock Consideration will be, when issued in accordance with
the terms hereof, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights.
(b) As of the date hereof, the authorized capital stock of Merger Sub
consists of 3,000 shares of Merger Sub Common Stock, of which 100 shares of
Merger Sub Common Stock are outstanding. All of the outstanding shares of
Merger Sub Common Stock are owned by Parent.
3.3 AUTHORIZATION OF AGREEMENT. Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and each instrument required hereby to be executed and delivered by it at the
Closing, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
each of Parent and Merger Sub of this Agreement and each instrument required
hereby to be executed and delivered by it at the Closing, the performance of
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of each of Parent and Merger Sub and by Parent as the sole
stockholder of Merger Sub and except for filing of the Certificate of Merger, no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and Merger
Sub and, assuming due authorization, execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, in each case except to the extent that the enforcement hereof may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium or other
similar law now or hereafter in effect relating to creditors' rights generally
and (B) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). No other corporate proceedings
are required by Parent other than the approval of the Board of Directors of
Parent and Merger Sub.
3.4 APPROVALS. The execution and delivery by Parent and Merger Sub of
this Agreement or any instrument required by this Agreement to be executed and
delivered by Parent or Merger Sub at the Closing do not, and the performance by
each of Parent and Merger Sub of
31
its respective obligations under this Agreement or any instrument required by
this Agreement to be executed and delivered by Parent or Merger Sub at the
Closing shall not, require Parent or Merger Sub to obtain any consent, approval,
authorization, license, waiver, qualification, Order or permit of, observe any
waiting period imposed by, or require Parent or Merger Sub to make any filing
with or notification to, any Court or Governmental Authority, except for (A)
compliance with applicable requirements, if any, of the Securities Act, the
Exchange Act or Blue Sky Laws and (B) the filing of appropriate Merger or other
documents as required by Delaware Law.
3.5 NO VIOLATION. Assuming effectuation of all filings, notifications,
and registrations with, termination or expiration of any applicable waiting
periods imposed by and receipt of all permits or Orders of Courts and/or
Governmental Authorities set forth in Section 3.4(A) or (B) above, the execution
and delivery by Parent and Merger Sub of this Agreement or any instrument
required by this Agreement to be executed and delivered by Parent or Merger Sub
at the Closing do not, and the performance of this Agreement by each of Parent
or Merger Sub of its respective obligations under this Agreement or any
instrument required by this Agreement to be executed and delivered by Parent or
Merger Sub at the Closing will not, (i) conflict with or violate the Certificate
of Incorporation or By-laws of Parent or the Certificate of Incorporation or By-
laws of Merger Sub, (ii) conflict with or violate any Law, Order or Regulation
in each case applicable to Parent or Merger Sub or by which either of its
respective properties is bound or affected, or (iii) result in any breach or
violation of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of their respective properties is bound or affected.
3.6 FINANCIAL STATEMENTS. Parent has delivered to the Company: (a)
audited balance sheets of Parent as at December 31 in each of the years 1996
through 1998 , and the related audited consolidated statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended, together with the report thereon of KPMG Peat Marwick LLP, independent
certified public accountants (the most recent of which, the "Parent Balance
Sheet"), and (b) unaudited balance sheets of the Parent as at March 31, 1999,
June 30, 1999 and September 30, 1999 and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash flow for the
three, six and nine months then ended, including in each case the notes thereto.
Such financial statements and notes (collectively, the "Parent Financial
Statements"), are true, correct and complete and fairly present the financial
condition and the results of operations, changes in stockholders' equity, and
cash flow of the Parent in all material respects as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the Parent Balance
Sheet). Except as disclosed therein, the Parent Financial Statements reflect
the consistent application of such accounting principles throughout the periods
involved.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.7 of the Parent Disclosure Schedule, since September 30, 1999, Parent
has conducted its business only in
32
the ordinary and usual course and in a manner consistent with past practice and,
since such date, there has not occurred any event, development or change which,
individually or in the aggregate, has resulted in or is reasonably likely to
result in a Material Adverse Effect.
3.8 BROKERS. No broker, financial advisor, finder or investment banker
or other Person (other than Punk Xxxxxx & Company) is entitled to any broker's,
financial advisor's, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent. Parent has heretofore furnished to the Company a complete
and correct copy of all agreements set forth in Section 3.7 of the Parent
Disclosure Schedule between Parent and financial advisor pursuant to which such
firm would be entitled to any payment relating to the transactions contemplated
hereunder.
3.9 DISCLOSURE. The representations and warranties and statements of
Parent contained in this Agreement (including the Parent Disclosure Schedule) do
not contain, and will not contain at the Closing Date, any untrue statement of a
material fact, and do not omit, and will not omit at the Closing Date, to state
any material fact necessary to make such representations, warranties and
statements, in light of the circumstances under which they are made, not
misleading. There is no fact known to Parent that has not been disclosed to the
Company in this Agreement (including in the Parent Disclosure Schedule) that is
reasonably likely to have a Material Adverse Effect on Parent.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company
covenants and agrees that, between the date hereof and the Effective Time,
except as expressly required or permitted by this Agreement or unless Parent
shall otherwise agree in writing, the Company shall conduct and shall cause the
businesses of each of its Subsidiaries and Affiliated Entities to be conducted
only in, and the Company and its Subsidiaries and Affiliated Entities shall not
take any action except in, the ordinary course of business and in a manner
consistent with past practice. The Company shall use its best efforts to
preserve intact the business organization and assets of the Company and each of
its Subsidiaries and Affiliated Entities, and to operate, and cause each of its
Subsidiaries and Affiliated Entities to operate, according to plans and budgets
provided to Parent, to keep available the services of the present officers,
employees and consultants of the Company and each of its Subsidiaries and
Affiliated Entities, to maintain in effect Material Agreements and to preserve
the present relationships of the Company and each of its Subsidiaries and
Affiliated Entities with advertisers, sponsors, customers, licensees, suppliers
and other Persons with which the Company or any of its Subsidiaries and
Affiliated Entities has business relations. By way of amplification and not
limitation, except as expressly permitted by this Agreement, neither the Company
nor any of its Subsidiaries or Affiliated Entities shall, between the date
hereof and the Effective Time, directly or indirectly do, or propose to do, any
of the following without the prior written consent of Parent:
(a) amend or otherwise change the Certificate of Incorporation or By-
laws or equivalent organizational document of the Company or any of its
Subsidiaries or Affiliated
33
Entities or alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of the Company or any
of its Subsidiaries or Affiliated Entities;
(b) issue, sell, transfer, pledge, dispose of or encumber, or
authorize the issuance, sale, transfer, pledge, disposition or encumbrance of,
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest of the Company, any of its Subsidiaries or
Affiliates (except for the issuance of Company Common Shares issuable pursuant
to employee stock options granted prior to the date hereof under the Company
Stock Plan, or outside of any plan, which options are outstanding on the date
hereof or pursuant to Company Warrants (the "Company Warrants") outstanding on
the date hereof); or sell, transfer, pledge, dispose of or encumber, or
authorize the sale, transfer, pledge, disposition or encumbrance of any assets
of the Company or any of its Subsidiaries or Affiliated Entities (except for
sales of assets in the ordinary course of business and in a manner consistent
with past practice) or redeem, purchase or otherwise acquire, directly or
indirectly, any of the capital stock of the Company or interest in or securities
of any Subsidiary or Affiliated Entity;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock (except that a wholly owned Subsidiary of the Company
may declare and pay a dividend to its parent); split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or amend the terms of, repurchase, redeem or otherwise acquire, or
permit any Subsidiary or Affiliated Entity to repurchase, redeem or otherwise
acquire, any of its securities or any securities of its Subsidiaries or
Affiliated Entities, or propose to do any of the foregoing;
(d) sell, transfer, lease, license, sublicense, mortgage, pledge,
dispose of, encumber, grant or otherwise dispose of any Intellectual Property
Rights, or amend or modify in any material way any existing agreements with
respect to any Intellectual Property Rights.
(e) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, limited liability company, partnership, joint
venture or other business organization or division thereof; incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee (other than guarantees of bank debt of the Company's Subsidiaries or
Affiliated Entities entered into in the ordinary course of business) or endorse
or otherwise as an accommodation become responsible for, the obligations of any
Person, or make any loans, advances or enter into any financial commitments,
except in the ordinary course of business consistent with past practice and as
otherwise permitted under any loan or credit agreement to which the Company is a
party; authorize any capital expenditures which are, in the aggregate, in excess
of $100,000 for the Company and its Subsidiaries or Affiliated Entities taken as
a whole; or enter into or amend in any material respect any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 4.1(e);
(f) hire or terminate any employee or consultant, except in the
ordinary course of business consistent with past practice; increase the
compensation (including, without limitation, bonus) payable or to become payable
to its officers or employees, except for increases
34
in salary or wages of employees of the Company or its Subsidiaries or Affiliated
Entities who are not officers of the Company in the ordinary course of business
consistent with past practices, or grant any severance or termination pay or
stock options to, or enter into any employment or severance agreement with any
director, officer or other employee of the Company or any of its Subsidiaries or
Affiliated Entities, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees;
(g) change, any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition, payments of accounts
payable and collection of accounts receivable) unless required by statutory
accounting principles or GAAP;
(h) create, incur, suffer to exist or assume any Lien on any of their
material assets other than Liens outstanding on the date hereof;
(i) other than in the ordinary course of business consistent with past
practice, (A) enter into any material agreement, (B) modify, amend or transfer
in any material respect or terminate any material agreement to which the Company
or any of its Subsidiaries or Affiliated Entities is a party or waive, release
or assign any material rights or claims thereto or thereunder or (C) enter into
or extend any lease with respect to real property with any third party;
(j) make any Tax election or settle or compromise any federal, state,
local or foreign income tax liability or agree to an extension of a statute of
limitations;
(k) settle any material Litigation or waive, assign or release any
material rights or claims except, in the case of Litigation, any Litigation
which settlement would not (A) impose either material restrictions on the
conduct of the business of the Company or any of its Subsidiaries or Affiliated
Entities or (B) for any individual Litigation item settled, exceed $50,000 in
cost or value to the Company or any of its Subsidiaries or Affiliated Entities.
The Company and its Subsidiaries or Affiliated Entities shall not pay, discharge
or satisfy any liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except in the ordinary course of business
consistent with past practice in an amount or value not exceeding $100,000 in
any instance or series of related instances or $100,000 in the aggregate or in
accordance with their terms as in effect as of the date hereof;
(l) engage in any transaction, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any related party,
other than those contemplated pursuant to the terms of this Agreement and those
existing as of the date hereof which are listed in Section 4.1(l) of the Company
Disclosure Schedule;
(m) fail to renew or maintain in full force and effect all insurance
policies, as the case may be, currently in effect or fail to pay any insurance
premiums thereon; and
(n) authorize, recommend, propose or announce an intention to do any
of the foregoing, or agree or enter into any agreement, contract commitment or
arrangement to do any of the foregoing.
35
4.2 NO SOLICITATION OF OTHER PROPOSALS.
(a) From the date hereof until the earlier of the Effective Time or
the termination of this Agreement in accordance with its terms, the Company
shall not, nor shall it permit any of its Subsidiaries or Affiliated Entities or
any of its or their respective officers, directors, employees, representatives
or agents (collectively, the "Company Representatives") to, and the Company
shall use its best efforts to cause each Company Stockholder who is an Affiliate
not to, directly or indirectly, (i) solicit, facilitate, initiate or encourage,
or take any action to solicit, facilitate, initiate or encourage, any inquiries
or the making of any proposal or offer that constitutes an Acquisition Proposal
or (ii) participate or engage in discussions or negotiations with, or provide
any information to, any Person concerning an Acquisition Proposal or which might
reasonably be expected to result in an Acquisition Proposal.
For purposes of this Agreement, the term "Acquisition Proposal" shall
mean any inquiry, proposal or offer from any person (other than Parent, Merger
Sub or any of their Affiliates) relating to:
(1) any merger, consolidation, recapitalization, liquidation or
other direct or indirect business combination, involving the Company or any
Subsidiary or Affiliated Entity or the issuance or acquisition of shares of
capital stock or other equity securities of the Company or any Subsidiary
or Affiliated Entity representing 10% or more of the outstanding capital
stock of the Company or such Subsidiary or Affiliated Entity or any tender
or exchange offer that if consummated would result in any Person, together
with all Affiliates thereof, beneficially owning shares of capital stock or
other equity securities of the Company or any Subsidiary or Affiliated
Entity representing 10% or more of the outstanding capital stock of the
Company or such Subsidiary or Affiliated Entity, or
(2) the sale, lease, exchange, license (whether exclusive or
not), or any other disposition of any significant portion of a material
Intellectual Property Right, or any significant portion of the business or
other assets of the Company or any Subsidiary or Affiliated Entity, or any
other transaction, the consummation of which could reasonably be expected
to impede, interfere with, prevent or materially delay the consummation of
the transactions contemplated hereby or which would reasonably be expected
to diminish significantly the benefits to Parent or its Affiliates of the
transactions contemplated hereby.
The Company shall immediately cease and cause to be terminated and shall cause
all Company Representatives (and shall use its best efforts to cause its non-
officer and non-director Affiliates) to terminate all existing discussions or
negotiations with any Persons conducted heretofore with respect to, or that
could reasonably be expected to lead to, an Acquisition Proposal. The Company
shall promptly notify all Company Representatives and non-officer and non-
director Affiliates of its obligations under this Section 4.2.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall:
36
(1) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal other than the Merger,
(2) withdraw or modify or propose to withdraw or modify in a
manner adverse to Parent or Merger Sub its approval or recommendation of
the Merger, this Agreement or the transactions contemplated hereby,
(3) upon a request by Parent to reaffirm its approval or
recommendation of this Agreement or the Merger, fail to do so within two
(2) Business Days after such request is made,
(4) enter, or cause the Company or any Subsidiary or Affiliated
Entity to enter, into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Acquisition
Proposal, or
(5) resolve or announce its intention to do any of the foregoing.
ARTICLE V
ADDITIONAL OBLIGATIONS
5.1 CONSENT AND WAIVER OF COMPANY STOCKHOLDERS.
(a) The Company shall promptly after the date hereof take all action
necessary in accordance with the provisions of the DGCL and the Company's
Certificate of Incorporation and By-laws to (1) obtain the written consent of
the Company's Stockholders pursuant to (S)228 of the DGCL or (2) duly call, give
notice of and (unless Parent requests otherwise) hold the Company Stockholders'
Meeting (the "Company Stockholders' Meeting") as soon as practicable and shall
consult with Parent in connection therewith. The Company shall mail to each
Stockholder who was a stockholder on the record date for determining
stockholders entitled to notice of the Meeting, (i) a notice of special meeting
(which notice may be included in the Information Statement (as defined herein)),
(ii) an information statement and letter of transmittal (the "Information
Statement") with respect to the matters to be submitted for stockholder approval
at the Meeting, in which its board of directors shall recommend to its
stockholders the approval of this Agreement; and (iii) a notice that appraisal
rights are available for the Company Shares held by each such Company
Stockholder, together with a statement of rights of objecting Company
Stockholders, in satisfaction of the Company's obligations under Section 262 of
the Delaware General Corporation Law. The Company shall use its best efforts to
obtain all votes, consents, and approvals of the Company Stockholders necessary
for the approval of this Agreement under the Delaware General Corporation Law
and its Certificate of Incorporation and By-laws. If Company Stockholders'
Meeting has been called and noticed, the Company shall not postpone or adjourn
(other than for the absence of a quorum and then only to a future date specified
by Parent) the Company Stockholders' Meeting without the consent of Parent. The
Company shall solicit from stockholders of the Company consents or proxies in
favor of the Merger and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required by the DGCL to authorize the
Merger.
37
(b) Each Company Stockholder hereby (i) irrevocably waives all of his, her
or its rights pursuant to Section 7 of the Certificate of Designation,
Preferences, and Rights of Series E Convertible Preferred Stock of Parent to
have any shares of Parent Preferred Stock redeemed by Parent, and (ii)
acknowledges that each stock certificate representing such shares of Parent
Preferred Stock shall bear the following legend (and the Company shall make a
notation on its books of transfer to such effect):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
LIMITATION OF RIGHTS PURSUANT TO SECTION 5.1(B) OF THE AGREEMENT AND
PLAN OF MERGER BY AND AMONG ORCHID BIOCOMPUTER, INC., GS ACQUISITION
CORP.. AND GENESCREEN, INC. DATED AS OF DECEMBER 21, 1999."
The foregoing waiver shall be binding upon any and all subsequent holders
of such shares of Parent Preferred Stock.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Upon reasonable notice, the Company shall (and shall cause each of
its Subsidiaries and Affiliated Entities to) afford to the officers, employees,
accountants, counsel and other representatives of Parent, reasonable access,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries and Affiliated Entities to) furnish
promptly to the other all information concerning its business, properties,
books, contracts, commitments, records and personnel as such other party may
reasonably request, including, without limitation information pertaining to
employees and consultants excluded from any benefits plan, and each party shall
make available to the other party the appropriate individuals for discussion of
such party's business, properties and personnel as the other party may
reasonably request. No investigation pursuant to this Section 5.2(a) shall
affect any representations or warranties of the parties herein or the conditions
to the obligations of the parties hereto.
(b) The Parent shall keep all information obtained pursuant to Section
5.2(a) confidential in accordance with the terms of the confidentiality
agreement, dated August 13, 1999 (the "Confidentiality Agreement"), between
Parent and the Company. Anything contained in the Confidentiality Agreement to
the contrary notwithstanding, the Company and Parent hereby agree that each such
party may issue press release(s) or make other public announcements in
accordance with Section 5.7.
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5.3 ALL REASONABLE EFFORTS; FURTHER ASSURANCES.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each party hereto shall use all reasonable efforts to take, or cause
to be taken, all appropriate actions, and do, or cause to be done, and to assist
and cooperate with the other party or parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated hereby.
The Company and Parent shall use all reasonable efforts to:
(i) obtain all licenses, permits, consents, waivers, approvals,
authorizations, qualifications or Orders (including all United States and
foreign governmental and regulatory rulings and approvals), required to be
obtained by Parent or the Company or any of their respective Subsidiaries
or Affiliated Entities, and the Company and Parent shall make all filings
(including, without limitation, all filings with United States and foreign
governmental or regulatory agencies) under applicable Law required in
connection with the authorization, execution and delivery of this Agreement
by the Company and Parent and the consummation by them of the transactions
contemplated hereby and thereby, including the Merger (in connection with
which Parent and the Company will cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to filings and, if
requested, will accept all reasonable additions, deletions or changes
suggested in connection therewith);
(ii) furnish all information required for any application or
other filing to be made pursuant to any applicable law or any applicable
Regulations of any Governmental Authority in connection with the
transactions contemplated by this Agreement; and
(iii) lift, rescind or mitigate the effects of any injunction,
restraining order or other order adversely affecting the ability of any
party hereto to consummate the transactions contemplated hereby and thereby
and to prevent, with respect to any threatened injunction, restraining
order or other Order, the issuance or entry thereof,
provided, however, that neither Parent nor any of its Affiliates shall be under
any obligation to (x) make proposals, execute or carry out agreements or submit
to Orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets material (in nature or amount) of Parent, any of its Affiliates, the
Company or the holding separate of the Company Common Shares or Company
Preferred Shares or imposing or seeking to impose any material limitation on the
ability of Parent or any of its Subsidiaries or Affiliated Entities to conduct
their business or own such assets or to acquire, hold or exercise full rights of
ownership of the Company Common Shares or Company Preferred Shares or (y)
otherwise take any step to avoid or eliminate any impediment which may be
asserted under any Law governing competition, monopolies or restrictive trade
practices which, in the reasonable judgment of Parent, might result in a
limitation of the benefit expected to be derived by Parent as a result of the
transactions contemplated hereby or might adversely affect the Company or Parent
or any of Parent's Affiliates. Neither party hereto will take any action
39
which results in any of the representations or warranties made by such party
pursuant to Articles II or III, as the case may be, becoming untrue or
inaccurate in any material respect.
(b) Parent and the Company shall use all reasonable efforts to satisfy
or cause to be satisfied all of the conditions precedent that are set forth in
Article VI, as applicable to each of them, and to cause the transactions
contemplated by this Agreement to be consummated. Each party hereto, at the
reasonable request of another party hereto, shall execute and deliver such other
instruments and do and perform such other reasonable acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.4 STOCK OPTIONS.
(a) As soon as practicable after the execution of this Agreement, the
Company shall use its commercially reasonable best efforts to cause the exercise
or termination of all outstanding employee and consultant stock options and all
non-employee director stock options, including without limitation, the incentive
stock options and non-qualified stock options issued pursuant to the Company
Stock Plan. Notwithstanding the foregoing, under no circumstances shall the
Company be required to offer any incentives or other consideration for the
termination of such options.
(b) The Company shall use commercially best efforts to terminate all
Company Stock Plans as of the Effective Time or as promptly as practicable
thereafter.
5.5 REGISTRATION RIGHTS. As soon as practicable after the execution of
this Agreement, the Company shall use commercially reasonable best efforts to
terminate, effective as of the Effective Time, agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled or to cause the Company or any of its Subsidiaries
or Affiliated Entities to file a registration statement under the Securities
Act, or which otherwise relate to the registration of any securities of the
Company. The Company shall use its commercially reasonable best efforts to
ensure that following the Effective Time no holder of any voting or non-voting
capital stock, other equity interests, or other voting securities of the
Company, or debt or other instrument convertible or exchangeable for any voting
or non-voting capital stock, other equity interests, or other voting securities
of the Company, will have any right thereunder or with respect thereto to cause
the Company or any of its Subsidiaries or Affiliated Entities to file a
registration statement under the Securities Act, or which otherwise relate to
the registration of any securities of the Company.
5.6 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which results in any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect (or, in the case of any representation or warranty qualified by
its terms by materiality or Material Adverse Effect, then untrue or inaccurate
in any respect) and any failure of the Company, Parent or Merger Sub, as the
case may be, to comply with or satisfy in any material respect any covenant,
condition or
40
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.6 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
(b) Each of the Company and Parent shall give prompt notice to the
other of (i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the Merger, (ii)
any notice or other communication from any Governmental Authority in connection
with the Merger, (iii) any Litigation, relating to or involving or otherwise
affecting the Company or its Subsidiaries or Affiliated Entities or the Parent
that relates to the consummation of the Merger; (iv) the occurrence of a default
or event that, with notice or lapse of time or both, will become a default under
any contract which is material to Parent or any Material Agreement of the
Company; and (v) any change that is reasonably likely to have a Material Adverse
Effect on the Company or Parent or is likely to delay or impede the ability of
either Parent or the Company to consummate the transactions contemplated by this
Agreement or to fulfill their respective obligations set forth herein.
(c) Each of the Company and Parent shall give (or shall cause their
respective Subsidiaries or Affiliated Entities to give) any notices to third
Persons, and use, and cause their respective Subsidiaries or Affiliated Entities
to use, all reasonable efforts to obtain any consents from third Persons (i)
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, (ii) otherwise required under any contracts, licenses, leases or
other agreements in connection with the consummation of the transactions
contemplated hereby or (iii) required to prevent a Material Adverse Effect on
the Company or Parent from occurring. If any party shall fail to obtain any
such consent from a third Person, such party shall use all reasonable efforts,
and will take any such actions reasonably requested by the other parties, to
limit the adverse effect upon the Company and Parent, their respective
Subsidiaries and Affiliated Entities, and their respective businesses resulting,
or which would result after the Effective Time, from the failure to obtain such
consent.
5.7 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with and
obtain the approval of the other party before issuing any press release or other
public announcement with respect to the Merger or this Agreement and shall not
issue any such press release prior to such consultation and approval, except as
may be required by applicable law or any listing agreement related to the
trading of the shares of either party on any national securities exchange or
national automated quotation system, in which case the party proposing to issue
such press release or make such public announcement shall use reasonable efforts
to consult in good faith with the other party before issuing any such press
release or making any such public announcement. Notwithstanding the foregoing,
in the event the Company's Board of Directors withdraws its recommendation of
this Agreement in compliance herewith, the Company will no longer be required to
consult with or obtain the agreement of Parent in connection with any press
release or public announcement.
5.8 TAKEOVER LAWS. If any form of anti-takeover statute, regulation or
Certificate of Incorporation provision or contract is or shall become applicable
to the Merger or the transactions contemplated hereby, the Company and the Board
of Directors of the Company shall grant such approvals and take such actions as
are necessary under such laws and provisions so that the transactions
contemplated hereby and thereby may be consummated as promptly as
41
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of such statute, regulation, provision or
contract on the transactions contemplated hereby or thereby.
5.9 STOCKHOLDER AGREEMENTS. The Company shall use its reasonable best
efforts, on behalf of Parent and pursuant to the request of Parent, to cause
each stockholder designated by the Parent (a "Consenting Stockholder") to
execute and deliver to Parent a Stockholder Agreement in the form of Exhibit A
attached hereto, as soon as reasonably practicable after the execution of this
Agreement. The Company acknowledges and agrees to be bound by and comply with
the provisions of paragraph 2 of each of the Stockholder Agreements as if a
party thereto with respect to transfers of record of ownership of shares of the
Company Common Shares and Company Preferred Shares, and agrees to notify the
transfer agent for any Company Common Shares and provide such documentation and
do such other things as may be necessary to effectuate the provisions of such
Stockholder Agreements.
5.10 RELEASE AGREEMENTS. The Company shall use its best efforts, on
behalf of Parent and pursuant to the request of Parent, to cause each Person
identified in Section 5.10 of the Company Disclosure Schedule to execute and
deliver to Parent a written release and waiver satisfactory in form and
substance to Parent in its sole discretion and in substantially the form
attached hereto as Exhibit C (the "Release Agreements") prior to the Effective
Time, providing for, among other things, release of the Company, Parent and the
Surviving Corporation and their respective Affiliates from any and all claims,
known and unknown, that such Person has or may have against such Persons through
the Effective Time.
5.11 MAINTENANCE, PROSECUTION AND FILING OBLIGATIONS. The Company shall
pay the costs of preparation for filing, prosecution, and maintenance of all
Intellectual Property Rights as required and shall not permit the lapse of any
filings following the execution of this Agreement. The Company shall provide
copies of all filings and evidence of payments under this Section 5.11 to
Parent.
5.12 AMENDMENT TO 401(K) PLAN. The Company shall promptly after the
date hereof take all action necessary in accordance with the provisions of
applicable federal and state law to amend its 401(k) plan (the "401(k) Plan") to
change the status of the 401(k) Plan from standardized to non-standardized and
to limit the participation of individuals in the plan to the employees of the
Company and its Subsidiaries.
5.13 POST-CLOSING ERISA ASSESSMENT. As soon as reasonably practicable and no
later than eight (8) months following the Effective Time, Parent shall evaluate
the benefit plans, policies, procedures, employment records, and other documents
of the Company in order to determine any potential exposure of the Surviving
Corporation to liability under ERISA with respect to eligibility requirements
under the Company 401(k) Plan (such evaluation hereinafter referred to as the
"ERISA Assessment"). Upon completion of the ERISA Assessment, Parent shall
provide written notice to the Stockholders' Representative of its good faith
estimate of the amount of funds reasonably sufficient to pay for potential
(determined in accordance with a reasonable application of applicable law)
claims related to violations of ERISA ("ERISA Claims") that are discovered
during the ERISA Assessment, including reasonable legal fees not to exceed
$10,000
42
to cover the costs of the ERISA Assessment. Parent and each of the Company
Stockholders hereby agree that all ERISA Claims shall be addressed as provided
for in the Escrow Agreement.
ARTICLE VI
CONDITIONS OF MERGER
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived by the party entitled to the benefit thereof,
in whole or in part, the extent permitted by applicable Law:
(a) STOCKHOLDER APPROVAL; EXECUTION AND DELIVERY OF AGREEMENT. This
Agreement and the Merger shall have been authorized by the requisite vote of the
Company Stockholders in accordance with the provisions of the DGCL and the
Certificate of Incorporation and by-laws of the Company. Each of the Company
Stockholders shall have executed a written consent pursuant to which each
Company Stockholder agrees (i) to be bound as a party to the Agreement and (ii)
to execute additional documents necessary, desirable, proper or reasonably
requested by Parent to carry out the purposes of the Agreement and (iii) to use
all reasonable efforts to take, or cause to be taken, all appropriate actions,
and do, or cause to be done, and to assist and cooperate with the other party or
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger.
(b) REGULATORY APPROVALS. All approvals and consents of applicable
Courts and/or Governmental Authorities required to consummate the Merger shall
have been received, except for such approvals and consents, the failure of which
to have been so received, shall not have a Material Adverse Effect.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other Order (whether
temporary, preliminary or permanent) issued by any court of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect which is non-
appealable, nor shall any proceeding brought by any administrative agency or
commission or other Governmental Authority, domestic or foreign, seeking any of
the foregoing be pending, and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(d) NO ORDER. No Court or Governmental Authority having jurisdiction
over the Company or Parent shall have enacted, issued, promulgated, enforced or
entered any Law, Regulation or Order (whether temporary, preliminary or
permanent) which is then in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger substantially on the
terms contemplated by this Agreement without an opportunity for appeal by either
party.
43
(e) PRIVATE PLACEMENT OFFERING. Parent shall have closed a private
placement of Parent Preferred Shares resulting in aggregate proceeds to Parent
of not less than $24,000,000.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the following conditions, any or all of which may be waived by Parent and Merger
Sub, in whole or in part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement and the Related Agreements
shall be true and correct in all material respects on and as of the Effective
Time, except for changes contemplated by this Agreement (together with the
Company Disclosure Schedule) except for those (x) representations and warranties
that are qualified by materiality or Material Adverse Effect, (in which case
such representations and warranties shall be true and correct in all respects)
and (y) representations and warranties which address matters only as of a
particular date (in which case such representations and warranties qualified as
to materiality or Material Adverse Effect shall be true and correct in all
respects, and those not so qualified shall be true and correct in all material
respects, on and as of such particular date), with the same force and effect as
if made on and as of the Effective Time, and Parent and Merger Sub shall have
received a certificate to such effect signed by the Chief Executive Officer of
the Company.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement and the Related Agreements to be performed or complied with by it
on or prior to the Effective Time. Parent and Merger Sub shall have received a
certificate to such effect signed by the Chief Executive Officer and Chief
Financial Officer of the Company.
(c) THIRD PARTY CONSENTS. Parent shall have received, prior to the
Effective Time, evidence, in form and substance reasonably satisfactory to it,
that those licenses, Permits, consents, waivers, approvals, authorizations,
qualifications or Orders (including all United States and foreign governmental
and regulatory rulings and approvals) of Governmental Authorities and other
third parties described in Section 2.5(a) of the Company Disclosure Schedule (or
not described in Section 2.5(a) of the Company Disclosure Schedule but required
as described in Section 2.5(a) and (b) of this Agreement) have been obtained,
except where failure to have been so obtained, either individually or in the
aggregate, shall not have a Material Adverse Effect.
(d) RELATED AGREEMENTS. Each of the Related Agreements shall be in
full force and effect as of the Effective Time and become effective in
accordance with the respective terms thereof and the actions required to be
taken thereunder by the parties thereto immediately prior to the Effective Time
shall have been taken, and each Person who or which is required or contemplated
by the parties hereto to be a party to any Related Agreement who or which did
not theretofore enter into such Related Agreement shall execute and deliver such
Related Agreement.
44
(e) RELEASE AGREEMENTS. Parent shall have received Release Agreements
substantially in the form of Exhibit C executed and delivered by each Person
identified on Section 5.10 of the Company Disclosure Schedule.
(f) NO MATERIAL ADVERSE EFFECT. From and including the date hereof,
there shall not have occurred any event and no circumstance shall exist which,
alone or together with any one or more other events or circumstances has had, is
having or would reasonably be expected to have a Material Adverse Effect on the
Company.
(g) DISSENTING SHARES. The Dissenting Shares shall comprise not more
than 5% of the issued and outstanding Company Common Shares and Company
Preferred Shares.
(h) MERGER CERTIFICATE. The Company shall have executed and delivered
the Merger Certificate.
(i) OPINION OF COUNSEL TO THE COMPANY. Parent shall have received the
opinion of Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx, L.L.P., dated the Closing Date,
substantially in the form of Exhibit D.
(j) TERMINATION OF REGISTRATION RIGHTS. The Company shall have
terminated, effective as of the Effective Time, all agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled, or to cause the Company or any of its Subsidiaries
to file a registration statement under the Securities Act, or otherwise relate
to the registration of any securities of the Company, except as permitted under
Section 5.6 hereof.
(k) CANCELLATION OF NOTE. The Company shall have executed such
documents and shall have taken such actions as are necessary to cancel,
effective as of the Effective Time, that certain Subordinated Convertible Term
Note dated as of September 11, 1998 by Parent in favor of the Company in the
original principal amount of $3,547,820.50.
(l) NON-COMPETITION AGREEMENTS. Parent shall have received non-
competition agreements executed by each of the individuals listed in Section
6.2(l) of the Company Disclosure Schedule substantially in the form of Exhibit F
attached hereto.
(m) DUE DILIGENCE REVIEW. Parent shall have completed its due
diligence reviews of the business, operations, financial status, contracts and
title to the properties of the Company and its Subsidiaries and the results
thereof shall be satisfactory, in the sole discretion of Parent; provided,
however, that Parent shall not have any obligation to undertake or, if
undertaken, to complete any such due diligence review and the satisfaction of
this Section 6.2(m) by waiver or completion of the due diligence review to the
satisfaction of Parent shall not constitute a waiver or release of the Company
with respect to any warranty, representation or obligation of the Company
pursuant to this Agreement.
(n) AMENDMENT TO 401(K) PLAN. The Company shall have amended its
401(k) Plan pursuant to Section 5.12 of this Agreement.
45
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger is also subject to the following conditions,
any or all of which may be waived by Company, in whole or in part, to the extent
permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement and the Related
Agreements shall be true and correct in all material respects on and as of the
Effective Time, except for changes contemplated by this Agreement, (except for
those (x) representations and warranties that are qualified by materiality or
Material Adverse Effect, in which case such representations and warranties shall
be true and correct in all respects and (y) representations and warranties which
address matters only as of a particular date (in which case such representations
and warranties qualified as to materiality or Material Adverse Effect shall be
true and correct in all respects, and those not so qualified shall be true and
correct in all material respects, on and as of such particular date), with the
same force and effect as if made on and as of the Effective Time, and the
Company shall have received a certificate to such effect signed by the Chief
Operating Officer of Parent, with respect to Parent and the Vice President of
Merger Sub, with respect to Merger Sub.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by the Chief Operating Officer of Parent, with respect to Parent
and the Vice President of Merger Sub, with respect to the Merger Sub.
(c) MERGER CERTIFICATE. Merger Sub shall have executed and delivered
the Merger Certificate.
(d) OPINION OF COUNSEL TO PARENT. Company shall have received the
opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. dated Closing
Date, substantially in form of Exhibit E.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent and the Company; or
(b) By either Parent or the Company if the Merger shall not have been
consummated on or before December 31, 1999; provided, that the right to
terminate this Agreement under this Section 7.1 shall not be available to any
party whose willful failure to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have been consummated on or before such date; or
46
(c) By either Parent or the Company, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action, in each
case which has become final and non-appealable which prohibits the Merger; or
(d) By either Parent or the Company, if, approval of the Merger by the
requisite number of the Company Stockholders is not obtained by written consent,
or if, at the Company Stockholders' Meeting (including any adjournment or
postponement thereof), the requisite vote of the Company Stockholders to
authorize this Agreement shall not have been obtained; or
(e) By Parent, if the Board of Directors of the Company or any
committee thereof shall have (1) approved or recommended, or proposed to approve
or recommend, any Acquisition Proposal other than the Merger (2) failed to
present and recommend the authorization of this Agreement and the Merger to the
Company Stockholders, or withdrawn or modified, or proposed to withdraw or
modify, in a manner adverse to Parent or Merger Sub, its recommendation of the
Merger, this Agreement or the transactions contemplated hereby, (3) entered, or
caused the Company or any Subsidiary or Affiliated Entity to enter, into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Acquisition Proposal, (4) taken any action prohibited
by Section 4.2, or (5) resolved by the Board or announced its intention to do
any of the foregoing; or
(f) By Parent, if neither Parent nor Merger Sub is in material breach
of its obligations under this Agreement, and if (i) there has been a breach at
any time by the Company of any of its representations and warranties hereunder
such that Section 6.2(a) would not be satisfied (treating such time as if it
were the Effective Time for purposes of this Section 7.1(g)) or (ii) there has
been the willful breach on the part of the Company of any of its covenants or
agreements contained in this Agreement such that Section 6.2(b) will not be
satisfied (treating such time as if it were the Effective Time for purposes of
this Section 7.1(g)), and, in both case (i) and case (ii), such breach (if
curable) has not been cured within 10 days after written notice to the Company;
or
(g) By the Company, if it is not in material breach of its obligations
under this Agreement, and if (i) there has been a breach at any time by Parent
or Merger Sub of any of their respective representations and warranties
hereunder such that Section 6.3(a) would not be satisfied (treating such time as
if it were the Effective Time for purposes of this Section 7.1(g)), or (ii)
there has been the willful breach on the part of Parent or Merger Sub of any of
their respective covenants or agreements contained in this Agreement such that
Section 6.3(b) would not be satisfied (treating such time as if it were the
Effective Time for purposes of this Section 7.1(g)), and, in both case (i) and
case (ii), such breach (if curable) has not been cured within 10 days after
written notice to Parent and Merger Sub.
7.2 EFFECT OF TERMINATION. Except as provided in this Section 7.2, in
the event of the termination of this Agreement pursuant to Section 7.1, this
Agreement (other than this Section 7.2 and Sections 5.3(b), 5.12, 7.3 and
Article VIII, which shall survive such termination) will forthwith become void,
and there will be no liability on the part of Parent, Merger Sub or the Company
or any of their respective officers or directors to the other and all rights and
obligations
47
of any party hereto will cease, except that nothing herein will relieve any
party from liability for any breach, prior to termination of this Agreement in
accordance with its terms, of any representation, warranty, covenant or
agreement contained in this Agreement.
7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated.
(b) Nothing in this Section 7.3 shall be deemed to be exclusive of any
other rights or remedies Parent may have hereunder or under any Related
Agreement or at law or in equity for any breach of this Agreement or any of the
Related Agreements.
7.4 AMENDMENT. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after approval of the
Merger by the stockholders of the Company, no amendment may be made which would
reduce the amount or change the type of consideration into which each share of
Company Common Shares and Company Preferred Shares shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by all of the parties hereto.
7.5 WAIVER. At any time prior to the Effective Time, any party hereto
may extend the time for the performance of any of the obligations or other acts
required hereunder, waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE VIII
ESCROW; INDEMNIFICATION
8.1 SURVIVAL. All representations and warranties of the parties in
this Agreement, or in any agreement, instrument or document furnished in
connection with this Agreement or the transactions contemplated hereby, shall
survive the Closing and shall expire on the first anniversary of the Closing
Date, except that (a) claims, if any, asserted in writing prior to such first
anniversary identified as a claim for indemnification pursuant to this Article
VIII shall survive until finally resolved and satisfied in full if the party
entitled to indemnification prevails in establishing its right to
indemnification and (b) claims, if any, which are based upon fraud or
intentional misrepresentation shall survive for the full period of the
applicable statute of limitations, until finally resolved and satisfied in full
if asserted on or prior to such anniversary date if the party entitled to
indemnification prevails in establishing its right to indemnification.
8.2 INDEMNIFICATION AND WAIVER. (a) Each of the Company
Stockholders shall indemnify, defend and hold Parent and the Surviving
Corporation and their respective officers,
48
directors, employees and stockholders (other than the Company Stockholders and
their successors in interest) and their successors and assigns, and (b) Parent
shall indemnify, defend and hold the Company Stockholders, in each case from,
against and with respect to any claim, liability, obligation, loss, damage,
assessment, judgment, cost and expense (including, without limitation,
reasonable attorneys' and accountants' fees and costs and expenses reasonably
incurred in investigating, preparing, defending against or prosecuting any
litigation or claim, action, suit, proceeding or demand) of any kind or
character ("Damages") arising out of or in any manner incident, relating or
attributable to:
(i) any material inaccuracy in any representation or material breach of
warranty by an indemnifying party contained in this Agreement or in
any certificate, instrument or transfer or other document or agreement
executed by in connection with this Agreement or otherwise made or
given in connection with this Agreement;
(ii) any failure by an indemnifying party to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition
to be performed or observed by it under this Agreement or under any
certificates or other documents or agreements executed in connection
with this Agreement;
(iii) in the case of clause (a) above, arising out of any reliance by
Parent on any books or records of the Company or reliance by Parent on
any information furnished to Parent pursuant to this Agreement by or
on behalf of the Company or the Company Stockholders;
(iv) in the case of clause (a) above, arising out of or relating to
operation of the business of the Company on or prior to the Closing
Date or facts and circumstances existing at or prior to the Closing
Date, whether or not such liabilities or obligations were known on
such date; and
(v) in the case of clause (b) above, arising of or relating to operation
of the business of the Company after the Closing Date.
8.3 CLAIMS FOR INDEMNIFICATION. In the event of the occurrence of
any event which any party asserts is an indemnifiable event pursuant to this
Article VIII, the party claiming indemnification (the "Indemnified Party") shall
provide prompt notice to the party required to provide indemnification (the
"Indemnifying Party"), specifying in detail the facts and circumstances with
respect to such claim and the basis for which indemnification is available
hereunder. If such event involves the claim of any third party the Indemnifying
Party shall have the right to control the defense or settlement of such claim;
provided, however, that (i) the Indemnified Party shall be entitled to
participate in the defense of such claim at its own expense, (ii) the
Indemnifying Party shall obtain the prior written approval of the Indemnified
party (which approval shall not be unreasonably withheld or delayed) before
entering into any settlement of such claim if, pursuant to or as a result of
such settlement, injunctive or other non-monetary relief would be imposed
against the Indemnified Party, (iii) the Indemnifying Party shall not be
entitled to control (but shall be entitled to participate at its own expense in
the
49
defense of), and the Indemnified Party shall be entitled to have sole
control over, and shall assume all expense with respect to the defense or
settlement of any claim to the extent such claim seeks an order, injunction or
other equitable relief against the indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party; provided that the
Indemnified Party shall provide written notice to the Indemnifying Party of its
election to assume control over the defense of such claim pursuant to this
clause (iii), and (iv) if the Indemnifying Party is entitled to but fails to
assume control over the defense of a claim as provided in this Section 8.3,
providing that Damages associated with such claim are covered by the indemnity
provisions of Section 8.2, the Indemnified Party shall have the right to defend
such claim, provided further that the Indemnified Party shall obtain the prior
written approval of the Indemnifying party (which approval shall not be
unreasonably withheld or delayed) before entering into any settlement of such
claim if, pursuant to or as a result of such settlement, injunctive or other
non-monetary relief would imposed against the Indemnifying Party.
In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Article VIII, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the claim to which such indemnification
relates.
8.4 THRESHOLD FOR INDEMNIFICATION. No claim by Parent against the
Company Stockholders for indemnification pursuant to this Article VIII with
respect to any item of Damages arising out of, relating or attributable to any
inaccuracy in any representation or breach of warranty by the Company shall be
made, unless such item, together with the aggregate of all prior Damages of
Parent, shall exceed $100,000 (the "Threshold Amount") in which event Parent
shall be entitled, subject to the provisions of this Article VIII to make a
claim for indemnification hereunder to the extent or any and all of such
Damages.
8.5 INTENTIONALLY OMITTED.
8.6 LIMITATIONS OF INDEMNIFICATION . The indemnification
obligations of the Company Stockholders shall be several and not joint and shall
be limited to their respective shares of Parent Preferred Stock or pro rata
portion of the Aggregate Merger Cash Consideration held as part of the Escrow
Fund.
50
8.7 STOCKHOLDERS' REPRESENTATIVE.
(a) Sandpiper Ventures LLC shall be constituted and appointed as agent
("Stockholders' Representative") for an on behalf of the Company Stockholders to
give and receive notices and communications, to authorize delivery to Parent of
the Parent Preferred Stock and cash from the Escrow Fund in satisfaction of
claims by Parent, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the Stockholders'
Representative for the accomplishment of the foregoing. Such agency may be
changed by the holders of a majority in interest of the Escrow Fund from time to
time upon not less than ten (10) days' prior written notice to Parent and the
Escrow Agent. No bond shall be required of the Stockholders' Representative,
and the Stockholders' Representative and Escrow Agent shall receive no
compensation for his services. Notices or communications to or from the
Stockholders' Representative shall constitute notice to or from each of the
Company Stockholders.
(b) The Stockholders' Representative shall not be liable for any act done
or omitted hereunder as Stockholders' Representative while acting in good faith,
and any act done or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith. The Company Stockholders shall
severally indemnify the Stockholders' Representative and hold him harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Stockholders' Representative and arising out of or in
connection with the acceptance or administration of his duties hereunder.
(c) The Stockholders' Representative shall have reasonable access to
information about Parent and the reasonable assistance of Company's officers and
employees for purposes of performing his duties and exercising his rights
hereunder, provided that the Stockholders' Representative shall treat
confidentially and not disclose any nonpublic information from or about Company
to anyone (except on a need to know basis to individuals who agree to treat such
information confidentially).
(d) A decision, consent or instruction of the Stockholders' Representative
shall constitute a decision of all Company Stockholders for whom shares of
Parent Preferred Stock otherwise issuable to them or that portion of the
Aggregate Merger Cash Consideration otherwise payable to them are deposited in
the Escrow Fund and shall be final, binding and conclusive upon each such
Company Stockholders, and the Escrow Agent and Parent may rely upon any
decision, act, consent or instruction of the Stockholders' Representative as
being the decision, act, consent or instruction of each and every such Company
Stockholder. The Escrow Agent and Parent are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Stockholders' Representative.
51
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested, or by electronic mail, with a
copy thereof to be delivered by mail (as aforesaid) within 24 hours of such
electronic mail, or by telecopier, with confirmation as provided above addressed
as follows:
(a) If to Parent or Merger Sub:
Orchid Biocomputer, Inc.
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
Senior Vice President, Corporate Development
& Chief Operating Officer
With a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) If to the Company:
GeneScreen Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxx, President
52
With a copy to:
Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx, L.L.P.
Energy Plaza
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of nationally-
recognized overnight courier, on the next Business Day after the date when sent
(c) in the case of facsimile transmission or telecopier or electronic mail, upon
confirmed receipt, and (d) in the case of mailing, on the third Business Day
following the date on which the piece of mail containing such communication was
posted.
9.2 DISCLOSURE SCHEDULES. The Company Disclosure Schedule shall be
divided into sections corresponding to the sections and subsections of this
Agreement. Disclosure of any fact or item in any section of the Company
Disclosure Schedule shall not, should the existence of the fact or item or its
contents be relevant to any other section of the Company Disclosure Schedule, be
deemed to be disclosed with respect to such sections.
9.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "Affiliated Entity" means, with respect to the Company, each of
the entities listed on Part 2.1(b) of the Disclosure Schedule.
(b) "Affiliates" means, with respect to any Person, any other Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned Person;
including, without limitation, any partnership or joint venture in which the
Company (either alone, or through or together with any other Subsidiary) has,
directly or indirectly, an interest of 5% or more of the issued and outstanding
capital stock of such Person;
(c) "Business Day" means any day other than a Saturday, Sunday or day
on which banks are permitted to close in the State of New Jersey or in the State
of Delaware.
(d) "Cause" means the following reasons upon which to terminate an
employee's employment with Parent or its Subsidiaries: (a) misconduct that is
materially injurious, in the reasonable judgment of the Board of Directors of
Parent, to Parent or any of its Subsidiaries, stockholders or affiliates; (b)
conviction of (or pleading nolo contender to) any felony or any misdemeanor
involving moral turpitude which might, in the reasonable judgment of the Board
of Directors of Parent, cause embarrassment to Parent or any of its
Subsidiaries, stockholders or Affiliates; (c) commission of an act of personal
dishonesty or breach of fiduciary duty involving personal profit in connection
with the employees employment by the Company; (d) commission of an act which the
Board of Directors of Parent shall reasonably have found to have involved
53
willful misconduct or gross negligence on the part of the employee, in the
conduct of his duties hereunder; (e) use of illegal drugs, habitual absenteeism,
chronic alcoholism or any other form of addiction; (f) refusal or repeated
failure to comply with the reasonable policies, standards or regulations of the
Company; or (g) employee's material breach of the terms and conditions of his or
her employment agreement.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company Disclosure Schedule" means a schedule of even date
herewith delivered by the Company to the Parent concurrently with the execution
of this Agreement, which, among other things, will identify exceptions to the
Company's representations and warranties contained in Article II by specific
section and subsection references;
(g) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(h) "Court" means any court or arbitration tribunal of the United
States, any domestic state, or any foreign country, and any political
subdivision thereof.
(i) "Environmental Claim" means any claim, action, cause of action,
investigation or notice by any Person alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (a)
the presence, release or disposal of any Hazardous Materials at any location,
whether or not owned or operated by the Company, or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
(j) "Environmental Laws" means any Law pertaining to: (i) the
protection of health, safety and the indoor or outdoor environment; (ii) the
conservation, management or use of natural resources and wildlife; (iii) the
protection or use of surface water and ground water; (iv) the management,
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement, removal, remediation
or handling of, or exposure to, any Hazardous Material; or (v) pollution
(including any release to air, land, surface water and ground water); and
includes, without limitation, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended, and the Regulations
promulgated thereunder and the Solid Waste Disposal Act, as amended, 42 U.S.C.
ss. 6901 et seq.
(k) "GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied consistently
throughout the periods involved.
(l) "Governmental Authority" means any governmental agency or
authority (other than a Court) of the United States, any domestic state, or any
foreign country, and any political subdivision or agency thereof, and includes
any authority having governmental or quasi-governmental powers.
54
(m) "Hazardous Material" means any substance, chemical, compound,
product, solid, gas, liquid, waste, by-product, pollutant, contaminant or
material which is hazardous or toxic and is regulated under any Environmental
Law, and includes without limitation, asbestos or any substance containing
asbestos, polychlorinated biphenyls or petroleum (including crude oil or any
fraction thereof).
(n) "Intellectual Property Right" has the meaning ascribed to such
term in Section 2.21(b) of this Agreement.
(o) "Knowledge" means (i) in the case of an individual, knowledge of a
particular fact or other matter deemed to be possessed by the individual if (a)
such individual, after making due inquiry, is actually aware of such fact or
other matter or (ii) in the case of an entity (other than an individual) such
entity will be deemed to have "Knowledge" of a particular fact or other matter
if any individual who is serving, or has at any time served, as a director,
officer, partner, in-house counsel, patent counsel (with respect to Intellectual
Property Rights only), executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter.
(p) "Law" means all laws, statutes and ordinances of any Governmental
Agency including all decisions of Courts having the effect of law in each such
jurisdiction;
(q) "Lien" means any mortgage, pledge, security interest, attachment,
encumbrance, lien (statutory or otherwise), option, conditional sale agreement,
right of first refusal, first offer, termination, participation or purchase or
charge of any kind (including any agreement to give any of the foregoing);
provided, however, that the term "Lien" shall not include (i) statutory liens
for Taxes, which are not yet due and payable or are being contested in good
faith by appropriate proceedings, (ii) statutory or common law liens to secure
landlords, lessors or renters under leases or rental agreements confined to the
premises rented, (iii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pension or
other social security programs mandated under applicable Laws, (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens, and (v)
restrictions on transfer of securities imposed by applicable state and federal
securities Laws;
(r) "Litigation" means any suit, action, arbitration, cause of action,
claim, complaint, criminal prosecution, investigation, demand letter,
governmental or other administrative proceeding, whether at law or at equity,
before or by any Court or Governmental Authority, before any arbitrator or other
tribunal;
(s) "Material Adverse Effect" means any fact, event, change,
circumstance or effect that is materially adverse to the business, condition
(financial or otherwise), operations, results of operations, assets or
liabilities of the (1) Company and its Subsidiaries and Affiliated Entities,
taken as a whole when such term, is used in relation to the Company and/or the
Subsidiaries and Affiliated Entities or the context otherwise so requires, or
(2) the Parent and its Subsidiaries, taken as a whole, when such term is used in
relation to the Parent or the context otherwise so requires.
55
(t) "Order" means any judgment, order, writ, injunction or decree of
any Court or Governmental Authority.
(u) "Parent Balance Sheet" means the balance sheet for the year ended
December 31, 1998.
(v) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, limited liability company,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act);
(w) "Qualified IPO" shall mean a public offering by the Parent of
shares of Parent Common Stock pursuant to which Parent realizes aggregate gross
proceeds of at least Twenty-Five Million Dollars ($25,000,000).
(x) "Regulation" means any rule or regulation of any Governmental
Authority having the effect of Law.
(y) "Related Agreements" means the Stockholder Agreement, and Release
Agreement and Confidentiality Agreement.
(z) "Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent or any other Person means any corporation, partnership,
joint venture, limited liability company or other legal entity of which the
Company, the Surviving Corporation, Parent or such other Person, as the case may
be, (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
(aa) "Year 2000 Compliant" shall mean the design, writing and testing
of software owned or licensed by a Person (including existing products and owned
software and technology currently under development) used in the operation of
such Person's business as presently conducted , such that such software will at
all times (i) record, store, process, calculate, manage, manipulate and present
calendar dates falling before, on and after (and if applicable, spans of time
including) December 31, 1999, including, without limitation, single-century
formulas and multi-century formulas and (ii) create, calculate, recognize,
accept, display, store, retrieve, accent, compare, sort, manipulate, or process
any information dependent on or relating to such dates or otherwise provide use
of dates or date-dependent or date-related data, including, but not limited to,
century recognition, day-of-the week recognition, leap years, date values and
interfaces of date functionalities, without loss of accuracy, functionality,
data integrity and performance and will provide that all date-related data and
user interface functionalities and data fields include the indication of
century.
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The word "herein" and similar references mean, except where a specific Section
or Article reference is expressly indicated, the entire Agreement rather than
any specific Section or
56
Article. The table of contents and the headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
9.7 ENTIRE AGREEMENT. This Agreement (including all exhibits and
schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and undertakings (other than the Confidentiality Agreement), both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and are not intended to confer upon any other Person any rights or
remedies hereunder.
9.8 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any Affiliate provided that no such assignment shall
relieve the assigning party of its obligations hereunder.
9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
will impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor will any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any
rights or remedies otherwise available.
9.11 GOVERNING LAW. This agreement and the agreements, instruments
and documents contemplated hereby will be governed by and construed in
accordance with the Law of the State of Delaware (exclusive of conflicts of law
principles) ("Delaware Law"). Delaware Courts within the State of Delaware and,
more particularly to the fullest extent such Court shall have subject matter
jurisdiction over the matter, the Court of Chancery of the State of Delaware,
will have exclusive jurisdiction over any and all disputes between the parties
hereto, whether in law or equity, arising out of or relating to this Agreement
and the agreements, instruments and documents contemplated hereby. The parties
consent to and agree to submit to the jurisdiction of such Courts, provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this Section 9.11 and shall not be deemed to be a general submission to the
57
jurisdiction of such Courts or in the State of Delaware other than for such
purpose. Each of the parties hereby waives, and agrees not to assert in any
such dispute, to the fullest extent permitted by applicable Delaware Law, any
claim that (i) such party is not personally subject to the jurisdiction of such
Courts, (ii) such party and such party's property is immune from any legal
process issued by such Courts or (iii) any Litigation commenced in such Courts
is brought in an inconvenient forum.
9.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
58
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement and Plan of Merger to be executed as of the date first written above
by their respective officers thereunto duly authorized.
ORCHID BIOCOMPUTER, INC.
By /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Operating Officer and
Senior Vice President
GS ACQUISITION CORP.
By /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President and Secretary
GENESCREEN INC.
By /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: President/CEO
59
Index of Defined Terms
Acquisition Proposal................... 4.2(a)
Affiliated Entity...................... 9.3(a)
Affiliates............................. 9.3(b)
Aggregate Merger Cash Consideration.... 1.6(b)
Aggregate Merger Consideration......... 1.6(b)
Agreement Caption.....................
Blue Sky Laws.......................... 2.5(b)
Business Day........................... 9.3(c)
Cause.................................. 9.3(d)
Certificate of Merger.................. 1.2
Certificates........................... 1.12(c)
Closing................................ 1.14
Closing Date........................... 1.14
Code................................... 9.3(e)
Company................................ Caption
Company Accounts Receivable............ 2.10
Company Approvals...................... 2.1(a)
Company Balance Sheet.................. 2.8(a)
Company Benefit Plans.................. 2.15(a)
Company Common Shares.................. Preamble
Company Disclosure Schedule............ 9.3(f)
Company Financial Statements........... 2.8(b)
Company Number Shares.................. 1.6(c)(ii)
Company Option(s)...................... 1.8
Company Preferred Shares............... Preamble
Company Representatives................ 4.2(a)
Company Series A Stock................. Preamble
Company Series B Stock................. Preamble
Company Shares......................... Preamble
Company Stock Plan(s).................. 1.8
Company Stockholder(s)................. 1.6(b)
Company Stockholders' Meeting.......... 5.1
Company Warrants....................... 4.1(b)
Confidentiality Agreement.............. 5.2(b)
Consenting Stockholder................. 5.19
Control................................ 9.3(g)
Court.................................. 9.3(h)
Customers.............................. 2.11
Damages................................ 8.2(b)
Delaware Law........................... 9.11
DGCL................................... Preamble
Deemed Exercised Shares................ 1.8
Dissenting Shares...................... 1.16
Effective Time......................... 1.2
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Environmental Claim.................... 9.3(i)
Environmental Laws..................... 9.3(j)
ERISA.................................. 2.15(a)
ERISA Affiliate........................ 2.15(a)
ERISA Assessment....................... 5.13
ERISA Claim............................ 5.13
Escrow Agent........................... 1.6(a)
Escrow Agreement....................... 1.6(a)
Escrow Fund............................ 1.6(a)
Exchange Act........................... 2.5(b)
Exchange Agent......................... 2.5(b)
Exchange Ratio Fraction................ 1.6(c)(ii)
GAAP................................... 9.3(k)
Governmental Authority................. 9.3(l)
Hazardous Material..................... 9.3(m)
HSR Act................................ 2.27
Indemnified Party...................... 8.2
Indemnifying Party..................... 8.3
Information Statement.................. 5.1
Injunction............................. 6.1(c)
Intellectual Property Right............ 2.21(b)
Key Employee........................... 1.9
Knowledge.............................. 9.3(o)
Law.................................... 9.3(p)
Lien................................... 9.3(q)
Litigation............................. 9.3(r)
Material Adverse Effect................ 9.3(s)
Material Agreements.................... 2.6
Merger................................. Preamble
Merger Cash Consideration.............. 1.6(b)
Merger Stock Consideration............. 1.6(c)(ii)
Merger Sub............................. Caption
Merger Sub Common Stock................ 1.10
NOL.................................... 2.19(m)
Offering............................... 1.6(b)
Order.................................. 9.3(t)
Parent................................. Caption
Parent Approvals....................... 3.1
Parent Common Stock.................... 3.2(a)
Parent Financial Statements............ 3.6(b)
Parent Preferred Stock................. Preamble
Parent Stipulated Expenses............. 7.3(d)
Permits................................ 2.7
Person................................. 9.3(v)
Private Placement Memorandum........... 1.6(b)
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Proprietary Rights Act................. 2.17(b)
Qualified IPO.......................... 9.3(w)
Regulation............................. 9.3(x)
Related Agreements..................... 9.3(y)
Release Agreements..................... 5.10
Repurchase Right....................... 1.9
Securities Act......................... 1.6(b)
Stockholder Agreements................. Preamble
Stockholders' Representative........... 8.7(a)
Subsidiaries........................... 9.3(z)
Subsidiary............................. 9.3(z)
Subsidiary/Affiliate Entity Approvals.. 2.1(c)
Suppliers.............................. 2.11
Surviving Corporation.................. 1.1
Tax.................................... 2.19
Tax Returns............................ 2.19
Taxes.................................. 2.19
Threshold Amount....................... 8.4
Unaccredited Company Stockholder....... 1.6(b)
WARN Act............................... 2.13(b)
Year 2000 Compliant.................... 9.3(aa)
401(k) Plan............................ 5.12
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