M I R A G E N
May 7, 1997
InVitro International
16632 Millikan Avenue
Irvine, CA 92714
Dear Sirs:
This letter, upon your acceptance, will evidence our mutual intention
to enter into a definitive agreement providing for a merger, in which all
of the outstanding capital stock or all of the assets, business,
contractual and proprietary rights of Miragen Inc. ("Miragen"), a
California corporation (the target company), will be acquired by InVitro
International ("InVitro"), a California corporation (the acquiring
company).
The form of the transaction, whether an exchange of capital stock,
statutory merger, or transfer of assets between Miragen and InVitro
(hereinafter the anticipated transaction is referred to as the "Merger"),
will be mutually determined by Miragen and InVitro after both companies
have received the advice and recommendations of their respective
accountants and professional advisors. The assets and business of Miragen
to be acquired by InVitro in the Merger shall include all of Miragen's
existing assets and proprietary rights relating to human and animal
identification products and related technologies.
This letter is also an expression of the intention of Miragen and
InVitro to proceed expeditiously to negotiate, draft, and execute a
definitive agreement for the Merger (hereinafter referred to as the
"Agreement"). The Agreement, when executed will reflect the terms of this
letter and such other terms and conditions as are typical to a transaction
of this nature (which shall include appropriate representations and
warranties as to the business, assets, liabilities, capitalization,
material contracts, proprietary rights, financial condition and other
matters relevant to the business and operations of the parties) and such
additional terms and conditions as shall be mutually agreed upon. The
parties to the Agreement shall include InVitro, Miragen, and any other
party who, in the opinion of InVitro or Miragen, is necessary to the
transactions.
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1. CERTAIN TERMS OF MERGER AGREEMENT. The material terms and
conditions of the Merger to be included in the Agreement are as follows:
1.1 The Agreement shall provide for the Merger which shall be
consummated on or before September 15, 1997 (the "Closing"). On the
Closing Date, all of the issued and outstanding Miragen capital stock or
substantially all of the business, assets and proprietary rights of Miragen
shall be acquired by InVitro.
1.2 At the Closing, InVitro shall issue and deliver to the
shareholders of Miragen previously authorized and unissued shares of
InVitro common stock in an amount equal to 80% of the outstanding shares of
the InVitro (after giving effect to the closing of the Merger) calculated
on a fully diluted basis. In calculating the outstanding shares of Miragen
for this purpose, it will be assumed that outstanding Miragen options,
warrants and convertible securities are exercised immediately prior to the
closing, and that number of shares of InVitro common stock necessary to
account for Miragen options, warrants and convertible securities will be
reserved in lieu of being issued. At the Closing, InVitro will substitute
options, warrants and convertible securities to purchase shares of the
InVitro's common stock for each outstanding option, warrant and other
convertible security to acquire shares of Miragen, each such option or
warrant to represent the right to purchase that number of InVitro shares as
if the Miragen option, warrant or convertible security had been exercised
immediately prior to the Merger and exercisable for the same aggregate
consideration, and on substantially the same other terms and conditions,
that would apply if all of such Miragen options, warrant or convertible
security had been fully exercised.
1.3 Upon the Closing of the Merger, each of the officers,
directors and 10% shareholders of InVitro shall execute an agreement with
Miragen and InVitro in which each of such officer, director and 10%
shareholder shall release InVitro from any and all claims arising as a
result of any prior events (except as permitted by the Agreement) and
further covenant and agree that they will not compete with InVitro and
Miragen for a period of five (5) years after the Closing in any business
engaged in by Miragen as of the Closing Date including, without limitation,
the business of human and animal identification technology.
1.4 Until the Closing, each of InVitro and Miragen shall
continue to operate its business in the ordinary course and shall not,
without the prior written consent of the other party, do any of the
following:
(i) Incur any material obligations or commitments other
than in the ordinary course of business;
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(ii) Grant any salary increases (other than as required
by existing contracts or consistent with current
practices), unscheduled promotions or enter into
any new employment or benefit contracts;
(iii) Solicit, induce or otherwise engage in discussions
or negotiations relating to or proposed to lead to
the acquisition or merger of sale of substantially
all of the assets or shares of Miragen by or with
any party other than InVitro;
(iv) Sell or dispose of any material assets or
properties, except in the ordinary course of
business or with the prior consent of the other
party hereto; or,
(v) Sell any additional shares of its capital stock or
grant any additional rights or options to acquire
its capital stock, with the except of Miragen's
current private placement offering.
1.5 Miragen shall provide InVitro, on or prior to the Closing
Date, with audited financial statements required in connection with the
acquisition of a "significant subsidiary" by InVitro as that term is
defined by rules and regulations promulgated by the Securities and Exchange
Commission and such other information as is required for InVitro to prepare
and file appropriate documents relating to the Merger with the Securities
and Exchange Commission. Such financial statements will include, among
other items, an audited balance sheet of Miragen as of a recent date,
statements of income for each of its last two fiscal years, and related
statements of shareholder's equity, statements of cash flows and the
appropriate notes to such financial statements, together with the report of
an independent certified public accounting firm. If required by InVitro as
a condition to Closing, InVitro shall have received a "cold-comfort" letter
from a firm of independent certified public accountants selected by InVitro
as to the financial statements required by this paragraph and the financial
condition of Miragen as of the Closing Date.
1.6 As a condition to the consummation of the Merger, there
shall have been no material adverse change in the assets, business or
prospects of either Miragen or InVitro except as contemplated by the
Agreement. All financial statements provided by the parties to each other
pursuant to the Agreement shall be represented to fairly present the
financial condition of such party at the date of such financial statements
and their results of operations for the periods covered thereby, and shall
be prepared in accordance with generally accepted accounting principles.
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1.7 InVitro and Miragen will exert their best efforts to
obtain such consents or approvals, and to make such filings as in the
opinion of their respective counsel may be necessary or advisable to effect
the transactions contemplated herein. At the request of InVitro, Miragen
shall obtain the consent of any third party which is necessary for the
transfer of any asset, right or contract of Miragen pertaining to the
Merger contemplated herein, if any.
1.8 As a condition to the consummation of the Agreement,
InVitro and its counsel and Miragen and its counsel must each be satisfied
as to the validity and legality of all aspects of the Merger, including all
activities undertaken in relation to the Agreement. Each of the parties to
the Merger will pay their own expenses incurred in connection with the
Agreement and all other events required for the Closing.
1.9 The Agreement will provide that any claims or disputes
arising thereunder or as a result of the transactions contemplated therein
which cannot be resolved by the parties will be referred to alternative
dispute resolution by binding arbitration in the State of California.
2. DUE DILIGENCE. Upon the execution of this letter of intent
by the parties, Miragen and InVitro, and each of their duly authorized
representatives, will be provided with full access to the projections,
financial records and supervisory management personnel of the other party,
which shall include copies of all material agreements, corporate
proceedings, access to the chief executive officer and chief financial
officer, marketing, product development and manufacturing supervisors, and
other records and information which each party deems of significance in an
due diligence investigation of the other party hereto. The disclosure of
any such information shall be subject to the provisions of Section 3 of
this letter agreement.
3. CONFIDENTIALITY. In connection with the foregoing matters,
each party hereto has or will be furnishing to the other from time to time
with oral and written information as to its proprietary products, marketing
strategy and business plans, significant portions of which each of the
parties considers to be proprietary and confidential information (herein
called the "Confidential Information"). Each party acknowledges that
"Confidential Information," as used herein, does not include any
information which (i) was or becomes generally available to the public
other than as a result of an improper disclosure by the other party hereto,
or (ii) was or becomes information available to the other party on a
non-confidential basis from a third party source that is not bound by a
confidentiality obligation to either of the parties hereto.
Each party agrees that Confidential Information will be used
solely for the purpose of evaluating the Merger, investigating market
information and potential markets, and for InVitro to pursue due diligence
and legal disclosure requirements in connection with proposed financing
activities by InVitro, and will not be used in the business or operations
of the party to which such information has been disclosed or
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used in any other way, directly or indirectly, that may detrimental to the
interests of the party that owns such Confidential Information.
Confidential Information may be disclosed to representatives of the party
receiving the same who need to know such Confidential Material for the
purposes described above, it being understood that such representatives
shall be informed of the confidential nature of the Confidential
Information and shall be directed to treat the Confidential Information
confidentially and as proprietary information of the party that owns the
same. Each party shall notify the other as to the identity of such
representatives. If either party receives a request, including a subpoena
or similar legal inquiry, to disclose any of the Confidential Material, it
shall provide the party that owns such Confidential Information with prompt
notice so that the owner may seek appropriate protective relief.
If the Agreement is not executed or the Closing thereunder shall fail
to occur for any reason, each party shall promptly deliver and return all
copies of Confidential Information to the party which owns the same, and
without retaining any copy, notes or extracts thereof.
Although each party understands that they will endeavor to include in
the Confidential Information all materials which it believes to be relevant
for the purposes of this letter agreement and the Merger, each party
further understands that no representation or warranty as to the accuracy
or completeness of the Confidential Information has or will be made except
as provided by separate written agreement-
4. NO SOLICITATION OF EMPLOYEES. Without the prior written
consent of Miragen or InVitro, for a period of eighteen (18) months from
the date of this letter, neither of them nor any of their affiliates will
directly or indirectly solicit for employment, employ, or otherwise
contract for the services of any person who is now employed (either as an
employee or consultant) by the other party unless the Closing under the
Agreement has been completed or unless such individual currently acts as a
consultant to both of the parties.
5. PRESS RELEASE. Upon your acceptance and approval hereof, each
of us are authorized by the other to issue a press release for the purpose
of publicly announcing the transactions contemplated by this letter.
InVitro and Miragen each agree to consult with the other as to the form and
substance of any press release or other public disclosure of the matters
covered in this letter, provided that this shall not be deemed to prohibit
InVitro or Miragen from making any disclosure which its respective counsel
deems necessary to comply with applicable law.
6. SURVIVAL OF CERTAIN PROVISIONS. The provision of Sections 3,
4 and 5 of this letter agreement are for the benefit of the respective
parties hereto, shall survive any termination of this letter agreement, and
shall be governed by and construed in accordance with the laws of the State
of California.
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This letter reflects an expression of our mutual intent only, and
shall not constitute a binding legal obligation for the transactions
described herein (except as expressly set forth in Sections 3, 4 and 5
above) until such time as the Agreement has been executed and the Merger
has been approved by the Board of Directors and shareholders of InVitro and
the Board of Directors of Miragen. It is our desire to move expeditiously
towards the completion of these transactions on the basis of the terms and
conditions contained herein. To help accomplish this goal, if you are in
agreement with the foregoing, would you please indicate your approval of
the contents of this letter by signing the attached copy in the space
provided and returning it to us at your earliest convenience.
The parties acknowledge that they were initially introduced to each
other by, and currently share, two common directors and common outside
corporate counsel who will have an inherent and unavoidable conflict of
interest as to the Merger. Each of the parties agrees to engage the
services of their own independent counsel for purposes of advising them in
connection with this letter of intent, the Agreement, the Closing and other
matters relevant to the Merger. Each of the parties will require approval
of the Merger by a majority or more of their independent directors who are
not affiliated with the other party.
Very truly yours,
MIRAGEN INC.
By: /s/ Kevin B. Morton
-------------------------
Kevin B. Morton, President
and Chief Executive Officer
ACCEPTED AND AGREED TO THIS
13th DAY OF MAY, 1997
INVITRO INTERNATIONAL
By: /s/ W. Richard Ulmer
-------------------------------------
W. Richard Ulmer,
President and Chief Executive Officer