EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PASHLETH INVESTMENT LTD.,
DIOMED ACQUISITION CORP.
AND
DIOMED, INC.
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Dated as of January 29, 2002
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TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER...................................................1
BACKGROUND.....................................................................1
1. THE MERGER...............................................................2
1.1 General...............................................................2
1.2 Certificate of Incorporation..........................................2
1.3 By-Laws...............................................................2
1.4 Directors and Officers................................................2
1.5 Conversion of Securities..............................................3
1.6 Adjustment of the Exchange Ratios.....................................4
1.7 Dissenting Shares.....................................................4
1.8 No Fractional Shares..................................................5
1.9 Novation of Non-Plan Options and Warrants.............................5
1.10 Exchange Procedures; Distributions with Respect to
Unexchanged Shares; Stock Transfer Books............................5
1.11 Stock Certificate Legends.............................................6
1.12 Further Assurances....................................................8
2. REPRESENTATIONS AND WARRANTIES CONCERNING THE ACQUIRED ENTITIES..........8
2.1 Organization..........................................................8
2.2 Capitalization; Options and Other Rights..............................8
2.3 Authority; No Conflicts; Consents....................................10
2.4 Charter Documents....................................................11
2.5 Financial Statements.................................................11
2.6 Absence of Undisclosed Liabilities; Indebtedness.....................11
2.7 Operations and Obligations...........................................12
2.8 Properties...........................................................14
2.9 Contracts............................................................14
2.10 Absence of Default...................................................15
2.11 Litigation...........................................................16
2.12 Compliance with Law..................................................16
2.13 Intellectual Property................................................16
2.14 Tax Matters..........................................................18
2.15 Employee Benefit Plans...............................................19
2.16 Executive Employees..................................................20
2.17 Employees............................................................20
2.18 Environmental Laws...................................................21
2.19 Bank Accounts, Letters of Credit and Powers of Attorney..............21
2.20 Subsidiaries.........................................................22
2.21 Affiliate Transactions...............................................22
2.22 Insurance............................................................22
2.23 Leases...............................................................22
(i)
2.24 Product Warranty.....................................................23
2.25 Product Liability....................................................23
2.26 Minute Books.........................................................23
2.27 Complete Copies of Materials.........................................23
2.28 Accuracy of Information Furnished....................................23
2.29 Diomed Review........................................................23
2.30 Reorganization.......................................................24
3. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND PARENT................24
3.1 Organization.........................................................24
3.2 Capital Structure....................................................24
3.3 Authority; No Conflicts; Consents....................................25
3.4 Charter Documents....................................................26
3.5 Financial Statements.................................................26
3.6 Absence of Undisclosed Liabilities; Indebtedness.....................27
3.7 Operations and Obligations...........................................27
3.8 Employee Benefit Plans...............................................29
3.9 Employees............................................................30
3.10 Tax Matters..........................................................31
3.11 Minute Books.........................................................31
3.12 Complete Copies of Materials.........................................32
3.13 Reorganization.......................................................32
3.14 SEC Documents; Undisclosed Liabilities...............................32
3.15 Absence of Certain Changes...........................................32
3.16 Interim Operations of Acquisition....................................32
3.17 Disclosure...........................................................32
4. ACQUIRED ENTITIES CONDUCT PENDING CLOSING;
ACQUIRED ENTITIES COVENANTS...........................................33
4.1 Conduct of Business Pending Closing..................................33
4.2 Prohibited Actions Pending Closing...................................33
4.3 Access; Documents; Supplemental Information..........................34
5. PARENT AND ACQUISITION CONDUCT PENDING CLOSING;
PARENT AND ACQUISITION COVENANTS......................................34
5.1 Conduct of Business Pending Closing..................................34
5.2 Prohibited Actions Pending Closing...................................34
5.3 Access; Documents; Supplemental Information..........................35
5.4 Review of Pre-closing Documents and Press Releases..................35
6. JOINT COVENANTS.........................................................35
6.1 Notification of Certain Matters......................................35
6.2 Tax Returns; Cooperation.............................................35
6.3 Reorganization.......................................................36
6.4 Form 8-K; Other Filings..............................................36
6.5 Offering Memorandum..................................................36
6.6 Diomed Information Statement.........................................37
6.7 Regulatory Approval by Parent........................................37
6.8 Notices from Governmental Agencies...................................37
6.9 Directors' and Officers' Insurance...................................37
(ii)
6.10 Novation Requests....................................................38
6.11 Registration of Shares and Other Securities..........................38
6.12 Post-Closing Covenant................................................39
6.13 Actions by the Parties...............................................39
7. CONDITIONS PRECEDENT....................................................40
7.1 Conditions Precedent to Each Party's Obligation to Effect the Merger.40
7.2 Conditions Precedent to Obligations of Parent........................41
7.3 Conditions Precedent to Obligations of Diomed........................41
7.4 Frustration of Closing Conditions....................................43
8. SURVIVAL OF REPRESENTATION AND WARRANTIES...............................43
9. BROKERS' AND FINDERS' FEES..............................................43
10. EXPENSES................................................................43
11. USE OF PRIVATE PLACEMENT PROCEEDS.......................................43
12. PRESS RELEASES..........................................................44
13. CONFIDENTIAL INFORMATION................................................44
14. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC.........................45
15. ASSIGNMENT AND BINDING EFFECT...........................................45
16. TERMINATION.............................................................45
16.1 Termination of Agreement.............................................45
16.2 Effect of Termination................................................46
17. DEFINITIONS.............................................................46
18. SCHEDULES...............................................................52
19. SUCCESSORS..............................................................52
20. ASSIGNMENTS.............................................................52
21. NOTICES.................................................................53
22. SPECIFIC PERFORMANCE....................................................54
23. SUBMISSION TO JURISDICTION; PROCESS AGENT; NO JURY TRIAL;
BINDING ARBITRATION...................................................55
24. THIRD PARTY BENEFICIARIES...............................................55
25. COUNTERPARTS............................................................56
26. HEADINGS................................................................56
27. GOVERNING LAW...........................................................56
28. AMENDMENTS..............................................................56
29. EXTENSIONS; WAIVER......................................................56
30. SEVERABILITY............................................................56
31. CONSTRUCTION............................................................57
32. INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES.......................57
33. REMEDIES................................................................57
34. ELECTRONIC SIGNATURES...................................................57
(iii)
ATTACHMENTS
EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Subscription Agreement
Exhibit C Form of Mandatory Designations of Parent Class A Preferred Stock
Exhibit D Form of Consulting Agreement with Verus
Exhibit E Form of Parent Bylaws, as amended
Exhibit F Form of Closing Certificate of Diomed
Exhibit G Form of Legal Opinion of Counsel to Diomed
Exhibit H Form of Legal Opinion of Special Counsel to Diomed
Exhibit I Form of Parent and Acquisition Closing Certificate
Exhibit J Form of Letter from Certain Directors
Exhibit K Form of Legal Opinion of Counsel to Parent and Acquisition
Exhibit L Form of Legal Opinion of Counsel to Acquisition
Exhibit M Form of Legal Opinion of Local Counsel
Exhibit N Form of Diomed Option Novation Request
Exhibit O Form of Diomed Warrant Novation Request
SCHEDULES
Schedule 1.5 Capitalization of Parent After Merger
Schedule 2.2(b) Existing Agreements Regarding Diomed Securities
Schedule 2.2(c) Voting Agreements
Schedule 2.2(d) Diomed Capital Stockholders
Schedule 2.2(e) Stockholders of Acquired Entities That Are Parties to
Contracts Regarding Capital Stock of Any Such
Acquired Entities
Schedule 2.3(a) Required Corporate Action or Other Proceedings
Schedule 2.6(a) Liabilities or Obligations of Acquired Entities
Schedule 2.6(b) Indebtedness of Acquired Entities
Schedule 2.7(a) Material Adverse Effect Events, Conditions,
Impairments, Etc. as to Any Acquired Entities
Schedule 2.7(b) Business Conduct by Any Acquired Entities Either Not
Within the Ordinary Course or Not Consistent with
Past Practice
Schedule 2.7(c) Accrued or Unpaid Dividends or Distributions With
Respect to Any Acquired Entities Capital Stock
Schedule 2.9 Contracts and Material Agreements of Any
Acquired Entities
Schedule 2.10 Events of Default of Acquired Entities
Schedule 2.11 Litigation
Schedule 2.12 Violations of Laws and Required Authorizations
Schedule 2.13(a) Patents of Acquired Entities
Schedule 2.13(b) Trademarks of Acquired Entities
Schedule 2.13(c) Software of Acquired Entities
Schedule 2.13(g) Contracts With Third Parties Regarding Intellectual
Property of Any Acquired Entities
(iv)
Schedule 2.13(h) Former Employees of Any Acquired Entities Involved in
Development of Intellectual Property Who Have Not
Assigned Rights and Acquired Entities Contracts
with Employees
Schedule 2.14 Tax Matters
Schedule 2.15(a) Outstanding Obligations of Acquired Entities Regarding
Employee Benefit Plans
Schedule 2.15(b) Benefit Plans of Acquired Entities
Schedule 2.15(d) Adoptions, Amendments or Changes in Acquired Entities
Employee Benefit Plans
Schedule 2.15(e) Outstanding Stock Options of Acquired Entities
Schedule 2.15(f) Benefit Plan Compensation or Benefits Triggered by
this Agreement
Schedule 2.15(g) Acquired Entities Restricted Stock Purchase
Arrangements
Schedule 2.15(h) Acquired Entities Capital Stock Issued Pursuant to Any
Restricted Stock Purchase
Agreement or Stock Option Agreement
Schedule 2.16 Salary Rates and Bonuses of Executive Employees of
Acquired Entities
Schedule 2.17 Additional Compensation of Executive Employees of
Acquired Entities
Schedule 2.19 Bank Accounts, Letters of Credit and Powers of Attorney
Schedule 2.20 Subsidiaries of Acquired Entities
Schedule 2.21 Transactions of Affiliates of Acquired Entities
Schedule 2.22 Insurance
Schedule 2.23 Leases
Schedule 2.24 Terms and Conditions of Sale or Lease for Acquired
Entities
Schedule 3.1 Jurisdictions of Incorporation of Parent
and Acquisition
Schedule 3.2(a) Parent's Authorized Capitalization and Issued and
Outstanding Capital Stock
Schedule 3.2(b) Agreements Regarding Parent Capital Stock
Schedule 3.2(c) Parent Capital Stockholders
Schedule 3.4 Certificate of Incorporation and By-laws of Parent
Schedule 3.6(a) Liabilities or Obligations of Parent
Schedule 3.6(b) Indebtedness of Parent
Schedule 3.7(a) Material Adverse Effect Events, Conditions,
Impairments, Etc. as to Parent
Schedule 3.7(b) Business Conduct by Parent Either Not Within the
Ordinary Course or Not Consistent with Past Practice
Schedule 3.7(c) Accrued or Unpaid Dividends or Distributions With
Respect to Parent Capital Stock
Schedule 3.8(a) Outstanding Obligations of Parent Regarding
Employee Benefit Plans
Schedule 3.8(b) Benefit Plans of Parent
Schedule 3.8(d) Adoptions, Amendments or Changes in Parent
Employee Benefit Plans
Schedule 3.8(e) Outstanding Parent Stock Options
Schedule 3.8(f) Parent Benefit Plan Compensation or Benefits Triggered
by this Agreement
Schedule 3.8(g) Parent Restricted Stock Purchase Arrangements
Schedule 3.8(h) Parent Capital Stock Issued Pursuant to Any Restricted
Stock Purchase Agreement or Stock Option Agreement
Schedule 3.9 Employee Claims for Compensation
(v)
Schedule 3.10 Tax Matters of Parent
Schedule 3.14 Parent SEC Documents
Schedule 3.15 Disclosure of Certain Changes
Schedule 9.1 Brokers' and Finders' Fees
(vi)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
January 29, 2002, by and among (i) Pashleth Investment Ltd., a Delaware
corporation, whose address is #5-4360 Agar Drive, Richmond, British Columbia,
V7B 1A3, Canada ("PARENT"), (ii) Diomed Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent, whose address is the same
as Parent ("Acquisition") and (iii) Diomed, Inc., a Delaware corporation, whose
address is 1 Dundee Park, Andover, MA 01810 ("DIOMED").
BACKGROUND
A. Diomed is a leading developer of minimally invasive
clinical solutions and uses its proprietary technology to manufacture and
distribute medical devices and related disposables as part of an integrated
clinical solution. Diomed desires to raise capital to be used for working
capital purposes, for the development of its new laser development project and
to fund future business acquisitions, among other things.
B. Parent has proposed to raise capital to fund the operating
and other activities of and pay certain obligations of Diomed by means of an
offering of securities that is exempt from the registration requirements of the
Securities Act.
C. Acquisition is a wholly-owned subsidiary of Parent and was
formed to merge with and into Diomed so that as a result of the Merger, as
defined below, Diomed will survive and become a wholly-owned subsidiary of
Parent.
D. The Boards of Directors of each of Parent, Acquisition and
Diomed have determined that this Agreement and the merger of Acquisition with
and into Diomed (the "MERGER") in accordance with the provisions of the DGCL,
and subject to the terms and conditions of this Agreement, is advisable and in
the best interests of Parent and Diomed and their respective stockholders.
E. The Boards of Directors of each of Parent, Acquisition and
the Acquired Entities have approved this Agreement and the transactions
contemplated hereby.
F. The Parties desire that the Merger and related transactions
qualify as a "plan of reorganization" under Section 368(a) of the Code and not
subject the holders of shares, options or warrants of Diomed to tax under the
Code.
G. Certain capitalized terms used in this Agreement without
definition shall have the respective meanings given them in Section 17.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
1
1. THE MERGER.
1.1 GENERAL.
(a) Upon the terms and subject to the conditions of this
Agreement and in accordance with the DGCL, at the Effective Time (as defined in
Section 1.1(b)), (i) Acquisition shall be merged with and into Diomed, (ii) the
separate corporate existence of Acquisition shall cease, and (iii) Diomed shall
be the surviving corporation (the "SURVIVING CORPORATION"). As a result of the
Merger, the outstanding shares of capital stock of Diomed shall be exchanged and
cancelled in the manner provided in Section 1.5. With respect to references in
this Agreement relating to any obligations or duties of Diomed accruing after
the Effective Time, the usage of the defined term "DIOMED" as opposed to
"SURVIVING CORPORATION" shall not operate to negate any such obligations or
duties.
(b) The Merger shall become effective at the time of
filing of a certificate of merger (the "CERTIFICATE OF MERGER"), substantially
in the form attached hereto as EXHIBIT A, with the Secretary of State of the
State of Delaware in accordance with the provisions of Section 251 of the DGCL,
or at such later time as may be stated in the Certificate of Merger (the
"EFFECTIVE TIME"). Subject to the terms and conditions of this Agreement, Diomed
and Acquisition shall duly execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware at the time of the closing of the
Merger (the "CLOSING"). The Closing shall take place at the New York offices of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., commencing at 10:00 a.m. or on such
other date, (not later than the Expiration Date), time and place as the parties
may mutually agree (the "CLOSING DATE").
(c) 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 Diomed and
Acquisition shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of Diomed and Acquisition
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
1.2 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Diomed, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided therein or by applicable law.
1.3 BY-LAWS. The By-laws of Diomed, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.
1.4 DIRECTORS AND OFFICERS. From and after the Effective Time,
(a) the directors of Diomed at the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation and, (b) the officers of
Diomed at 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.
2
1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Acquisition, Diomed
or the holders of any of the following securities:
(a) Each issued and outstanding share of common stock of
Acquisition shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving
Corporation;
(b) Each share of capital stock of Diomed ("DIOMED
CAPITAL STOCK") of any class or series owned or held in treasury by Diomed shall
be canceled and retired without any conversion thereof and no payment or
distribution shall be made with respect thereto;
(c) Subject to the provisions of Sections 1.6, each
share of Diomed Common Stock, par value $.001 per share ("DIOMED COMMON STOCK")
issued and outstanding immediately prior to the Effective Time (other than (i)
shares canceled in accordance with Section 1.5(b) and (ii) Dissenting Shares (as
defined in Section 1.7 below)) shall be converted into twenty-five
one-hundredths (0.25) (such number to be adjusted in accordance with Section 1.6
(as so adjusted, the "DIOMED COMMON STOCK EXCHANGE RATIO")) validly issued,
fully paid and nonassessable share of Class A Preferred Stock, par value $.001
per share, of Parent (the "PARENT CLASS A PREFERRED STOCK"), rounded to the
nearest one-thousandth of a share. As of the Effective Time, each share of
Diomed Common Stock shall no longer be outstanding and shall automatically be
canceled and retired, and each holder of record of a certificate representing
any shares of Diomed Common Stock shall cease to have any rights with respect
thereto, other than the right to receive shares of the Parent Class A Preferred
Stock to be issued in consideration therefor upon the surrender of such
certificate, if and to the extent requested by such holder;
(d) Subject to the provisions of Sections 1.6, each
share of Diomed Series A Preferred Stock, par value $.01 per share ("DIOMED
SERIES A PREFERRED STOCK") issued and outstanding immediately prior to the
Effective Time (other than (i) shares canceled in accordance with Section 1.5(b)
and (ii) Dissenting Shares) shall be converted into fifty one-hundredths (0.50)
(such number to be adjusted in accordance with Section 1.6 (as so adjusted, the
"DIOMED SERIES A PREFERRED STOCK EXCHANGE RATIO")) validly issued, fully paid
and nonassessable share of Parent Class A Preferred Stock, rounded to the
nearest one-thousandth of share. As of the Effective Time, each share of Diomed
Series A Preferred Stock shall no longer be outstanding and shall automatically
be canceled and retired, and each holder of record of a certificate representing
any shares of Diomed Series A Preferred Stock shall cease to have any rights
with respect thereto, other than the right to receive shares of Parent Class A
Preferred Stock to be issued in consideration therefor upon the surrender of
such certificate, if and to the extent requested by such holder;
(e) Subject to the provisions of Sections 1.6 and 1.8,
immediately (and in no event more than one day) after the Effective Time each of
the Diomed Option Plans and each Diomed Plan Option issued and outstanding
immediately prior to the Effective Time shall be assumed by Parent and shall be
exchanged for a Parent Option to purchase that number of shares of validly
issued, fully paid and nonassessable shares of Parent Class A Preferred Stock as
shall equal (i) the Common Stock Exchange Ratio, multiplied by (ii) the number
of shares of Diomed Common Stock subject to the Diomed Option, and the exercise
price at which each such
3
Parent Option is exercisable shall be the price at which the Diomed Plan Option
that was so converted into a Parent Option had been exercisable immediately
prior to the Effective Time, multiplied by the reciprocal of the Diomed Common
Stock Exchange Ratio; PROVIDED, that if the Diomed Common Stock Exchange Ratio
is other than 1:4, the number of shares of Parent Class A Preferred Stock
purchasable upon the exercise of such Parent Option, and the exercise price at
which each such Parent Option is exercisable, shall be adjusted to reflect the
Diomed Common Stock Exchange Ratio. As of the Effective Time, each Diomed Plan
Option shall no longer be outstanding and shall automatically be cancelled and
retired.
SCHEDULE 1.5 to this Agreement shall be jointly prepared by Parent and Diomed
immediately prior to the Closing and shall set forth the capitalization of
Parent after giving effect to the Merger.
1.6 ADJUSTMENT OF THE EXCHANGE RATIOS. If, subsequent to
the date of this Agreement, prior to the Effective Time, any stock split,
combination, reclassification or stock dividend with respect to the Parent Class
A Preferred Stock or Parent Common Stock (collectively, "PARENT CAPITAL STOCK"),
any change or conversion of Parent Capital Stock into other securities, or any
other dividend or distribution with respect to the Parent Capital Stock occurs
or, if a record date with respect to any of the foregoing occurs, the Parties
shall make appropriate and proportionate adjustments to the Diomed Common Stock
Exchange Ratio and the Diomed Series A Preferred Stock Exchange Ratio and
thereafter all references to the Diomed Common Stock Exchange Ratio and the
Diomed Series A Preferred Stock Exchange Ratio, as the case may be, shall be
deemed to be the Diomed Common Stock Exchange Ratio and the Diomed Series A
Preferred Stock Exchange Ratio, as so adjusted.
1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this
Agreement to the contrary, shares of Diomed Capital Stock that are outstanding
immediately prior to the Effective Time and which are held of record by
stockholders who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL (collectively, the
"DISSENTING SHARES") shall not be converted into or represent the right to
receive the consideration set forth in Section 1.5(c) or 1.5(d). Such
stockholders shall be entitled to receive such consideration as is determined to
be due with respect to such Dissenting Shares in accordance with the provisions
of Section 262 of the DGCL, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares under Section 262 of
the DGCL shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
shares of Parent Capital Stock specified in Section 1.5(c) or 1.5(d), without
any interest thereon, upon surrender, in the manner provided in Section 1.10, of
the certificate or certificates that were formerly evidenced by such Dissenting
Shares.
(b) Diomed shall give Parent (i) prompt notice of
any demands for appraisal received by Diomed, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by Diomed and
(ii) the opportunity to direct all negotiations
4
and proceedings with respect to demands for appraisal under the DGCL. Diomed
shall not, except with the prior written consent of Parent, offer to settle any
such demands.
1.8 NO FRACTIONAL SHARES. [RESERVED]
1.9 NOVATION OF NON-PLAN OPTIONS AND WARRANTS. Beginning
at the Effective Time and continuing until Parent shall have fully performed its
obligations under this Section 1.9, Parent will promptly accept and execute each
Diomed Non-Plan Option Novation Request and each Diomed Warrant Novation Request
tendered to it by the holder of any Diomed Non-Plan Option and Diomed Warrant
and return to each such holder as soon as practicable thereafter (and in no
event more than 30 Business Days) one original counterpart of each Diomed
Non-Plan Option Novation Request or Diomed Warrant Novation Request, as the case
shall be, bearing Parent's original signature. After Parent's execution of any
Diomed Non-Plan Option Novation Request or Diomed Warrant Novation Request, as
the case shall be, 25% of the number of Diomed Non-Plan Options (as adjusted
pursuant to Section 1.6 if the Diomed Common Stock Exchange Ratio is other than
4:1) referred to therein shall become separate obligations of Parent under the
terms and conditions set forth in the respective novation request, and the
Parent Option Plan referred to therein, and shall be Parent Options (as such
term is used in this Agreement), and 25% of the number of Diomed Warrants
referred to therein (as adjusted pursuant to Section 1.6 if the Diomed Common
Stock Exchange Ratio is other than 4:1) shall become separate obligations of
Parent under the terms and conditions set forth in the respective novation
request and shall be warrants to purchase shares of Parent Class A Preferred
Stock ("PARENT WARRANTS"). The Diomed Non-Plan Options or the Diomed Warrants
referred to in the respective novation request shall no longer be outstanding
and shall automatically be cancelled and retired.
1.10 EXCHANGE PROCEDURES; DISTRIBUTIONS WITH RESPECT TO
UNEXCHANGED SHARES; STOCK TRANSFER BOOKS.
(a) Shares of the Parent Capital Stock shall not
be certificated shares unless requested to be certificated thereof in writing by
any Diomed Stockholder.
(b) From time to time after the Effective Time
until the date on which less than 1% of the Diomed Capital Stock (calculated on
a fully diluted basis) remain to be surrendered, Parent shall make available to
the Requesting Holders, certificates representing shares of the Parent Capital
Stock to be issued pursuant to Sections 1.5(c) and 1.5(d) to such Requesting
Holders in exchange for their shares of Diomed Capital Stock. Such shares of
Parent Capital Stock, are referred to herein as the "EXCHANGE FUND."
(c) As soon as practicable after the Effective
Time, Parent shall send to each Person who shall have been, at the Effective
Time, a holder of record of certificates which represented outstanding Diomed
Capital Stock and who is a Requesting Holder (the "CERTIFICATES"), which shares
were converted into the right to receive Parent Capital Stock pursuant to
Sections 1.5(c) and 1.5(d), a letter of transmittal which (i) shall specify that
delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon actual delivery thereof to Parent and (ii) shall contain
instructions for use in effecting the surrender of the Certificates. Upon
surrender to Parent of Certificates for cancellation, together with such
5
letter of transmittal duly executed and such other documents as Parent may
reasonably require, such Requesting Holder shall be entitled to receive in
exchange therefor a certificate representing the number of shares of Parent
Capital Stock into which the applicable portion of Diomed Capital Stock
represented by the surrendered Certificate shall have been converted at the
Effective Time, and the Certificates so surrendered shall then be canceled.
Until surrendered as contemplated by this Section 1.10(c), each Certificate from
and after the Effective Time shall be deemed to represent only the right to
receive, upon such surrender, the number of shares of Parent Capital Stock into
which such Diomed Capital Stock shall have been converted.
(d) If any certificate representing Parent
Capital Stock is to be issued to any Person other than the registered holder of
the Certificate surrendered in exchange therefor, it shall be a condition to
such exchange that such surrendered Certificate shall be properly endorsed and
otherwise in proper form for transfer and such Person either (i) shall pay to
Parent any transfer or other taxes required as a result of the issuance of such
certificates of Parent Capital Stock and the distribution of such cash payment
to such Person or (ii) shall establish to the satisfaction of Parent that such
tax has been paid or is not applicable. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Diomed Capital Stock such amounts as Parent is required
to deduct and withhold with respect to the making of such payment under the
Code, or any provision of any other applicable tax law. To the extent that
amounts are so withheld by Parent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of Diomed Capital Stock in respect of which such deduction and withholding was
made by Parent. All amounts in respect of taxes received or withheld by Parent
shall be disposed of by Parent in accordance with the Code or such other
applicable tax law.
(e) If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and subject to such
other customary conditions as the board of directors of the Surviving
Corporation and Parent may impose, Parent shall issue in exchange for such lost,
stolen or destroyed Certificate the shares of Parent Capital Stock as determined
under Section 1.5(c) or 1.5(d) in respect of such Certificate; PROVIDED, that
Parent may, in its reasonable discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to deliver a bond in such sum as it may reasonably require as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(f) From and after the Effective Time, the
holders of shares of Diomed Capital Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares except
as otherwise provided herein or by applicable law.
1.11 STOCK CERTIFICATE LEGENDS. Each stock certificate
delivered by Parent to a stockholder of Diomed (a "Diomed Stockholder") whose
address in the books and records of Diomed is in the United States or Canada
will be imprinted with legends substantially in the following forms:
THE SHARES THIS CERTIFICATE REPRESENTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
6
"SECURITIES ACT"). SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FILED BY THE ISSUER WITH THE SECURITIES AND EXCHANGE COMMISSION
COVERING SUCH SHARES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
Each stock certificate delivered by Parent to a Diomed Stockholder
whose address is other than in the United States or Canada will be imprinted
with legends substantially in the following forms:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE
ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH
SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE SURVIVING CORPORATION'S RIGHTS PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C), (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO THE SURVIVING CORPORATION AND IN THE CASE OF
THE FOREGOING CLAUSE (D), A CERTIFICATE OF TRANSFER (A FORM OF WHICH MAY
BE OBTAINED FROM THE SURVIVNG CORPORATION) COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE SURVIVING CORPORATION. HEDGING TRANSACTIONS WITH REGARD
TO THIS
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SECURITY MAY NOT BE CONDUCTED BY THE HOLDER HEREOF UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
1.12 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, powers,
franchises, properties or assets of either Diomed or Acquisition or (b)
otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors or their designees
shall be authorized to execute and deliver, in the name and on behalf of
either Diomed or Acquisition, all such deeds, bills of sale, assignments
and assurances and do, in the name and on behalf of Diomed or
Acquisition, 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, powers, franchises, properties or
assets of Diomed or Acquisition, as applicable, and otherwise to carry
out the purposes of this Agreement.
2. REPRESENTATIONS AND WARRANTIES CONCERNING THE ACQUIRED ENTITIES.
Diomed represents and warrants to Parent and Acquisition that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and, except as expressly provided in a representation or warranty, as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 2, except as set forth in the disclosure schedules
Diomed has delivered to Parent on the date hereof).
2.1 ORGANIZATION. Each Acquired Entity is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its creation, formation or organization and has all requisite
power and authority and all necessary governmental approval to carry on its
business as it has been and is now being conducted and any businesses in which
it currently proposes to engage. Each Acquired Entity is duly qualified or
licensed as a foreign entity to do business, and is in good standing, in each
jurisdiction where such qualification or license is required, except where the
failure so to qualify would not have a Material Adverse Effect.
2.2 CAPITALIZATION; OPTIONS AND OTHER RIGHTS.
(a) The total authorized shares of capital stock of
Diomed consists of (i) 40,000,000 shares of Diomed Common Stock, of which (A)
9,315,690 shares are issued and outstanding, (B) 5,450,000 shares have been
reserved for the conversion of Diomed Preferred Stock (as defined below), (C)
121,924 shares have been reserved for issuance upon exercise of Diomed Warrants,
(D) 1,804,384 shares have been reserved for issuance upon exercise of Diomed
Options, and (E) [417,832] shares have been reserved for issuance upon
conversion of the Second QLT Promissory Note in accordance with the terms and
conditions thereof (the shares of Diomed Common Stock reserved for conversion,
or issuance upon exercise of, the
8
securities referred to in such clauses (B) through (F) of clause (i) of this
Section 2.2(a) are collectively referred to as the "RESERVED DIOMED COMMON
SHARES," and (ii) 3,500,000 shares of preferred stock, par value $0.01 per share
(the "DIOMED PREFERRED STOCK"), of which (A) 3,500,000 shares have been
designated as Diomed Series A Preferred Stock, 2,725,000 shares of which are
issued and outstanding. All of the issued and outstanding shares of Diomed
Common Stock have been duly and validly authorized and issued and are fully paid
and nonassessable, and all of the Reserved Diomed Common Shares, when issued
upon the conversion or exercise of the Diomed Preferred Stock and the other
securities referred to in subclauses (B) through (F) of clause (i) of this
Section 2.2(a), will be duly and validly authorized and issued and fully paid
and nonassessable. All the shares of Diomed Preferred Stock have been duly and
validly authorized and issued and are fully paid and nonassessable. None of the
Diomed Capital Stock has been issued, and none of the Diomed Capital Stock will
be issued in violation, of the preemptive rights of any Diomed Stockholder. The
issued and outstanding shares of Diomed Common Stock and issued and outstanding
shares of Diomed Preferred Stock have been issued, and the shares of Diomed
Common Stock to be issued upon the conversion of Diomed Preferred Stock will be
issued, in compliance in all material respects with applicable Federal and state
securities laws and regulations.
(b) Except as set forth in the Shareholders Agreement dated
March 2001 and as set forth under in SCHEDULE 2.2(b) and except for shares of
Diomed Common Stock issuable upon the exercise of options outstanding under the
Diomed Option Plans, the exercise of the Diomed Warrants, or the conversion of
the October 2001 Bridge Loan Notes and the December 2001 Bridge Loan Notes,
there are no existing agreements, subscriptions, options, warrants, calls,
commitments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any Person any interest in or the right to purchase or otherwise
acquire from Diomed or granting to Diomed any interest in or the right to
purchase or otherwise acquire from any Person, at any time, or upon the
occurrence of any stated event, any securities of Diomed, whether or not
presently issued or outstanding, nor are there any outstanding securities of
Diomed or any other entity which are convertible into or exchangeable for other
securities of Diomed, nor are there any agreements, subscriptions, options,
warrants, calls, commitments or rights of any kind granting to any Person any
interest in or the right to purchase or otherwise acquire from Diomed or any
other Person any securities so convertible or exchangeable.
(c) Except as set forth in SCHEDULE 2.2(c) there are no
proxies, agreements or understandings with respect to the voting of any of the
shares of Diomed Capital Stock or the direction of the business operations or
conduct of Diomed, except as contemplated by this Agreement.
(d) SCHEDULE 2.2(d) sets forth a true and complete list of all
holders of Diomed Capital Stock (including the amount and type of security
beneficially owned by such holder), together with the address of each such
stockholder as currently shown on Diomed's books and records.
(e) Except as set forth on SCHEDULE 2.2(e), to the Best
Knowledge of Diomed, no stockholder of any Acquired Entity is a party to any (i)
contract that would require such stockholder to sell, transfer or otherwise
dispose of any Capital Stock of any Acquired
9
Entity (other than this Agreement) or (ii) other contract with respect to any
capital stock of any Acquired Entity.
2.3 AUTHORITY; NO CONFLICTS; CONSENTS.
(a) Diomed has full power and authority to execute,
deliver and perform this Agreement and the transactions contemplated hereunder.
Except as set forth on SCHEDULE 2.3(a), the execution, delivery and performance
of this Agreement by Diomed has been duly authorized and approved by all
necessary corporate or other action, and no other corporate or other proceedings
on the part of Diomed are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Diomed and is the legal, valid and binding obligation
of Diomed, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors rights generally and by
the effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(b) The execution, delivery and performance by Diomed of
this Agreement and the consummation of the Merger do not, and will not, (i)
violate or conflict with any provision of the Certificate of Incorporation or
By-laws of Diomed, (ii) violate any law, rule, regulation, order, writ,
injunction, judgment or decree of any court, governmental authority or
regulatory agency applicable to any Acquired Entity, except for violations
which, individually or in the aggregate, would not have a Material Adverse
Effect, or (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any note, bond,
indenture, lien, mortgage, lease, permit, guaranty or other agreement,
instrument or obligation to which any Acquired Entity is a party or by which any
of its assets may be bound, except for violations, breaches or defaults which,
individually or in the aggregate, would not have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by
Diomed does not, and the performance by Diomed of this Agreement will not,
require any consent, approval, authorization or permission of, or filing with or
notification of any governmental or regulatory authority, domestic or foreign,
or any other Person except for (i) the filing and recordation of appropriate
merger documents as required by the DGCL, (ii) the approval of the Diomed
Stockholders and (iii) any such consent, approval, authorization, permission,
notice or filing which, if not obtained or made, would not have a Material
Adverse Effect.
(d) The Board of Directors of (i) each Acquired Entity
is properly constituted. The Board of Directors of Diomed has approved this
Agreement and the transactions contemplated hereby, has determined that the
terms of the Merger are in the best interests of the Diomed Stockholders, and
has resolved to recommend the approval of the Merger and the adoption of this
Agreement and the consummation of the transactions contemplated hereby to the
Diomed Stockholders.
(e) Pursuant to the provisions of the DGCL, the
Certificate of Incorporation of Diomed, the By-laws of Diomed and any other
applicable law, the only
10
approval of Diomed Stockholders required to approve the Merger and to approve
and adopt this Agreement and the transactions contemplated hereby is the
approval of (i) a majority of the outstanding shares of Diomed Common Stock, and
(ii) two-thirds of the outstanding shares of Diomed Series A Preferred Stock,
voting as a separate class.
2.4 CHARTER DOCUMENTS. Diomed has previously furnished to
Parent a true, complete and correct copy of the Certificate of Incorporation and
By-laws of Diomed and the Articles of Association and Memorandum of Association
of each of the Acquired Subsidiaries, in each case as in effect as of the date
of this Agreement. No Acquired Entity is in violation of any provision of any
document referred to in the foregoing sentence, other than violations that would
not have a Material Adverse Effect.
2.5 FINANCIAL STATEMENTS.
(a) Diomed has previously furnished to Parent true and
complete copies of the following financial statements (the "FINANCIAL
STATEMENTS"):
(i) the audited consolidated balance sheet as of and for
the fiscal years ended December 31, 1999 and December 31, 2000
(the "BALANCE SHEET"), together with reports by Arthur Andersen
LLP;
(ii) the audited consolidated statements of operations,
stockholders' equity and cash flows as of and for the fiscal years
ended December 31, 1999 and December 31, 2000, together with
reports by Arthur Andersen LLP;
(iii) the unaudited consolidated balance sheet as of
September 30, 2001 (the "UNAUDITED BALANCE SHEET") prepared in
compliance with the requirements of a Form 10-QSB to be filed
pursuant to the Exchange Act; and
(iv) the unaudited consolidated statements of operations,
stockholders' equity and cash flows for the nine-month period
ended September 30, 2001 prepared in compliance with the
requirements of a Form 10-QSB to be filed in pursuant to the
Exchange Act.
(b) The Financial Statements were prepared in accordance
with GAAP (except, in the case of the unaudited consolidated financial
statements, for normal and recurring year-end adjustments (which will not be
material individually or in the aggregate) and the omission of footnotes). The
Financial Statements were each prepared on the basis of the books and records of
the Acquired Entities (in each case, as of the date of such Financial
Statements) and present fairly, in all material respects, the consolidated
financial position of the Acquired Entities as of the dates thereof and the
consolidated results of the operations and changes in stockholders' equity and
cash flows of the Acquired Entities for each of the periods then ended in
conformity with GAAP.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES; INDEBTEDNESS.
(a) Except as disclosed on SCHEDULE 2.6(a) or as set
forth in the notes to the Financial Statements, no Acquired Entity has any
liability or obligation of any nature
11
(whether absolute, accrued or contingent or otherwise) which is materially in
excess of amounts shown or reserved therefor in the Financial Statements other
than (a) liabilities or obligations not required under GAAP on a basis
consistent with that of preceding accounting periods to be reported on such
Financial Statements and (b) liabilities or obligations incurred after the date
of the Unaudited Balance Sheet incurred in the ordinary course of business and
consistent with past practice.
(b) Except as disclosed on SCHEDULE 2.6(b), no Acquired
Entity has any Indebtedness which has not been incurred in the ordinary course
of business and consistent with past practice.
2.7 OPERATIONS AND OBLIGATIONS.
(a) Except as set forth in SCHEDULE 2.7(a) or reported
on the Unaudited Balance Sheet, since December 31, 2000:
(i) there has been no event or condition that has had or
would have a Material Adverse Effect; and
(ii) there has been no impairment, damage, destruction,
loss or claim, whether or not covered by insurance, or
condemnation or other taking which would have a Material Adverse
Effect.
(b) Except (i) as set forth in SCHEDULE 2.7(b) and (ii)
for actions required to be taken hereunder or approved in advance thereof by
Parent in writing, since December 31, 2000, each Acquired Entity has conducted
its business only in the ordinary course and consistent with past practice.
Without limiting the generality of the foregoing, since December 31, 2000,
except as set forth in such schedule, no Acquired Entity has:
(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any option,
warrant or other right to purchase, any of its capital stock or
other equity interest or any security convertible into its capital
stock or other equity interest other than as listed on SCHEDULE
2.2(b), 2.2(c) or 2.2(e);
(ii) except as set forth in SCHEDULE 2.6(b), issued,
delivered or agreed (conditionally or unconditionally) to issue or
deliver any bonds, notes or other debt securities, or borrowed or
agreed to borrow any funds (other than intercompany debt) in
excess of $50,000 or entered into any lease the obligations of
which, in accordance with generally accepted accounting
principles, would be capitalized, which lease has a capitalized
value in excess of $50,000;
(iii) other than liabilities reflected or reserved against
in the Balance Sheet and liabilities incurred since December 31,
2000 in the ordinary course of business consistent with past
practice, paid any obligation or liability (absolute or
contingent) in excess of $50,000;
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(iv) declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders or
purchased or redeemed, or agreed to purchase or redeem, any
capital stock;
(v) except in the ordinary course of business consistent
with past practice or as set forth in SCHEDULE 2.9, made or
permitted any material amendment or termination of any agreement
to which any Acquired Entity is a party and is or should be set
forth in SCHEDULE 2.9;
(vi) undertaken or committed to undertake capital
expenditures exceeding $100,000 for any single project or related
series of projects;
(vii) sold, leased (as lessor), transferred or otherwise
disposed of, mortgaged or pledged, or imposed or suffered to be
imposed any Lien on, any of the assets reflected on the Balance
Sheet having an aggregate value of greater then $50,000 or any
assets acquired by any Acquired Entity after December 31, 2000
having an aggregate value of greater than $50,000, except for
inventory and personal property sold or otherwise disposed of for
fair value in the ordinary course of its business consistent with
past practice and except for Permitted Liens;
(viii) canceled any debts owed to or claims held by any
Acquired Entity in excess of $50,000 per obligation (including the
settlement of any claims or litigation);
(ix) accelerated or delayed collection of accounts
receivable in excess of $50,000 per account in advance of or
beyond their regular due dates or the dates when the same would
have been collected except in the ordinary course of its business
consistent with past practice;
(x) delayed or accelerated payment of any account
payable or other liability in excess of $50,000 per item beyond or
in advance of its due date or the date when such liability would
have been paid except in the ordinary course of its business
consistent with past practice;
(xi) entered into or become committed to enter into any
other material transaction involving more than $100,000 except in
the ordinary course of business;
(xii) allowed the levels of supplies or other materials
included in the inventory of any Acquired Entity to vary by more
than $100,000 from the levels customarily maintained in accordance
with past practice;
(xiii) except for increases in the ordinary course of
business consistent with past practice, instituted any increase in
any compensation payable to any employee of any Acquired Entity,
amended any Benefit Plan or modified any other benefits made
available to any such employees;
13
(xiv) made any change in the accounting principles or made
any material change in accounting practices used by any Acquired
Entity, in each case, from those applied in the preparation of the
Financial Statements; or
(xv) taken any of the actions which, under Section 4.2,
it is prohibited from taking between the date hereof and the
Closing Date.
(c) Except as set forth in SCHEDULE 2.7(c), there are no
accrued and unpaid dividends or distributions with respect to the any capital
stock of any Acquired Entity.
2.8 PROPERTIES.
(a) Each of the Acquired Entities has good, marketable,
and indefeasible title to, or a valid leasehold interest in, all buildings,
machinery, equipment, and other tangible assets (i) located on their premises,
shown on the Financial Statements, or acquired after the date thereof and (ii)
necessary for the conduct of their business as currently conducted and as
currently proposed to be conducted, in each case free and clear of all
encumbrances, except for properties and assets disposed of in the ordinary
course of business since the date thereof and except for Permitted Liens. Each
such tangible asset is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition (subject to normal wear and tear), and is suitable for the purposes
for which it is currently used and currently is proposed to be used.
(b) None of the Acquired Entities owns any real
property.
2.9 CONTRACTS. SCHEDULE 2.9 lists any of the following not
otherwise listed on any other schedule:
(a) Each contract or commitment which creates an
obligation, or a right to receive payment, on the part of the Acquired Entities
in excess of $50,000 and not described in clauses (b) through (k) below;
(b) Each written debt instrument, including, without
limitation, any loan agreement, line of credit, promissory note, security
agreement or other evidence of indebtedness, where an Acquired Entity is a
lender, borrower or guarantor, in a principal amount in excess of $100,000;
(c) Each written contract or commitment restricting an
Acquired Entity from engaging in any line of business;
(d) Each written contract to which any Acquired Entity
is a party which contains a provision relating to a change in control of such
Acquired Entity that (i) permits the other party thereto to modify in any
material respect or to terminate such contract or (ii) requires notice to such
other party of such change in control of such Acquired Entity;
(e) Each written contract or commitment in excess of
$50,000 to which any Acquired Entity is a party for any charitable contribution;
14
(f) Each written joint venture or partnership agreement
to which any Acquired Entity is a party;
(g) Each written distributorship, sales agency, sales
representative, reseller or marketing, value added reseller, original equipment
manufacturing, technology transfer, source code license or other license or
other agreement containing the right to sublicense software and/or technology,
in each case, to which any Acquired Entity is a party;
(h) Each written agreement in excess of $50,000 to which
any Acquired Entity is a party with respect to any assignment, discounting or
reduction of any receivables of such Acquired Entity;
(i) Each agreement, option or commitment or right with,
or held by, any third party to acquire any assets or properties, of any Acquired
Entity, having a value in excess of $50,000, except for contracts for the sale
of inventory, machinery or equipment in the ordinary course of business;
(j) Each written employment or consulting contract
entered into by any Acquired Entity which is currently in effect; and
(k) Each supply agreement to which any Acquired Entity
is a party that such Acquired Entity could not readily replace without a
material impact on such Acquired Entity.
Except as set forth in SCHEDULE 2.9, (i) to the Best Knowledge of
Diomed, there are no oral contracts or commitments of the types described in
this Section 2.9 which create an obligation on the part of any Acquired Entity
which are individually in excess of $50,000 or in the aggregate in excess of
$100,000, (ii) there are no contracts or commitments between any Acquired Entity
and any Affiliate that is not listed on any other schedule, (iii) there are no
contracts, commitments or arrangements between any Acquired Entity and any
employee which require the payment of any compensation upon the occurrence of
change in control of such Acquired Entity, (iv) there are no contracts or
arrangements to which any Acquired Entity is a party, except this Agreement,
which require notice to, the consent of, or other than with respect to services
provided in connection with the Merger, any payment of any compensation (whether
as a penalty, liquidated damages or otherwise) to any party with respect to the
Merger or any of the transactions contemplated hereby or in the event of the
termination of such contract or arrangement on or following the Effective Time,
(v) there are no contracts to which any Acquired Entity is a party which would
create rights in any Person against Parent or any of its Affiliates (other than
rights against the Acquired Entities and as in effect on the Closing Date) and
(vi) Diomed has been duly authorized to enter into each of the contracts listed
in SCHEDULE 2.9 and each of the contracts listed in SCHEDULE 2.9 is binding and
enforceable in accordance with its terms.
2.10 ABSENCE OF DEFAULT. Except as set forth in SCHEDULE 2.10:
(a) Each of the agreements listed on SCHEDULE 2.9 that
creates obligations of any Person in excess of $50,000 is, and, after giving
effect to the Merger, will be, valid and binding and in full force and effect,
in each case, without breaching the terms thereof
15
or resulting in the forfeiture or impairment of any rights thereunder and
without notice to, the consent, approval or act of, or the making of any filing
with, any other Person;
(b) Each Acquired Entity has fulfilled and performed in
all material respects its obligations under each such agreement to which it is a
party to the extent such obligations are required by the terms thereof to have
been fulfilled or performed through the date hereof;
(c) Each Acquired Entity is not alleged in writing to
be, and no other party to any such agreement is, in default under, nor is there
alleged in writing to be any basis for termination of, any such agreement;
(d) No event has occurred and no condition or state of
facts exists which, with the passage of time or the giving of notice or both,
would constitute such a default or breach by any Acquired Entity or by any such
other party; and
(e) Each Acquired Entity is not currently renegotiating
any such agreement or paying liquidated damages in lieu of performance
thereunder.
2.11 LITIGATION. Except as set forth in SCHEDULE 2.11, to the
Best Knowledge of such entity, no Acquired Entity is a party to any action,
suit, arbitration, legal or administrative proceeding or investigation pending
or threatened against it. There is no judgment, order, writ, injunction or
decree of any court, governmental agency, tribunal or other governmental or
regulatory authority as to which any of the assets, properties or business of
any Acquired Entity is subject.
2.12 COMPLIANCE WITH LAW. Except as set forth in SCHEDULE 2.12:
(a) Each Acquired Entity has complied in all respects
with, and is not in violation of, any law, ordinance or governmental rule or
regulation (collectively, "LAWS") to which it or its business is subject other
than failures to comply and violations which do not have a Material Adverse
Effect; and
(b) Each Acquired Entity has obtained all licenses,
permits, certificates or other governmental authorizations (collectively
"AUTHORIZATIONS") necessary for the ownership or use of its assets and
properties or the conduct of its business other than Authorizations (i) which
are ministerial in nature and which no Acquired Entity has reason to believe
would be issued in due course and (ii) which, the failure of any Acquired Entity
to possess, would not subject such Acquired Entity to penalties or fines
exceeding $100,000 in the aggregate ("IMMATERIAL AUTHORIZATIONS").
2.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.13(a) contains a summary description of
each Acquired Entity's Patent. All Patents required to be listed that have been
registered with the United States Patent and Trademark Office or with a
corresponding state office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject
16
to any maintenance fees, taxes, or actions falling due within 90 days after the
Closing Date. No Patent required to be listed has been or is now involved in any
opposition, invalidation, or cancellation and no such action is threatened with
respect to any such Patent.
(b) SCHEDULE 2.13(b) lists each Acquired Entity's
Trademarks. All Trademarks required to be listed that have been registered with
the United States Patent and Trademark Office or with a corresponding state
office are currently in compliance with all formal legal requirements (including
the timely post-registration filing of affidavits of use and incontestability
and renewal applications), are valid and enforceable, and are not subject to any
maintenance fees, taxes, or actions falling due within 90 days after the Closing
Date. No Trademark required to be listed has been or is now involved in any
opposition, invalidation, or cancellation and no such action is threatened with
the respect to any such Trademark. All products and materials containing a
Trademark required to be listed bear the proper legal notice where permitted by
law.
(c) Except as set forth in SCHEDULE 2.13(c) no Software
used by any Acquired Entity has been specifically developed by or for any
Acquired Entity.
(d) Each Acquired Entity has taken all reasonable
precautions to protect the secrecy, confidentiality, and value of each of its
Trade Secrets, the loss of which would have a Material Adverse Effect (such
Trade Secrets being referred to in this Agreement as "MATERIAL TRADE SECRETS").
To the Best Knowledge of Diomed without inquiry, no Material Trade Secret is
part of the public knowledge or literature, or, has been used, divulged, or
appropriated either for the benefit of any third person or to any Acquired
Entity's detriment. No Material Trade Secret is subject to any adverse claim nor
has any adverse claim been threatened with respect to any such Material Trade
Secret and there is no basis therefor.
(e) Each Acquired Entity owns or has the right to use
all Intellectual Property necessary to operate its business as currently
conducted. Each item of Intellectual Property that each Acquired Entity owns or
uses immediately prior to the Closing will be owned or available for use by the
Surviving Corporation on identical terms and conditions immediately subsequent
to the Closing.
(f) To the Best Knowledge of Diomed, no Acquired Entity
has interfered with, infringed upon, misappropriated, or otherwise violated or
come into conflict with any other person's Intellectual Property ("THIRD PARTY
INTELLECTUAL PROPERTY"). No Acquired Entity has received any notice alleging any
such interference, infringement, misappropriation, violation, or conflict
(including any claim that each Acquired Entity must license or refrain from
using any Third Party Intellectual Property) and is not aware of any basis for
such notice or claim. To the Best Knowledge of Diomed, no third person has any
Third Party Intellectual Property that interferes or would be likely to
materially interfere with any Acquired Entity's use of any of its Intellectual
Property. To the Best Knowledge of Diomed, no Acquired Entity will materially
interfere with, infringe upon, misappropriate, or otherwise come into conflict
with, any Third Party Intellectual Property Rights as a result of the continued
operation of its businesses as currently conducted. To the Best Knowledge of
Diomed, no other person has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Acquired Entity's Intellectual Property.
17
(g) SCHEDULE 2.13(g) identifies each contract pursuant
to which any Acquired Entity has granted to a third party rights under or with
respect to any of its Intellectual Property (together with any exceptions).
SCHEDULE 2.13(g) further identifies each contract pursuant to which any Acquired
entity has a right to use any Third Party Intellectual Property. Each Acquired
Entity has made available to Parent correct and complete copies of all contracts
with respect to such use as amended to date.
(h) Except as set forth on SCHEDULE 2.13(h), all former
and current employees of each Acquired Entity whose position required the
development of Intellectual Property for such Acquired Entity have executed
written contracts with the applicable Acquired Entity that assign to such
Acquired Entity all rights to any inventions, improvements, discoveries or
information relating to such Acquired Entity's business; and no employee of any
Acquired Entity has entered into any contract that restricts or limits in any
way the scope or type of work in which the employee may be engaged or requires
the employee to transfer, assign, or disclose information concerning his or her
work to any person other than the Acquired Entity.
2.14 TAX MATTERS. Except as set forth in SCHEDULE 2.14, (a) each
Acquired Entity has filed all Tax Returns required to be filed; (b) (A) all such
Tax Returns are complete and accurate in all material respects, except to the
extent that a reserve for Taxes has been established on the Unaudited Balance
Sheet, and (B) all Taxes shown to be due on such Tax Returns have been timely
paid; (c) all Taxes (whether or not shown on any Tax Return) owed by any
Acquired Entity have been timely paid or the applicable Acquired Entity has
established or caused to be established adequate reserves therefor on its
consolidated financial statements on at least a quarterly basis; (d) no Acquired
Entity has waived or been requested to waive any statute of limitations in
respect of Taxes, which waiver or request is still in effect; (e) none of the
Tax Returns referred to in clause (a) have been examined by the Internal Revenue
Service or any applicable taxing authorities; (f) there is no action, suit,
investigation, audit, claim or assessment pending or proposed or threatened with
respect to Taxes of any Acquired Entity; (g) all deficiencies asserted or
assessments made as a result of any examination of the Tax Returns referred to
in clause (a) have been paid in full or have been reserved against and entered
into the books and records of each Acquired Entity; (h) there are no liens for
Taxes upon the assets of any Acquired Entity except liens relating to current
Taxes not yet due and payable; (i) all Taxes which any Acquired Entity is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued, reserved against and entered on
the books of such Acquired Entity in accordance with GAAP; (j) no Acquired
Entity is a party to any tax sharing or indemnification agreement; (k) no
Acquired Entity is a "United States Real Property Holding Company" as defined in
section 897 of the Code; (l) during the five-year period ending on the date
hereof, no Acquired Entity was a distributing corporation or a controlled
corporation in a transaction intended to be governed by section 355 of the Code;
(m) no election has been made under section 301.7701-3 or any similar provision
of Tax law to treat any Acquired Entity or any Affiliate of any Acquired Entity
as an association, corporation or partnership; (n) no Acquired Entity is
disregarded as an entity for U.S. federal income tax purposes; (o) none of
Diomed's net operating loss is "dual consolidated loss" as defined in section
1503 of the Code; and (p) none of Diomed's non-U.S. subsidiaries is a "passive
foreign investment company" as defined in section 1297 of the Code or a "foreign
personal holding company" as defined in section 553 of the Code.
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2.15 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on SCHEDULE 2.15(a), all amounts
which any Acquired Entity is required by law or by agreement with its employees
to deduct from such employees' salaries and/or transfer to such employees'
pension, life insurance, incapacity insurance, continuing education fund or
other plans have been duly paid into the appropriate fund or funds, and no
Acquired Entity has any outstanding obligation to make any such transfer or
provision.
(b) No Acquired Entity has any "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), or "employee welfare benefit plans" (as defined
in Section 3(1) of ERISA). SCHEDULE 2.15(b) contains a list and brief
description of all Benefit Plans maintained, or contributed to, by any Acquired
Entity or any Person that, together with any Acquired Entity, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each Acquired
Entity and each such other Person, a "COMMONLY CONTROLLED ENTITY") for the
benefit of any current or any former employees, officers or directors of any
Acquired Entity. Each Acquired Entity has made available to Parent true,
complete and correct copies of (i) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (ii) the most recent summary
plan description for each Benefit Plan for which such summary plan description
is required, (iii) each trust agreement and group annuity contract relating to
any Benefit Plan and (iv) all correspondence with the IRS, the United States
Department of Labor or other governmental entity relating to any outstanding
controversy or audit. Except as could not reasonably be expected to have a
Material Adverse Effect, each Benefit Plan has been administered in accordance
with its terms.
(c) No Acquired Entity has maintained, contributed to or
been obligated to contribute to any plan that is subject to Title IV of ERISA.
(d) Except as set forth in SCHEDULE 2.15(d), since the
date of the most recent audited consolidated financial statements, there has not
been any adoption or amendment by any Acquired Entity of any Benefit Plan, or
any change in any actuarial or other assumption used to calculate funding
obligations with respect to any Benefit Plan, or any change in the manner in
which contributions to any Benefit Plan are made or the basis on which such
contributions are determined.
(e) SCHEDULE 2.15(e) lists all outstanding stock options
of each Acquired Entity, showing for each such option: (i) the name of the
optionee, (ii) the number of shares issuable, (iii) the number of vested shares
as of the date hereof, (iv) the exercise price and (v) if granted under a Diomed
Option Plan, the Diomed Option Plan under which such option was granted. Except
as set forth on SCHEDULE 2.15(E), none of the outstanding options is subject to
acceleration or cancellation as a result of the Merger.
(f) Except as set forth in SCHEDULE 2.15(f) or as
provided by this Agreement, no employee of any Acquired Entity will be entitled
to any additional compensation or benefits or any acceleration of the time of
payment or vesting of any compensation or benefits under any Benefit Plan as a
result of the transactions contemplated by this Agreement.
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(g) Except as set forth in SCHEDULE 2.15(g), no Acquired
Entity has issued any common stock under any restricted stock purchase
arrangement, and no Acquired Entity is a party to any restricted stock purchase
arrangement. After giving effect to the Merger, no Acquired Entity shall be
subject to the restricted stock purchase arrangements set forth in SCHEDULE
2.15(g), which Schedule also lists (i) the number of shares of restricted stock
issuable and (ii) the vesting schedule for the shares of restricted stock.
(h) SCHEDULE 2.15(h) lists all shares of capital stock
issued pursuant to any restricted stock purchase agreement or stock option
agreement (including, without limitation, any such agreement amended in
accordance with the provisions of this Agreement and any stock option agreement
issued under any Diomed Option Plan, including (i) the date such shares were
sold, (ii) the purchase price per share (which is also the price at which any
Acquired Entity may repurchase such shares) and (iii) the number of shares
issued. Except as indicated in SCHEDULE 2.15(h), the transactions contemplated
by this Agreement, including without limitation the Merger, shall not cause any
acceleration, vesting or other similar consequences to the rights of the Parties
under any provision of the Diomed Stock Plan or any stock option plan of any
Acquired Entity.
2.16 EXECUTIVE EMPLOYEES.
(a) SCHEDULE 2.16 lists the names, titles and current
annual salary rates of and bonuses paid in the years 1999 through 2001 or
currently payable to all present officers and employees of each Acquired Entity
whose annual base salary in such year exceeded $100,000 (the "EXECUTIVE
EMPLOYEES").
(b) Except as set forth in SCHEDULES 2.16 OR 2.17, no
Acquired Entity has any employment agreement with, and maintains any employee
benefit plan (within the meaning of Section 3(3) of ERISA) with respect to, any
Executive Employees. There are no agreements with respect to any Executive
Employees which would obligate any Acquired Entity to make any payment or
provide any benefit the deduction of which is limited by Section 280G of the
Code or that could be subject to tax under Section 4999 of the Code.
2.17 EMPLOYEES. SCHEDULE 2.17 contains true, full and accurate
particulars of the names and salaries of all the employees and officers of each
Acquired Entity whose total compensation in 2001 exceeded $50,000. The salary
figures set forth in SCHEDULE 2.17 include all remuneration payable, vacation
pay balances, balances in pension funds, or customs, manager's insurance and any
profit sharing commission, incentive or discretionary bonus arrangements to
which any Acquired Entity is a party. Complete and correct copies of all such
agreements (including all amendments) have been provided to Parent. Except as
set forth in SCHEDULE 2.17:
(a) There are no controversies pending or threatened
between any Acquired Entity and any of its employees, which controversies have
or could reasonably be expected to have a Material Adverse Effect;
(b) No Acquired Entity is liable for any arrears of
wages or any taxes or penalties for failure to comply with any such laws, rules
or regulations;
20
(c) No Acquired Entity is subject to, nor do any of its
employees benefit from, any payment or undertaking with respect to the terms of
their employment (including, without limitation, amounts payable in respect of
severance pay);
(d) There are no agreements between any Acquired Entity
and any of its directors, officers, executives or employees which cannot be
terminated upon two weeks notice or less without giving rise to a claim for
damages or compensation (except for statutory severance pay);
(e) No Acquired Entity is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by any Acquired Entity, nor are there any activities or proceedings of
any labor union to organize any such employees;
(f) There is no strike, slowdown, work stoppage or
lockout existing or threatened by or with respect to any employees of any
Acquired Entity;
(g) The severance pay due to employees of any Acquired
Entity is either paid, funded or provided for on the Balance Sheet. Except as
set forth in SCHEDULE 2.17, no Acquired Entity is aware of any circumstance
whereby any employee might reasonably demand (whether legally entitled to or
not) any claim for compensation on termination of employment beyond the
statutory severance pay to which such employee is entitled and no Acquired
Entity is aware of any claim to be made by any employee for payment of
compensation arising from the Merger by Parent; and
(h) no Acquired Entity has received any written notice
that any federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws intends to conduct an investigation of or relating
to it, and no such investigation is in progress.
2.18 ENVIRONMENTAL LAWS. No Acquired Entity has received any
notice or claim (or to the Best Knowledge of such entity is there any facts that
would form a reasonable basis for any claim), or entered into any negotiations
or agreements with any other Person, and no Acquired Entity is the subject of
any investigation by any governmental or regulatory authority, domestic or
foreign, relating to any material liability or remedial action under any
Environmental Laws. There are no pending or threatened actions, suits or
proceedings against any Acquired Entity or any of the properties, assets or
operations asserting any such material liability or seeking any material
remedial action in connection with any Environmental Laws.
2.19 BANK ACCOUNTS, LETTERS OF CREDIT AND POWERS OF ATTORNEY.
SCHEDULE 2.19 has been separately provided to Parent under an agreement of
confidentiality and lists (a) all bank accounts, lock boxes and safe deposit
boxes relating to the business and operations of each Acquired Entity (including
the name of the bank or other institution where such account or box is located
and the name of each authorized signatory thereto), (b) all outstanding letters
of credit issued by financial institutions for the account of each Acquired
Entity (setting forth, in each case, the financial institution issuing such
letter of credit, the maximum amount available under such letter of credit, the
material terms (including the expiration date) of such letter of credit and the
party or parties in whose favor such letter of credit was issued), and (c) the
name and address
21
of each Person who has a power of attorney to act on behalf of such Acquired
Entity. Each Acquired Entity has heretofore delivered to Parent true, correct
and complete copies of each letter of credit and each power of attorney
described in SCHEDULE 2.19.
2.20 SUBSIDIARIES. SCHEDULE 2.20 sets forth each Subsidiary of
any Acquired Entity (a) its name and jurisdiction of creation, formation, or
organization, (b) if such Subsidiary is a corporation, (i) the number of
authorized equity interests of each class of its equity interests, (ii) the
number of issued and outstanding equity interests of each class of its equity
interests, the names of the holders thereof, and the number of equity interests
held by each such holder, and (iii) the number of equity interests held in
treasury, and (c) if such Subsidiary is not a corporation, (i) the class of
equity interests created under such Subsidiary's organizational documents and
(ii) the holder(s) of such equity interests. All of the issued and outstanding
equity interests of each Subsidiary (A) that is a corporation have been duly
authorized and are validly issued, fully paid, and nonassessable and (B) that is
not a corporation have (i) been duly created pursuant to the laws of the
jurisdiction of such Subsidiary, (ii) have been issued and paid for in
accordance with the organizational documents governing such Subsidiary, and
(iii) are fully paid and nonassessable and require no further capital
contribution, loans, or credit support. Each Acquired Entity holds of record and
owns beneficially all of the outstanding equity interests of the Subsidiaries,
free and clear of any encumbrances (other than restrictions under the Securities
Act and state securities laws). Except as set forth in SCHEDULE 2.20, no options
or warrants exist or are authorized with respect to any Subsidiaries or their
equity interests and no such options or warrants will arise in connection with
the transactions. No Subsidiary is obligated to redeem or otherwise acquire any
of its equity interests.
2.21 AFFILIATE TRANSACTIONS. Except for the agreements listed in
SCHEDULE 2.21, (a) no officer or director of any Acquired Entity has any
significant interest in any Person that is engaged in a business which is in
competition with the business of the Acquired Entities and (b) no officer or
director of any Acquired Entity is a supplier to, or a customer of, such
Acquired Entity, or is a party to any contract listed in SCHEDULE 2.9, 2.13 or
2.24.
2.22 INSURANCE. SCHEDULE 2.22 lists all policies of insurance
maintained, owned or held by each Acquired Entity as of the date hereof. Each
Acquired Entity shall use all commercially reasonable efforts to keep such
insurance or comparable insurance in full force and effect through the Closing
Date. To the best knowledge of such entity, each Acquired Entity has complied in
all material respects with each such insurance policy to which it is a party and
has not failed to give any notice or present any claim thereunder in a due and
timely manner, other than instances which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect. Except as
disclosed on SCHEDULE 2.22, to the Best Knowledge of such entity, the full
policy limits (subject to deductibles provided in such policies) are available
and unimpaired under each such policy and no insurer under any of such policies
has a basis to void such policy on grounds of non-disclosure on the part of any
Acquired Entity thereunder. Each such policy is in full force and effect and
will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated by this Agreement.
2.23 LEASES. SCHEDULE 2.23 lists all outstanding leases, both
capital and operating, or licenses, pursuant to which any Acquired Entity has
(i) obtained the right to use or occupy any real or personal property where the
value of such personal property exceeds $10,000
22
in the case of any single lease or $20,000 in the aggregate, or (ii) granted to
any other Person the right to use any property described in SCHEDULE 2.23.
2.24 PRODUCT WARRANTY. Each product designed, manufactured,
sold, leased, or delivered by any Acquired Entity has been in material
conformity with all applicable law, contracts, and all express and implied
warranties, and no Acquired Entity has any material liability (and there is no
basis for any present or future action against it giving rise to any liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the ordinary course
of business, consistent with GAAP. No product designed, manufactured, sold,
leased, or delivered by any Acquired Entity is subject to any guaranty,
warranty, or other indemnity or similar liability beyond the applicable standard
terms and conditions of sale or lease. SCHEDULE 2.24 includes copies of the
standard terms and conditions of sale or lease for each Acquired Entity
(containing applicable guaranty, warranty, and similar liability indemnity
provisions).
2.25 PRODUCT LIABILITY. No Acquired Entity, to its respective
Best Knowledge, has any liability (and there is no basis that is known to any
Acquired Entity for any present or future action against any of them giving rise
to any liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product designed,
manufactured, sold, leased, or delivered by any Acquired Entities.
2.26 MINUTE BOOKS. The minute books of each Acquired Entity
contain, in all material respects, a complete and accurate summary of all
meetings of directors and stockholders or actions by written resolutions since
the time of organization of each Acquired Entity through the date of this
Agreement, and reflect all transactions referred to in such minutes and
resolutions accurately, except for omissions which are not material.
2.27 COMPLETE COPIES OF MATERIALS. Each Acquired Entity has
delivered or made available true and complete copies of each document that has
been requested by Parent or its counsel in connection with their legal and
accounting review of the Acquired Entities.
2.28 ACCURACY OF INFORMATION FURNISHED. No representation,
statement or information contained in this Agreement (including the schedules),
or any contract or document executed in connection herewith or delivered
pursuant hereto or made available or furnished to Parent or its representatives
by any Acquired Entity contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the information contained therein not misleading. Each Acquired Entity has
provided Parent with correct and complete copies of all documents listed or
described in the Schedules.
2.29 DIOMED REVIEW. Each Diomed Stockholder that has consented
to the Merger has agreed that Diomed may represent and warrant to the following
on behalf of such stockholder and for the benefit of Parent.
Diomed represents and warrants that to its Best Knowledge:
23
(a) as to each Diomed Stockholder whose address on the
books and records of Diomed is within the United States or its territories or
possession, except as set forth on SCHEDULE 2.2(d), such Diomed Stockholder is
an "accredited investor" within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act, as presently in effect; and
(b) As to each Diomed Stockholder whose address on the
books and records of Diomed is other than within the United States or its
territories or possession, such Diomed Stockholder (i) is not a U.S. Person
within the meaning of Regulation S under the Securities Act and is not acquiring
the Parent Securities for the account or the benefit of a U.S. Person and (ii)
will resell the Parent Securities only in accordance with the provisions of
Regulation S under the Securities Act, pursuant to registration under the
Securities Act or pursuant to an available exemption form registration and will
not engage in hedging transactions with regard to the Parent Securities unless
in compliance with the Securities Act.
2.30 REORGANIZATION. No Acquired Entity has taken any action or
failed to take any action which action or failure would reasonably be expected
to jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
3. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND PARENT.
Each of Acquisition and Parent represents and warrants to each
Acquired Entity as follows:
3.1 ORGANIZATION. SCHEDULE 3.1 set forth the jurisdictions in
which Parent and Acquisition are incorporated. Each of Parent and Acquisition is
a corporation duly organized, validly existing and in good standing under the
laws of its respective state of incorporation, and has all requisite corporate
and authority and all necessary governmental approvals to enter into this
Agreement and the transactions contemplated hereby to be performed by it.
3.2 CAPITAL STRUCTURE.
(a) SCHEDULE 3.2(a) sets forth the authorized
capitalization of Parent and the number of shares of each class or series of
Parent's capital stock ("PARENT CAPITAL STOCK") that are issued and outstanding
as of the date of this Agreement, including the number of shares of Parent's
common stock ("PARENT COMMON STOCK") that are so issued and outstanding and the
number of shares of Parent Common Stock that (A) have been reserved for
conversion of shares of any class of stock that is convertible into Parent
Common Stock ("PARENT CONVERTIBLE SHARES"), (B) have been reserved for issuance
upon exercise of warrants to purchase shares of Parent Common Stock ("RESERVED
PARENT WARRANT SHARES") and (C) shares that have been reserved for issuance upon
exercise of options to purchase shares of Parent Common Stock ("RESERVED PARENT
OPTION SHARES"). All of the issued and outstanding shares of Parent Capital
Stock have been duly and validly authorized and issued and are fully paid and
nonassessable. All the Parent Common Stock when issued upon the conversion of
the Parent Convertible Shares, all the Reserved Parent Warrant Shares, when
issued upon the exercise of the underlying warrants, and all the Reserved Parent
Option Shares, when issued upon the due exercise of the underlying options, will
be duly and validly authorized and issued and fully paid and
24
nonassessable. All the shares of Parent Capital Stock have been duly and validly
authorized and issued and are fully paid and nonassessable. None of the Parent
Capital Stock has been issued and none of the Parent Capital Stock will be
issued in violation of the preemptive rights of any stockholder of Parent. The
issued and outstanding Parent Common Stock has been issued, and the Parent
Convertible Shares, the Reserved Parent Warrant Shares and the Reserved Parent
Option Shares will be issued, in compliance in all material respects with all
applicable Federal and state securities laws and regulations. The shares of
Parent Capital Stock to be issued pursuant to the Merger will be duly and
validly authorized and issued, will be fully paid and nonassessable and will be
issued in compliance with all applicable Federal and state securities laws and
regulations. The authorized capital stock of Acquisition consists of 1,000
shares of common stock, $0.001 par value per share, of which 100 shares are
issued and outstanding.]
(b) Except as set forth in SCHEDULE 3.2(b), there are no
existing agreements, subscriptions, options, warrants, calls, commitments,
trusts (voting or otherwise), or rights of any kind whatsoever granting to any
Person any interest in or the right to purchase or otherwise acquire from Parent
or granting to Parent any interest in or the right to purchase or otherwise
acquire from any Person, at any time, or upon the occurrence of any stated
event, any securities of Parent, whether or not presently issued or outstanding,
nor are there any outstanding securities of Parent, or any other entity which
are convertible into or exchangeable for other securities of Parent, nor are
there any agreements, subscriptions, options, warrants, calls, commitments or
rights of any kind granting to any Person any interest in or the right to
purchase or otherwise acquire from Parent or any other Person any securities so
convertible or exchangeable, nor, to the Best Knowledge of Parent, are there any
proxies, agreements or understandings with respect to the voting of the Parent
Capital Stock or the direction of the business operations or conduct of Parent,
except as contemplated by this Agreement.
(c) SCHEDULE 3.2(c) sets forth a true and complete list
of (and the total number of) all record holders of Parent Capital Stock
(including the amount and type of security owned by such holder, including the
mailing address of such holder as of [JANUARY 24, 2002]. Except as set forth on
SCHEDULE 3.2(c), no stockholder of Parent is a party to any contract that would
require such stockholder to sell, transfer or otherwise dispose of any capital
stock of Parent.
3.3 AUTHORITY; NO CONFLICTS; CONSENTS.
(a) Each of Parent and Acquisition has full corporate
power and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The Board of Directors of Acquisition (the
"ACQUISITION BOARD") has declared the Merger advisable and approved this
Agreement and resolved to recommend the approval of the Merger and adoption of
this Agreement and the consummation of the transactions contemplated hereby to
the sole stockholder of Acquisition. The execution, delivery and performance of
this Agreement by each of Parent and Acquisition has been duly authorized and
approved (i) in the case of Acquisition, by the Acquisition Board and Parent,
its sole stockholder, and (ii) in the case of Parent, by all necessary corporate
action and, except for (A) the adoption of this Agreement by the stockholders of
Acquisition and (B) the filing of appropriate merger documents as required by
the DGCL, no other corporate proceedings other than actions previously taken on
the part of either Parent or Acquisition are necessary to authorize this
Agreement and the
25
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by each of Parent and Acquisition and is the legal, valid
and binding obligation of each of Parent and Acquisition enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(b) The execution, delivery and performance by each of
Parent and Acquisition of this Agreement and the consummation of the Merger do
not, and will not, (i) violate or conflict with any provision of the certificate
of incorporation or by-laws of either Parent or Acquisition, (ii) violate any
law, rule, regulation, order, writ, injunction, judgement or decree of any
court, governmental authority, or regulatory agency, except for violations
which, individually or in the aggregate, will not have a Material Adverse Effect
on Parent or Acquisition taken as a whole, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any note, bond, indenture, lien, mortgage, lease, permit, guaranty or
other agreement, instrument or obligation, oral or written, to which Parent or
Acquisition is a party or by which any of the properties of Parent or
Acquisition may be bound, except for violations, breaches or defaults which,
individually or in the aggregate, will not have a Material Adverse Effect on
Parent or Acquisition taken as a whole.
(c) The execution and delivery of this Agreement by each
of Parent and Acquisition does not, and the performance by each of Parent and
Acquisition of this Agreement will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, or any other Person except for (i)
the filing and recordation of appropriate merger documents as required by the
DGCL, (ii) the approval of the stockholders of Parent, (iii) any such consent,
approval, authorization, permission, notice or filing which is required under
the Securities Act, the Exchange Act and applicable state securities laws, and
(iv) any such consent, approval, authorization, permission, notice or filing
which if not obtained or made would not have a Material Adverse Effect on Parent
and Acquisition or on the transactions contemplated by this Agreement.
3.4 CHARTER DOCUMENTS. SCHEDULE 3.4 is a copy of the
Certificate of Incorporation and the By-laws of Parent, as in effect as of the
date of this Agreement. The Certificate of Incorporation and By-laws of Parent
are each in full force and effect. Parent is not in violation of any provision
of its Certificate of Incorporation or By-laws.
3.5 FINANCIAL STATEMENTS.
(a) Except as set forth on SCHEDULE 3.5(a), Parent has
previously furnished to each Acquired Entity true and complete copies of the
following financial statements of Parent (the "PARENT FINANCIAL STATEMENTS"):
(i) the audited consolidated balance sheet as of and for
its most recently completed fiscal year (the "PARENT BALANCE
SHEET"), together with a report by its independent certified
public accountants;
26
(ii) the audited consolidated statements of operations,
stockholders' equity and cash flows as of and for its most
recently completed fiscal year, together with a report by its
independent certified public accountants;
(iii) the unaudited consolidated balance sheet as of its
most recently completed fiscal quarter (the "PARENT UNAUDITED
BALANCE SHEET"); and
(iv) the unaudited consolidated statements of operations,
stockholders' equity and cash flows for the interim period, as of
the last day of its most recently completed fiscal quarter.
(b) The Parent Financial Statements were prepared in
accordance with GAAP (except, in the case of the unaudited consolidated
financial statements, for normal and recurring year-end adjustments and the
omission of footnotes). The Parent Financial Statements were prepared on the
basis of the books and records of Parent (in each case, as of the date of such
Parent Financial Statements) and present fairly, in all material respects, the
consolidated financial position of Parent as of the dates thereof and the
consolidated results of Parent's operations and changes in stockholders' equity
and cash flows for each of the periods then ended in conformity with GAAP.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES; INDEBTEDNESS.
(a) Except as disclosed in SCHEDULE 3.6(a) or as set
forth in the notes to the Parent Financial Statements, Parent has no liability
or obligation of any nature (whether absolute, accrued or contingent or
otherwise) which is materially in excess of amounts shown or reserved therefor
in the Parent Financial Statements other than (i) liabilities or obligations not
required under GAAP on a basis consistent with that of preceding accounting
periods to be reported on such Parent Financial Statements and (ii) liabilities
or obligations incurred after the date of the Unaudited Parent Balance Sheet
incurred in the ordinary course of business and consistent with past practice,
it being understood that, for all purposes of this Agreement, Parent's ordinary
course of business shall refer to the minimal business conducted by an inactive
business with dormant or liquidating operations.
(b) Except as disclosed in SCHEDULE 3.6(b), Parent has
no Indebtedness which has not been incurred in the ordinary course of business
and consistent with past practice.
3.7 OPERATIONS AND OBLIGATIONS.
(a) Except as set forth in SCHEDULE 3.7(a) or reported
on the Parent Balance Sheet, since December 31, 2000, as to Parent:
(i) there has been no event or condition that has had or
would have a Material Adverse Effect; and
(ii) there has been no impairment, damage, destruction,
loss or claim, whether or not covered by insurance, or
condemnation or other taking which could reasonably be expected to
have a Material Adverse Effect.
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(b) Except as set forth in SCHEDULE 3.7(b), since
December 31, 2000, Parent has conducted its business only in the ordinary course
and consistent with past practice. Without limiting the generality of the
foregoing, since December 31, 2000, except as set forth in such schedule, Parent
has not:
(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any option,
warrant or other right to purchase, any of its capital stock or
other equity interest or any security convertible into its capital
stock or other equity interest;
(ii) except as set forth on SCHEDULE 3.6(b), issued,
delivered or agreed (conditionally or unconditionally) to issue or
deliver any bonds, notes or other debt securities, or borrowed or
agreed to borrow any funds (other than intercompany debt) or
entered into any lease the obligations of which, in accordance
with generally accepted accounting principles, would be
capitalized;
(iii) paid any obligation or liability (absolute or
contingent) other than liabilities reflected or reserved against
in the Parent Balance Sheet and liabilities incurred since
December 31, 2000 in the ordinary course of business consistent
with past practice;
(iv) declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders or
purchased or redeemed, or agreed to purchase or redeem, any Parent
Capital Stock;
(v) except in the ordinary course of business consistent
with past practice, made or permitted any material amendment or
termination of any agreement to which Parent is a party;
(vi) undertaken or committed to undertake capital
expenditures exceeding $20,000 for any single project or related
series of projects;
(vii) sold, leased (as lessor), transferred or otherwise
disposed of, mortgaged or pledged, or imposed or suffered to be
imposed any Lien on, any of the assets reflected on the Parent
Balance Sheet or any assets acquired by Parent after September 30,
2000, except for inventory and personal property sold or otherwise
disposed of for fair value in the ordinary course of its business
consistent with past practice and except for Permitted Liens;
(viii) canceled any debts owed to or claims held by Parent
(including the settlement of any claims or litigation) other than
intercompany debt;
(ix) accelerated or delayed collection of accounts
receivable in advance of or beyond their regular due dates or the
dates when the same would have been collected except in the
ordinary course of its business consistent with past practice;
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(x) delayed or accelerated payment of any account
payable or other liability beyond or in advance of its due date or
the date when such liability would have been paid except in the
ordinary course of its business consistent with past practice;
(xi) entered into or become committed to enter into any
other material transaction except in the ordinary course of
business;
(xii) allowed the levels of supplies or other materials
included in the inventory of Parent to vary materially from the
levels customarily maintained in accordance with past practice;
(xiii) except for increases in the ordinary course of
business consistent with past practice, instituted any increase in
any compensation payable to any employee of Parent, amended any
Benefit Plan or modified any other benefits made available to any
such employees;
(xiv) made any change in the accounting principles or made
any material change in accounting practices used by Parent, in
each case, from those applied in the preparation of the Parent
Financial Statements; or
(xv) taken any of the actions which, under Section 5.2,
it is prohibited from taking between the date hereof and the
Closing Date.
(c) Except as set forth in SCHEDULE 3.7(c), there are no
accrued and unpaid dividends or distributions with respect to Parent Capital
Stock.
3.8 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 3.8(a), all amounts
which Parent is required by law or by agreement with its employees to deduct
from such employees' salaries and/or transfer to such employees' pension, life
insurance, incapacity insurance, continuing education fund or other plans have
been duly paid into the appropriate fund or funds, and Parent has no outstanding
obligation to make any such transfer or provision.
(b) Parent does not have any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), or "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA). SCHEDULE 3.8(b) contains a list and brief
description of all Benefit Plans maintained, or contributed to, by Parent or any
Person that, together with Parent, is treated as a single employer under Section
412(b), (c), (m) or (o) of the Code (Parent and each such other Person, a
"PARENT COMMONLY CONTROLLED ENTITY") for the benefit of any current or any
former employees, officers or directors of Parent. Parent has made available to
each Acquired Entity true, complete and correct copies of (i) each Benefit Plan
(or, in the case of any unwritten Benefit Plans, descriptions thereof), (ii) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required, (iii) each trust agreement and group
annuity contract relating to any Benefit Plan and (iv) all correspondence with
the IRS, the United States Department of Labor or other governmental entity
relating to any outstanding
29
controversy or audit. Except as could not reasonably be expected to have a
Material Adverse Effect, each Benefit Plan has been administered in accordance
with its terms.
(c) Parent has not maintained, contributed to or been
obligated to contribute to any plan that is subject to Title IV of ERISA.
(d) Except as set forth in SCHEDULE 3.8(d), since the
date of the most recent audited consolidated financial statements, there has not
been any adoption or amendment by Parent of any Benefit Plan, or any change in
any actuarial or other assumption used to calculate funding obligations with
respect to any Benefit Plan, or any change in the manner in which contributions
to any Benefit Plan are made or the basis on which such contributions are
determined.
(e) SCHEDULE 3.8(e) lists all outstanding Parent
Options, showing for each such Option: (i) the name of the optionee, (ii) the
number of shares issuable, (iii) the number of vested shares as of the date
hereof and (iv) the exercise price. Except as set forth in SCHEDULE 3.8(e), none
of the outstanding Parent Options is subject to acceleration or cancellation as
a result of the Merger.
(f) Except as set forth in SCHEDULE 3.8(f) or as
provided by this Agreement, no employee of Parent will be entitled to any
additional compensation or benefits or any acceleration of the time of payment
or vesting of any compensation or benefits under any Benefit Plan as a result of
the transactions contemplated by this Agreement.
(g) Except as set forth in SCHEDULE 3.8(g), Parent has
not issued any Parent Common Stock under any restricted stock purchase
arrangement and Parent is not a party to any restricted stock purchase
arrangement. After giving effect to the Merger, Parent shall be subject to the
restricted stock purchase arrangements set forth in SCHEDULE 3.8(g), which
Schedule also lists (i) the number of shares of restricted stock issuable and
(ii) the vesting schedule for the shares of restricted stock.
(h) Except as set forth in SCHEDULE 3.8(h), Parent has
not issued any shares of Parent Capital Stock pursuant to any restricted stock
purchase agreement or stock option agreement (including, without limitation, any
stock option agreement issued under any stock option plan (the "PARENT STOCK
PLAN")). As to any shares or options so listed, SCHEDULE 3.8(h) sets forth (i)
the date such shares were sold, (ii) the purchase price per share (which is also
the price at which Parent may repurchase such shares) and (iii) the number of
shares issued. All restricted stock agreements of Parent are for the purchase of
Parent Common Stock. Except as set forth in SCHEDULE 3.8(h), the transactions
contemplated by this Agreement, including without limitation the Merger, shall
not cause any acceleration, vesting or other similar consequences to the rights
of the parties under any provision of any restricted stock agreement of Parent
or any option granted under the Parent Stock Plan.
3.9 EMPLOYEES. SCHEDULE 3.9 contains true, full and accurate
particulars of the names and salaries of all the employees and officers of
Parent whose total compensation in Parent's last fiscal year exceeded $100,000.
The salary figures set forth in SCHEDULE 3.9 include all remuneration payable,
vacation pay balances, balances in pension funds, or customs,
30
manager's insurance and any profit sharing commission, incentive or
discretionary bonus arrangements to which Parent is a party. Except as set forth
in SCHEDULE 3.9:
(a) There are no controversies pending or threatened
between Parent and any of its employees, which controversies have or could
reasonably be expected to have a Material Adverse Effect;
(b) Parent is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by
Parent, nor are there any activities or proceedings of any labor union to
organize any such employees;
(c) There is no strike, slowdown, work stoppage or
lockout existing or threatened by, or with respect to, any employees of Parent;
and
(d) The severance pay due to employees of Parent is
either funded or provided for on the Balance Sheet. Except as set forth in
SCHEDULE 3.9, Parent is not aware of any circumstance whereby any employee might
reasonably demand (whether legally entitled to or not) any claim for
compensation on termination of employment beyond the statutory severance pay to
which such employee is entitled and Parent is not aware of any claim to be made
by any employee for payment of compensation arising from the Merger by Diomed.
3.10 TAX MATTERS. Except as set forth in SCHEDULE 3.10, (a)
Parent has filed all Tax Returns required to be filed; (b) (i) all such Tax
Returns are complete and accurate in all material respects, except to the extent
that a reserve for Taxes has been established on the unaudited balance sheet as
of the end of its most recent fiscal year, and (ii) all Taxes shown to be due on
such Tax Returns have been timely paid; (c) all Taxes (whether or not shown on
any Tax Return) owed by Parent have been timely paid or Parent has established
or caused to be established adequate reserves therefor on its financial
statements on at least a quarterly basis; (d) Parent has not waived or been
requested to waive any statute of limitations in respect of Taxes, which waiver
or request is still in effect; (e) none of the Tax Returns referred to in clause
(a) have been examined by the Internal Revenue Service; (f) to the Best
Knowledge of Parent, there is no action, suit, investigation, audit, claim or
assessment pending or proposed or threatened with respect to Taxes of Parent;
(g) all deficiencies asserted or assessments made as a result of any examination
of the Tax Returns referred to in clause (a) have been paid in full or have been
reserved against and entered into the books and records of Parent; (h) there are
no liens for Taxes upon the assets of Parent except liens relating to current
Taxes not yet due and payable as are being contested in good faith; (i) all
Taxes which Parent is required by law to withhold or to collect for payment have
been duly withheld and collected, and have been paid or accrued, reserved
against and entered on the books of Parent in accordance with GAAP; and (j)
Parent is not and has not been a member of any group of corporations filing a
consolidated tax return for United States federal income tax purposes.
3.11 MINUTE BOOKS. The minute books, if any, of Parent contain,
in all material respects, a complete and accurate summary of all meetings of
directors and stockholders or actions by written resolutions since the time of
organization of Parent through the date of this Agreement, and reflect all
transactions referred to in such minutes and resolutions accurately,
31
except for omissions which are not material. Parent has provided true and
complete copies of all such minute book to Diomed's representatives.
3.12 COMPLETE COPIES OF MATERIALS. Parent has delivered or made
available true and complete copies of each document that has been requested by
Diomed or its counsel in connection with their legal and accounting review of
Parent.
3.13 REORGANIZATION. Parent has not taken any action or failed
to take any action which action or failure would reasonably be expected to
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
3.14 SEC DOCUMENTS; UNDISCLOSED LIABILITIES. SCHEDULE 3.14 sets
forth all reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein (the "PARENT SEC
DOCUMENTS")), if any, that Parent has filed with the SEC since January 1, 1999.
The Parent SEC Documents constitute all reports, schedules, forms, statements
and other documents that Parent was required to file with the SEC under the
Securities Act or the Exchange Act since January 1, 1998. Except as set forth in
SCHEDULE 3.14, as of their respective dates, the Parent SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents. Except as set
forth in SCHEDULE 3.14, the financial statements of Parent included in the
Parent SEC Documents comply as to form, as of their respective dates of filing
with the SEC, in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto.
3.15 ABSENCE OF CERTAIN CHANGES. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated by this
Agreement and except as disclosed in SCHEDULE 3.15 or in the Parent SEC
Documents, since December 31, 2000, Parent has conducted its business only in
the ordinary course, and there has not been (a) any event or occurrence which
could have a Material Adverse Effect, (b) except insofar as may have been or
required by a change in GAAP, any change in accounting methods, principles or
practices by Parent materially affecting its assets, liabilities or business,
(c) any tax election that individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect or any of its tax attributes or any
settlement or compromise of any material income tax liability or (d) any change
in control of Parent.
3.16 INTERIM OPERATIONS OF ACQUISITION. Acquisition was formed
solely for the purpose of engaging in transactions of the type contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
3.17 DISCLOSURE. No representation, statement, or information
contained in this Agreement (including the schedules) or any contract or
document executed in connection herewith or delivered pursuant hereto or made
available or furnished to Diomed or its representatives by Parent contains or
will omit to state any untrue statement of a material fact or omits or will omit
any material fact necessary to make the information contained therein not
misleading. Parent has provided Diomed with correct and complete copies of all
documents listed or described in the Schedules.
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4. ACQUIRED ENTITIES CONDUCT PENDING CLOSING; ACQUIRED ENTITIES
COVENANTS.
4.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof
until the Closing, Diomed shall, and shall cause each Acquired Subsidiary to:
(a) maintain its existence and remain in good standing;
(b) maintain the general character of its business and
properties and conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by this Agreement;
(c) maintain its business and accounting records
consistently with its past practices; and
(d) use its Reasonable Best Efforts (i) to preserve its
business intact, (ii) to keep available to each Acquired Entity the services of
its present officers and employees, and (iii) to preserve for each Acquired
Entity the goodwill of its suppliers, customers and others having business
relations with such Acquired Entity.
4.2 PROHIBITED ACTIONS PENDING CLOSING. Unless otherwise
provided for herein or approved by Parent in writing, from the date hereof until
the Closing, Diomed shall not and shall cause each Acquired Subsidiary not to:
(a) issue or sell or authorize for issuance as sale, or
grant any options or make other agreements with respect to, any shares of
capital stock or any of its securities;
(b) increase the number of shares eligible for grant
under any stock option;
(c) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(d) acquire (including by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof;
(e) mortgage, pledge or subject to Lien, any of its
assets or properties or agree to do so except for Permitted Liens;
(f) take any action, other than in the ordinary course
of business and consistent with past practice, with respect to accounting
policies or procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts receivables);
(g) make any material Tax election or settle or
compromise any material federal, state, local or foreign Tax liability;
33
(h) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to any of the transactions
contemplated by this Agreement;
(i) except in connection with the sale of any Acquired
Entity's products in the ordinary course of business and consistent with past
practice, sell, assign, transfer, license, sublicense, pledge or otherwise
encumber any of the Intellectual Property Rights; or
(j) announce an intention, commit or agree to do any of
the foregoing.
4.3 ACCESS; DOCUMENTS; SUPPLEMENTAL INFORMATION. From and after
the date hereof until the Closing, Diomed shall afford to (a) the officers,
independent certified public accountants, counsel and other representatives of
Acquisition and Parent, upon reasonable notice, free and full access at all
reasonable times, to the properties, books and records, including tax returns
filed and those in the process of being prepared by each Acquired Entity, and
the right to consult with the officers, employees, accountants, counsel and
other representatives, of each Acquired Entity in order that Acquisition and
Parent may have full opportunity to make such investigations as they shall
reasonably desire to make of the operations, properties, business, financial
condition and prospects of each Acquired Entity, and (b) Acquisition and Parent
and their representatives, such additional financial and operating data and
other information as to the properties, operations, business, financial
condition and prospects of each Acquired Entity as Acquisition and Parent or
their respective representatives shall from time to time reasonably require.
5. PARENT AND ACQUISITION CONDUCT PENDING CLOSING; PARENT AND
ACQUISITION COVENANTS.
5.1 CONDUCT OF BUSINESS PENDING CLOSING. From the date hereof
until the Closing, Parent will:
(a) maintain its existence in good standing;
(b) maintain the general character of its business and
properties and conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by this Agreement; and
(c) maintain its business and accounting records
consistently with its past practices.
5.2 PROHIBITED ACTIONS PENDING CLOSING. Unless otherwise
provided for herein or approved by Diomed in writing, from the date hereof until
the Closing, Parent shall not, and shall cause Acquisition not to:
(a) issue or sell or authorize for issuance or sale, or
grant any options or make other agreements with respect to, any shares of its
capital stock or any other of its securities;
34
(b) increase the number of shares eligible for grant
under its option plan;
(c) declare, set aside, make or pay any dividend or
other distribution payable in cash, stock, property or otherwise with respect to
any of its capital stock;
(d) mortgage, pledge or subject to Lien, any of its
assets or properties or agree to do so except for Permitted Liens;
(e) take any action, other than in the ordinary course
of business and consistent with past practice, with respect to accounting
policies or procedures (including, without limitation, procedures with respect
to the payment of accounts payable and collection of accounts receivables); or
(f) announce an intention, commit or agree to do any of
the foregoing.
5.3 ACCESS; DOCUMENTS; SUPPLEMENTAL INFORMATION. From and after
the date hereof until the Closing, Parent and Acquisition shall afford to (a)
the officers, independent certified public accountants, counsel and other
representatives of Diomed, upon reasonable notice, free and full access at all
reasonable times, to the properties, books and records, including tax returns
filed and those in the process of being prepared by Parent and Acquisition, and
the right to consult with the officers, employees, accountants, counsel and
other representatives, of Parent and Acquisition in order that Diomed may have
full opportunity to make such investigations as it shall reasonably desire to
make of the operations, properties, business, financial condition and prospects
of Parent and Acquisition, and (b) Diomed and its representatives, such
additional financial and operating data and other information as to the
properties, operations, business, financial condition and prospects of Parent
and Acquisition as Diomed or its representatives shall from time to time
reasonably require.
5.4 REVIEW OF PRE-CLOSING DOCUMENTS AND PRESS RELEASES. All
pre-Closing press releases and regulatory filings shall be presented to Diomed
for review and approval prior to release which approval Diomed agrees not to
unreasonably withhold or delay.
6. JOINT COVENANTS.
6.1 NOTIFICATION OF CERTAIN MATTERS. Diomed shall give prompt
notice to Parent, and Parent shall give prompt notice to Diomed, of (a) the
occurrence, or non-occurrence, of any event which would be likely to cause (i)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied and (b) any
failure of any Diomed, or Parent or Acquisition, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; PROVIDED, that the delivery of any notice pursuant to
this Section 6.1 shall not limit or otherwise affect the remedies available to
the party receiving such notice.
6.2 TAX RETURNS; COOPERATION. Diomed on the one hand, and
Parent, on the other, will cooperate with each other and provide such
information as the other Party may require in order to file any return to
determine Tax liability or a right to a Tax refund or to conduct a Tax
35
audit or other Tax proceeding. Such cooperation shall include making employees
available on a mutually convenient basis to explain any documents or information
provided hereunder or otherwise as required in the conduct of any audit or other
proceeding.
6.3 REORGANIZATION. Each of Parent and the Acquired Entities
shall, both before and after the Closing Date, use its reasonable Best Efforts
to cause the business combination of the Merger to be qualified as a
reorganization under Section 368(a) of the Code.
6.4 FORM 8-K; OTHER FILINGS. As promptly as practicable after
the date of this Agreement, Parent will with Diomed's cooperation prepare its
current report on SEC Form 8-K (the "FORM 8-K") to be dated as of the Effective
Time and any other filings required to be filed by it under the Exchange Act,
the Securities Act or any other Federal, foreign or blue sky or related laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). Without limitation, Parent will comply with the Accounting and
Financial Reporting Interpretations and Guidance issued by the Accounting Staff
Members in the SEC's Division of Corporate Finance on March 31, 2001 as the same
relate to "Reverse Acquisitions - Reporting Issues." Diomed will promptly review
the Other Filings and confirm the accuracy of all matters contained therein that
are based on written disclosures made by Diomed. After obtaining consent of
Parent and Diomed, Parent will file the Form 8-K on the date of the Effective
Time. After the Effective Time, Parent will timely file all reports with the
SEC, the stock exchange or trading system on which the Parent's shares are
listed or quoted and such other governmental agencies as may require the filing
of Other Filings.
6.5 OFFERING MEMORANDUM. As soon as practicable after the
execution of this Agreement, Parent shall prepare, with Diomed's cooperation,
the offering memorandum to be distributed to Parent's prospective investors (the
"OFFERING MEMORANDUM"). The Offering Memorandum will consist of a term sheet
describing the transactions contemplated by this Agreement in reasonable detail,
a subscription agreement between Parent and its investors for the purchase and
sale of the Private Placement Shares prior to the Effective Time and information
regarding Diomed. The Offering Memorandum will be supplemented prior to the
Effective Time with the Form 8-K in the form in which Parent will be filing such
current report with the SEC. Parent and Diomed shall each use commercially
reasonable efforts to cause the Offering Memorandum to comply with the
requirements of applicable federal and state laws. Parent will not distribute
the Offering Memorandum to any person that is not an "Accredited Investor" as
defined in Rule 501 promulgated under the Securities Act. Each of Parent and
Diomed will provide promptly to the other such information concerning its
business affairs and financial statements and as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Offering Memorandum, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Offering Memorandum. Diomed will promptly
advise Parent, and Parent will promptly advise Diomed, in writing if at any time
prior to the Effective Time either Diomed or Parent shall obtain knowledge of
any facts that might make it necessary or appropriate to amend or supplement the
Offering Memorandum in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law.
36
6.6 DIOMED INFORMATION STATEMENT. As promptly as practicable
after the execution of this Agreement and Diomed's receipt of the approval of
this Agreement from its stockholders by written consent of a majority of the
holders of its shares entitled to vote thereon, Diomed shall, in consultation
with Parent, prepare and mail to the Diomed Stockholders who have not executed
the written consent of stockholders pursuant to which the Merger was approved an
information statement containing substantially the same information as the Form
8-K, and otherwise complying with the applicable provisions of the DGCL,
including Section 262 thereof.
6.7 REGULATORY APPROVAL BY PARENT. Prior to the Effective Time,
Parent shall obtain all regulatory approvals needed to ensure that Parent
Securities to be issued in the Merger will be exempt from registration or
qualification under the Securities Act and the securities law of every
jurisdiction in which any registered holder of Diomed Capital Stock; Diomed
Options and Diomed Warrants has an address of record as of the Closing;
provided, that Parent shall not be required to consent generally to the service
of process in any jurisdiction in which it is not so subject.
6.8 NOTICES FROM GOVERNMENTAL AGENCIES. Parent will notify
Diomed promptly upon the receipt of any communication from the SEC or its staff
or any other government officials regarding the transactions contemplated by
this Agreement and will provide Diomed with copies of all correspondence between
Parent or any of Parent's representatives, on the one hand, and the SEC or its
staff or any other government officials, on the other hand, with respect to the
transactions contemplated hereby. In addition, subject to applicable laws
relating to the exchange of information, each Party will promptly furnish to the
other Parties copies of written communications (and memoranda setting forth the
substance of all oral communications) received by such party, or any of its
subsidiaries, affiliates or associates (as such terms are defined in Rule 12b-2
under the Exchange Act as in effect on the date hereof), from, or delivered by
any of the foregoing to, any governmental or regulatory authority, domestic or
foreign, relating to or in respect of the transactions contemplated under this
Agreement.
6.9 DIRECTORS' AND OFFICERS' INSURANCE.
(a) Parent shall at its expense, until the third
anniversary of the Effective Time, cause to be maintained in effect, to the
extent available, policies of directors' and officers' liability insurance in a
face amount of not less than seven million five hundred thousand dollars
($7,500,000).
(b) The provisions of this Section 6.9 are intended to
be for the benefit of, and shall be enforceable by, each party entitled to
insurance coverage, and his or her heirs and legal representatives, and shall be
in addition to any other rights a director or officer may have under the
Certificate of Incorporation or By-Laws of Parent or under the DGCL or
otherwise.
(c) If Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, in each such case, proper provision shall be made so that the
successors and assigns of the Parent, as the case may be, shall assume the
obligations set forth in this Section.
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6.10 NOVATION REQUESTS. Promptly after the execution of this
Agreement, Diomed will send (a) to each holder of Diomed Non-Plan Options two
counterparts of the Diomed Non-Plan Option Novation Request each executed by
Diomed and (b) to each holder of Diomed Warrants two counterparts of the Diomed
Warrant Novation Request each executed by Diomed, in all cases to the address of
the respective holder at his or her address on the books and records of Diomed.
Diomed will use its Reasonable Best Efforts to cause each holder of Diomed
Non-Plan Options or Diomed Warrants to tender the novation request to Parent on
or prior to the Effective Time. After the Effective Time, Diomed shall
co-operate with Parent to communicate with those holders of Diomed Non-Plan
Options and Diomed Warrants to cause them to return the novation requests to
Parent.
6.11 REGISTRATION OF SHARES AND OTHER SECURITIES.
(a) Parent shall use its Reasonable Best Efforts to
file, not later than 120 days after the Effective Time, a registration statement
(the "RESALE REGISTRATION STATEMENT") with the SEC covering the resale of the
shares of Parent Common Stock (i) that comprise the Private Placement Shares;
(ii) into which Merger Consideration Shares have theretofore automatically been
converted pursuant to their terms; (iii) into which Merger Consideration Shares
are convertible but have not yet been converted; and (iv) representing all
Penalty Amounts (as defined below in this Section 6.11(a)) assessed prior to
effectiveness of the Resale Registration Statement to the extent that such
shares are required to be issued pursuant to this Section 6.11 (collectively,
the "REGISTRABLE SECURITIES").
(b) Parent shall maintain the effectiveness of the
Resale Registration Statement through the first anniversary of the Effective
Time. Notwithstanding the foregoing, if at any time or from time to time after
the date of effectiveness of the Resale Registration Statement, Parent notifies
the holders of the Registrable Securities in writing of the existence of a
Potential Material Event, the holders of the Registrable Securities shall not
offer or sell any Registrable Securities, or engage in any other transaction
involving or relating to the Registrable Securities, from the time of the giving
of notice with respect to a Potential Material Event until Parent notifies the
holders of the Registrable Securities that such Potential Material Event either
has been disclosed to the public or no longer constitutes a Potential Material
Event; PROVIDED, that Parent may not so suspend the right of such holders of
Registrable Securities pursuant to this Section 6.11(b) for more than 120 days
in the aggregate.
(c) If Parent fails to (i) have the Resale Registration
Statement declared effective by the SEC within 240 days after the Effective
Time; or (ii) subject to Section 6.11(b), maintain the effectiveness of the
Resale Registration Statement through the first anniversary of the Effective
Time, on or prior to Parent's cure of such failure and in all events within 360
days thereafter Parent shall be obligated to issue to each holder of Registrable
Securities on the basis set forth below in this Section 6.11(c) such holder's
pro rata share of that number of shares of Parent Common Stock as shall in the
aggregate equal 1% of the Parent Common Stock as of the Effective Time
(calculated on a fully diluted basis and giving effect to the full conversion of
any outstanding shares of Parent Class A Preferred Stock), for each month or any
part thereof during which Parent's failure to obtain the effectiveness, or
maintain the effectiveness of the Resale Registration Statement, as the case may
be, continues (as so calculated, the resulting number is referred to as the
"PENALTY AMOUNT"). Parent will issue the
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Penalty Amount only to those of its stockholders that at the time of payment are
(i) not eligible to sell any Merger Consideration Shares owned by them under
Rule 144 and (ii) not subject to Special Conversion Restrictions all on the
following basis. The Penalty Amount will be divided by the sum of (a) the
aggregate number of Merger Consideration Shares that as of the date of
determination are not eligible to be sold under Rule 144 and (b) the aggregate
number of Merger Consideration Shares that as of the date of determination are
not convertible into Parent Common Stock because of Special Conversion
Restrictions; and the quotient shall be known as the "PER SHARE PENALTY AMOUNT."
The amount of the Penalty Amount distributable to each holder of Merger
Consideration Shares shall equal the Per Share Penalty Amount multiplied by the
number of Merger Consideration Shares held by such holder and further meeting
the qualifications set forth in (a) and (b) above.
(d) Within 45 days after the effectiveness of the Resale
Registration Statement, Parent will file one or more registration statements on
Form S-8, or such other form as may be appropriate to register the issuance of
shares on the exercise of Parent Options and shares issuable upon the exercise
of Parent Warrants (including warrants that were novated to become Parent
Warrants).
(e) The covenants set forth in Sections 6.11(a), (b),
(c) and (d) are for the express benefit of the holders of the Private Placement
Shares, Merger Consideration Shares, the Diomed Options and the Diomed Warrants.
6.12 POST-CLOSING COVENANT. Within 60 days after the Effective
Time, Parent will use its best efforts to effect a migratory merger with and
into, and thereby become, a corporation formed under the laws of the State of
Delaware ("Delco"). The certificate of incorporation and by-laws of Delco shall
be substantially identical to the articles of incorporation and by-laws of
Parent, except that the certificate of incorporation of Delco shall provide for
cumulative voting of its shares of all classes by its stockholders for the
election of directors and holders of the shares of the Parent Class A Preferred
Stock shall each have that number of votes as shall equal the number of shares
of Parent Common Stock into which each share of Parent Class A Preferred shall
be convertible. Parent makes this covenant for the express benefit of the Diomed
Stockholders and the Diomed Stockholders, or any of them, shall have the right
to enforce any breach of this covenant.
6.13 ACTIONS BY THE PARTIES. Upon the terms and subject to the
conditions set forth in this Agreement, each of the Parties will use its
Reasonable Best Efforts to take or cause to be taken all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable law
and regulations to consummate and make effective in the most expeditious manner
practicable, the transactions contemplated by this Agreement including (a)
obtaining all necessary actions and non-actions, waivers and consents, if any,
from any governmental agency or authority, making all necessary registrations
and filings and taking all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
governmental agency or authority; (b) obtaining all necessary consents,
approvals or waivers from any other Person; (c) defending any claim,
investigation, action, suit or other legal proceeding, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby; and (d) executing additional instruments
necessary to consummate the transactions contemplated by this Agreement. Each
Party will promptly consult
39
with the other and provide necessary information (including copies thereof) with
respect to all filings made by such party with the any agency or authority in
connection with this Agreement and the transactions contemplated hereby.
7. CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each Party to effect the Merger shall
be subject to the fulfillment or satisfaction, prior to or on the Closing Date,
of the following conditions:
(a) The Merger shall have been duly approved by the
requisite vote of the outstanding shares of Diomed Capital Stock and Acquisition
Common Stock entitled to vote thereon in accordance with the DGCL.
(b) All other authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any governmental or regulatory authority, domestic
or foreign, which the failure to obtain, make or occur would have the effect of
making the Merger or any of the transactions contemplated hereby illegal or
would have a Material Adverse Effect on Parent or Diomed (as Surviving
Corporation), assuming the Merger had taken place, shall have been obtained,
made or occurred.
(c) Parent has filed with the American Stock Exchange
its application to list thereon shares of Parent Common Stock and such
application shall be pending, subject to official notice of issuance.
(d) Parent shall have entered into the Subscription
Agreement substantially in the form attached hereto as EXHIBIT B, pursuant to
which Parent shall have consummated a private placement of shares of its common
stock in an offering of securities that is exempt from the registration
requirements of the Securities Act (the "PRIVATE PLACEMENT") and shall have
raised in the Private Placement gross proceeds of at least $7,000,000 and not
more than $10,000,000, after reduction for placement fees, all without waiver of
or modification from any of the material terms or conditions of the Subscription
Agreement, unless such changes have been previously agreed to in writing by
Diomed.
(e) Parent shall have duly amended its Certificate of
Incorporation to, among other things, (i) change its name to Diomed Holdings,
Inc. upon Closing of the Merger and, (ii) if necessary create a new class of
Parent Capital Stock, designated as Parent Class A Preferred Stock, with
designations, privileges and limitations substantially in the form attached
hereto as EXHIBIT C.
(f) Parent shall have assumed the obligations of Diomed
under the Consulting Agreement with Verus Support Services, Inc. ("VSSI"),
substantially in the form attached hereto as EXHIBIT D, pursuant to which Verus
shall have agreed to provide financial consulting services to Parent for a
period of eighteen months, at a consulting fee equal to $15,000 per month. The
board of directors of Diomed and Parent shall have approved the Consulting
Agreement pursuant to Section 144 of the DGCL and the cognate provisions of the
applicable corporate law for Parent.
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(g) Parent shall have adopted the By-laws substantially
in the form attached hereto as EXHIBIT E, to, among other things, provide for
the establishment of an audit committee of its board in accordance with the
listing requirements of the American Stock Exchange.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT. Parent's
obligation to effect the Merger and consummate the other transactions
contemplated to occur in connection with the Closing and thereafter is subject
to the satisfaction of each condition precedent listed below:
(a) Each representation and warranty set forth in
Section 2 shall have been accurate and complete in all material respects (except
with respect to any provisions including the word "material" or words of similar
import, and except with respect to materiality, as reflected under GAAP, in the
representations in Section 2.5 relating to the Financial Statements, with
respect to which such representations and warranties must have been accurate and
complete) as of the date of this Agreement, and shall be accurate and complete
in all material respects (except with respect to any provisions including the
word "material" or words of similar import and except with respect to
materiality, as reflected under GAAP, in the representations in Section 3.5
relating to the Financial Statements, with respect to which such representations
and warranties must have been accurate and complete) as of the Closing Date, as
if made on the Closing Date, after giving full effect to any supplements to the
schedules as amended from time to time so long as such modification does not
constitute a Material Adverse Effect. Parent and Acquisition shall have received
a certificate dated the Closing Date and signed by the chief executive officer
or corporate secretary of Diomed substantially in the form attached hereto as
EXHIBIT F, certifying that the conditions specified in Section 7.2(a) and 7.2(b)
have been satisfied.
(b) Diomed shall have performed and complied in all
material respects with its covenants to be performed or complied with at or
prior to the Closing.
(c) Since the date hereof there has been no event,
series of events or the lack of occurrence thereof which, singularly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Acquired Entities.
(d) No action is pending or threatened by or before any
governmental body, arbitrator, or mediator which seeks to restrain, prohibit,
invalidate, or collect any damages arising out of the transactions contemplated
by this Agreement.
(e) Counsel for Diomed shall have delivered to Parent
and Acquisition, legal opinions substantially in the form attached hereto as
EXHIBIT G and EXHIBIT H respectively.
7.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF DIOMED. Diomed's
obligation to effect the Merger and consummate the other transactions
contemplated to occur in connection with the Closing and thereafter is subject
to the satisfaction of each condition precedent listed below:
(a) Each representation and warranty set forth in
Article 3 shall have been accurate and complete in all material respects (except
with respect to any provisions including the word "material" or words of similar
import, with respect to which such
41
representations and warranties shall have been accurate and complete) as of the
date of this Agreement, and shall be accurate and complete in all material
respects (except with respect to any provisions including the word "material" or
words of similar import, with respect to which such representations and
warranties must have been accurate and complete) as of the Closing Date, as if
made on the Closing Date. Diomed shall have received certificates dated the
Closing Date and signed by the Chief Executive Officer or corporate secretary of
Parent, substantially in the form attached hereto as EXHIBIT I, certifying that
the conditions set forth in Section 7.3(a) and 7.3(b) have been satisfied.
(b) Parent shall have performed and complied in all
material respects with its covenants and obligations required by this Agreement
to be performed or complied with at or prior to the Closing.
(c) The size of the board of directors of Parent shall
have been fixed by resolution at three (3) persons and Mr. Peter Norris shall
have been appointed to serve as a director of Parent. The by-laws of Parent
shall provide that until April 30, 2003 or until the size of the board equals or
exceeds five (5) members, whichever first occurs, all actions taken by its board
of directors shall be taken only with the unanimous approval vote in person or
written consent of all directors.
(d) Mr. Peter Klein shall have been elected as the
President and Chief Executive Officer of Parent, and Parent has assumed Mr.
Klein's Employment Agreement with Diomed, dated July 1, 2001.
(e) Each of the directors of Parent (other than Mr.
Norris) shall have delivered to Parent an executed letter in the form of EXHIBIT
J. Each of the officers of Parent shall have resigned.
(f) Parent's assumption of the Diomed Option Plans and
each Diomed Plan Option issued and outstanding thereunder to each officer or
director of Diomed pursuant to Section 1.5(e) and Parents' acceptance of each
Diomed Non-Plan Option Novation Request and each Diomed Warrant Novation Request
issued and outstanding to each officer and director of Diomed shall have been
authorized by the unanimously adopted separate resolution of Parent's board of
directors, which resolution shall be satisfactory in form and substance to
Diomed's counsel.
(g) Counsel for Parent and Acquisition shall have
delivered to the Diomed Stockholders their legal opinions, substantially in the
respective forms attached hereto as EXHIBIT K and EXHIBIT L.
(h) Local counsel for parent shall have delivered to the
Diomed Stockholders its legal opinion, substantially in the form of EXHIBIT M.
(i) Since the date hereof there has been no event,
series of events or the lack of occurrence thereof which, singularly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Parent or Acquisition.
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(j) No action is pending or threatened by or before any
governmental body, arbitrator, or mediator which seeks to restrain, prohibit,
invalidate, or collect any damages arising out of the transactions contemplated
by this Agreement.
7.4 FRUSTRATION OF CLOSING CONDITIONS. None of the Acquired
Entities, Parent or Acquisition may rely on the failure of any condition set
forth in Sections 7.1, 7.2 or 7.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.12.
8. SURVIVAL OF REPRESENTATION AND WARRANTIES
The representations and warranties of the Parties contained in
this Agreement (including the schedules to the Agreement which are hereby
incorporated by reference) or in any instrument delivered pursuant to this
Agreement shall not survive the Effective Time. This Section shall not limit any
claim for fraud or any covenant or agreement by the parties which contemplates
performance after the Effective Time.
9. BROKERS' AND FINDERS' FEES
Each of Diomed, Parent and Acquisition represent and warrant that,
except as set forth in SCHEDULE 9.1, no broker, investment banker or financial
advisor is entitled to receive a brokerage fee, financing commission or other
commission from the Acquired Entities, Parent or Acquisition, respectively, in
respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
10. EXPENSES
Each of Diomed, Parent and Acquisition shall pay its own costs and
expenses relating to this Agreement, including without limitation in connection
with the preparation and negotiation of this Agreement, meetings of shareholders
of any Party required to approve the Merger and other related fees and expenses
of attorneys, appraisers, and other third parties, the carrying out of the
provisions of this Agreement and the structuring and consummation of the
transactions contemplated hereby.
11. USE OF PRIVATE PLACEMENT PROCEEDS
The Surviving Corporation shall use the proceeds of the Private
Placement for working capital, including without limitation, (a) financing or
retiring any expenses incurred in connection with (i) the Merger, (ii) the
Private Placement and (iii) retiring existing debt of Diomed; (b) funding of the
laser development project and other research and development initiatives
currently being contemplated by the executives of Diomed; (c) various business
acquisitions; and (d) working capital needs. Upon Closing, Parent shall deposit
and maintain such proceeds in a separate account, which shall be released only
upon a written request of the CFO of Diomed and with the explicit consent of the
Board of Directors of Parent.
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12. PRESS RELEASES
Upon the execution of this Agreement, Parent shall issue such
press release or announcement of the transactions contemplated by this Agreement
as may be required by the reporting requirements of the Exchange Act, subject to
the applicable requirements of Rules 135a and 135c under the Securities Act, and
such release or announcement will be reasonably satisfactory in form and
substance to Diomed and its counsel. Parent and Diomed shall not issue any other
press release or otherwise make public any information with respect to this
Agreement or the transactions contemplated hereby, prior to the Closing, without
the prior written consent of the other Parties which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, if required by law, Parent
or Diomed may issue such a press release or otherwise make public such
information as long as such disclosing Party notifies the other Parties of such
requirement and discusses with such other Parties in good faith the contents of
such disclosure.
13. CONFIDENTIAL INFORMATION
Except as may be required by law, stock exchange or other
regulation or as otherwise expressly contemplated herein, no Party or their
respective Affiliates, employees, agents and representatives will disclose to
any Person the existence of this Agreement, the subject matter or terms hereof
or any Confidential Information concerning the business or affairs of any other
Party that it may have acquired from such Party in the course of pursuing the
transactions without the prior written consent of Diomed or Parent, as the case
may be; provided, however, any Party may disclose any such Confidential
Information as follows: (a) to such Party's Affiliates and its or its
Affiliates' employees, lenders, counsel, or accountants, the actions for which
the applicable Party will be responsible; (b) to comply with any applicable law
or order, provided that prior to making any such disclosure the Party making the
disclosure notifies the other Party of any action of which it is aware which may
result in disclosure and uses its Reasonable Best Efforts to limit or prevent
such disclosure; (c) to the extent that the Confidential Information is or
becomes generally available to the public through no fault of the Party or its
Affiliates making such disclosure; (d) to the extent that the same information
is in the possession (on a non-confidential basis) of the Party making such
disclosure prior to receipt of such Confidential Information; (e) to the extent
that the Party that received the Confidential Information independently develops
the same information without in any way relying on any Confidential Information;
or (f) to the extent that the same information becomes available to the Party
making such disclosure on a nonconfidential basis from a source other than a
Party or its Affiliates, which source, to the disclosing Party's Best Knowledge,
is not prohibited from disclosing such information by a legal, Contractual, or
fiduciary obligation to the other Party. If the transactions are not
consummated, each Party will return or destroy as much of the Confidential
Information concerning the other Party as the Parties that have provided such
information may reasonably request. Notwithstanding the foregoing, Parent may
make such public disclosure of the existence of this Agreement, the principal
economic terms thereof, and the status with respect to achieving the Closing as
it desires; provided, that Parent will consult with Diomed prior to releasing
any such public disclosure so that Diomed may notify its employees of the
transactions. Neither Diomed nor any of its Affiliates will issue any press
release or other public announcement related to this Agreement or the
transactions without Parent's prior written approval.
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14. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC.
This Agreement and the agreements referred to or contemplated
herein set forth the entire understanding of the parties hereto with respect to
the transactions contemplated hereby, and, except as set forth in this
Agreement, such other agreements and the exhibits hereto, there are no
representations or warranties, express or implied, made by any party to this
Agreement with respect to the subject matter of this Agreement. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement and the agreements referred to or contemplated herein. All statements
contained in schedules, exhibits, certificates and other instruments attached
hereto shall be deemed representations and warranties (or exceptions thereto) by
Diomed, Acquisition or Parent, as the case may be.
15. ASSIGNMENT AND BINDING EFFECT
All terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
16. TERMINATION
16.1 TERMINATION OF AGREEMENT.
The Parties may terminate this Agreement as provided below:
(a) Parent and Diomed may terminate this Agreement as to
all Parties by mutual written consent at any time prior to the Closing.
(b) Parent or Diomed may terminate this Agreement upon
delivery of notice if the Closing has not occurred prior to the Expiration Date;
PROVIDED that the Party delivering such notice has not directly or indirectly
caused such failure to close; and PROVIDED FURTHER, that if the Closing has not
occurred by February 15, 2002, Diomed may commence discussions and negotiations
with parties other than Parent.
(c) Parent may terminate this Agreement by giving
written notice to Diomed at any time prior to the Closing if any Acquired Entity
has breached any representation, warranty, or covenant contained in this
Agreement in any material respect (except with respect to materiality for any
provisions including the word "material" or words of similar import and Section
2.5, in which case such termination rights will arise upon any breach).
(d) Diomed may terminate this Agreement by giving notice
to Parent at any time prior to the Closing, if Parent or Acquisition breached
any representation, warranty, or covenant contained in this Agreement in any
material respect (except with respect to materiality for any provisions
including the word "material" or words of similar import, in which case such
termination rights will arise upon any breach).
(e) Parent or Diomed may terminate this Agreement by
giving written notice to the other at any time prior to the Closing if either
Party is not reasonably satisfied in its sole discretion with the results of,
and its due diligence investigations with respect to, the
45
material operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise) of the Acquired Entities or Parent.
(f) Parent may terminate this Agreement by giving notice
to Diomed on or before the Expiration Date that it has not completed the Private
Placement on terms and conditions reasonably satisfactory to Parent in its sole
discretion.
16.2 EFFECT OF TERMINATION. Except for the obligations under
Sections 10, 12, 13 and 16, if this Agreement is terminated under Section 16.1,
then, all further obligations of the Parties under this Agreement will
terminate.
17. DEFINITIONS
As used in this Agreement the terms set forth below shall have the
following meanings:
(a) "ACQUIRED ENTITIES" means Diomed and the Acquired
Subsidiaries, collectively.
(b) "ACQUIRED SUBSIDIARIES" means DL and Stablefile.
(c) "AFFILIATE" of a Person means any other Person who
(i) directly or indirectly through one or more intermediaries Controls, is
Controlled by or is under common control with, such Person or (ii) owns more
than 5% of the capital stock or equity interest in such Person. "Control" means
the possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(d) "BENEFIT PLAN" means any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical, fringe benefit or other
plan, arrangement or understanding (whether or not legally binding) providing
material benefits to any current or former employee, officer or director of any
Acquired Entity.
(e) "BEST KNOWLEDGE" in respect of any representation
and warranty of (i) the Acquired Entities set forth in this Agreement means (A)
the actual knowledge of , President & CEO and CFO of Diomed (the "DIOMED
KNOWLEDGEABLE OFFICERS") and (B) except as otherwise set forth in such
representation or warranty, the constructive knowledge of the Diomed
Knowledgeable Officers to the extent such knowledge would have been obtained by
their due inquiry of the employees charged with responsibility for the
particular matter which is the subject of such representation or warranty and
(ii) Parent or Acquisition set forth in this Agreement shall mean the actual
knowledge of Joel Dumaresq (the "PARENT KNOWLEDGEABLE OFFICERS").
(f) "BUSINESS DAYS" has the meaning given it in the
General Construction Law of the State of New York.
(g) "CODE" means the Internal Revenue Code of 1986, as
amended.
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(h) "CONFIDENTIAL INFORMATION" means any confidential
information concerning the businesses and affairs of Parent Acquisition or
Diomed.
(i) "COPYRIGHTS" means all copyrights in both published
works and unpublished works.
(j) "DECEMBER 2001 BRIDGE LOAN NOTES" means [$200,000]
original principal amount of loan notes made by Diomed to Verus Group
International Limited ("VGIL") and Winton Capital Holdings, Ltd. ("WINTON").
(k) "DGCL" means the Delaware General Corporation Law.
(l) "DIOMED NON-PLAN OPTION NOVATION REQUEST" means the
request, substantially in the form of EXHIBIT N to this Agreement, pursuant to
which each holder of a Diomed Non-Plan Option may request that the Diomed
Non-Plan Options referred to therein be novated by Parent to become Parent
Options, subject to the terms and conditions thereof.
(m) "DIOMED NON-PLAN OPTIONS" means options to purchase
an aggregate of 489,679 shares of Diomed Common Stock outstanding as of the date
of this Agreement and not subject to the Diomed Option Plans.
(n) "DIOMED OPTION PLANS" means Diomed's 1998 Incentive
Plan and Diomed's 2001 Employee Stock Option Plan.
(o) "DIOMED OPTIONS" means the Diomed Non-Plan Options
and the Diomed Plan Options.
(p) "DIOMED PLAN OPTIONS" means options to purchase an
aggregate of 1,314,705 shares of Diomed Common Stock outstanding as of the date
of this Agreement under the Diomed Option Plans.
(q) "DIOMED WARRANTS" means warrants to issue an
aggregate of 121,494 shares of Diomed Common Stock.
(r) "DIOMED WARRANT NOVATION REQUEST" means the request,
substantially in the form of EXHIBIT O to this Agreement, pursuant to which each
holder of a Diomed Warrant may request that the Diomed Warrant referred to
therein be novated by Parent to become a Parent Warrant, subject to the terms
and conditions thereof.
(s) "DL" means Diomed, Ltd., a company formed under the
laws of the United Kingdom, and a wholly-owned subsidiary of Diomed.
(t) "DOLLARS" or "$" means the lawful currency of the
United States of America.
(u) "EDGAR" means the Electronic Data Gathering,
Analysis and Retrieval of the SEC.
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(v) "ENVIRONMENTAL LAWS" means all applicable federal,
state, local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses relating (i) to protection and clean-up of the
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation or release of
Hazardous Substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortious conduct.
(w) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(x) "EXPIRATION DATE" means March 29, 2002.
(y) "FIRST QLT PROMISSORY NOTE" means Diomed's
Promissory Note, dated November 8, 2000, payable to QLT Inc. in the original
principal amount of $339,336.45.
(z) "GAAP" means United States generally accepted
accounting principles.
(aa) "HAZARDOUS SUBSTANCES" means any and all hazardous
and toxic substances, wastes or materials, any pollutants, contaminants, or
dangerous materials (including, but not limited to, polychlorinated biphenyls,
PCBs, friable asbestos, volatile and semi-volatile organic compounds, oil,
petroleum products and fractions, and any materials which include hazardous
constituents or become hazardous, toxic, or dangerous when their composition or
state is changed), or any other similar substances or materials which are
included under or regulated by any Environmental Laws.
(bb) "INDEBTEDNESS" means as at any date of
determination, the sum of the following items of a Party, without duplication:
(i) obligations created, issued or incurred for borrowed money, including all
fees and obligations thereunder (including, without limitation, any prepayment
or termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations to pay the
deferred purchase price or acquisition price of property or services, other than
trade or accounts payable arising, and accrued expenses incurred, in the
ordinary course of business consistent with past practice, (iii) the face amount
of all letters of credit issued for the account of any Party and all drafts
thereunder, (iv) capital lease obligations, if any, and (v) any obligation
guaranteeing any Indebtedness or other obligations of any other Person.
(cc) "INTELLECTUAL PROPERTY" means the following
intellectual property:
(i) (A) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all
improvements thereon, and all Patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions and
re-examinations thereof, (B) all Trademarks, including all
goodwill associated therewith, and all applications, registrations
and renewals in connection therewith, (C) all Copyrights and
copyrightable works and all applications, registrations and
renewals in connection therewith and all moral rights relating
thereto insofar as
48
such moral rights have been assigned to any Acquired Entity, (D)
all Trade Secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, methods,
schematics, technology, technical data, designs, drawings,
flowcharts, block diagrams, specifications, customer and supplier
lists, pricing and cost information and business and marketing
plans and proposals), and (E) all Software and firmware in
whatever form (including data, databases and related
documentation);
(ii) all documents, records and files relating to design,
end user documentation, quality control, sales, marketing or
customer support for, and other tangible embodiments of, all
intellectual property described herein;
(iii) all proprietary rights and other tangible or
intangible proprietary information and materials; and
(iv) all licenses, agreements and other permissions or
rights in any third party product or any third party intellectual
property described in (i) through (iii) above;
that are owned or held by or on behalf of any Acquired Entity or that are being
used in the business as it is currently conducted.
(dd) "LIENS" means any mortgage, pledge, lien, security
interest, conditional or installment sale agreement, encumbrance, charge or
other claims of third parties of any kind.
(ee) "MATERIAL ADVERSE EFFECT" means (unless otherwise
specified), as to a Party, any condition or event that may (i) have a material
adverse effect on the assets, business, financial condition, operations of such
Party or Parties taken as a whole, in an amount in excess of $500,000, (ii)
materially impair the ability of such Party to perform its obligations under
this Agreement or (iii) prevent or delay beyond the Expiration Date the
consummation of the transactions contemplated under this Agreement.
(ff) "MERGER CONSIDERATION SHARES" means those shares of
Parent Class A Preferred Stock that are issued in the Merger pursuant to Section
1.5(c), 1.5(d) of this Agreement.
(gg) "NASDAQ" means the NASDAQ automated trading system
operated by the National Association of Securities Dealers, Inc.
(hh) "OCTOBER 2001 BRIDGE LOAN NOTES" means $500,000
original principal amount of loan notes made by Diomed to VGIL and Winton.
(ii) "PARENT COMMON STOCK" is defined in Section 3.2(a).
(jj) "PARENT OPTION" means an option to purchase shares
of Parent Class A Preferred Stock.
49
(kk) "PARENT WARRANT" means a warrant to purchase shares
of Parent Class A Preferred Stock issuable to the holders of Diomed Warrants
under the terms of this Agreement.
(ll) "PARTIES" means Parent, Acquisition and Diomed.
(mm) "PATENTS" means all (i) patents and patent
applications, and (ii) business methods, inventions, and discoveries that may be
patentable.
(nn) "PERMITTED LIENS" means (i) Liens for taxes,
assessments, or similar charges, incurred in the ordinary course of business
that are not yet due and payable or are being contested in good faith; (ii)
pledges or deposits made in the ordinary course of business; (iii) Liens of
mechanics, materialmen, warehousemen or other like Liens securing obligations
incurred in the ordinary course of business that are not yet due and payable or
are being contested in good faith; and (iv) similar Liens and encumbrances which
are incurred in the ordinary course of business and which do not in the
aggregate materially detract from the value of such assets or properties or
materially impair the use thereof in the operation of such business.
(oo) "PERSON" means any individual, corporation,
partnership, limited partnership, limited liability company, trust, association
or entity or government agency or authority.
(pp) "POTENTIAL MATERIAL EVENT" means the possession by
Parent of material information regarding a potential transaction beneficial to
Parent or its stockholders not ripe for disclosure in a registration statement,
which shall be evidenced by determinations in good faith by the Board of
Directors of Parent that disclosure of such information in the registration
statement would be detrimental to the business and affairs of Parent.
(qq) "PRIVATE PLACEMENT SHARES" means the shares of
Parent Common Stock offered to investors pursuant to Section 7.1(d) of this
Agreement in contemplation of the transactions contemplated by this Agreement.
(rr) "REASONABLE BEST EFFORTS" means prompt, substantial
and persistent efforts as a prudent Person desirous of achieving a result would
use in similar circumstances; provided that the Acquired Entities, Parent or
Acquisition, as applicable, shall be required to expend only such resources as
are commercially reasonable in the applicable circumstances.
(ss) "REQUESTING HOLDER" means a holder of Diomed Capital
Shares that requests, in accordance with Section 78.235.5 of the Nevada Revised
Statutes, the written statement containing the information specified therein be
represented by share certificates.
(tt) "RULE 144" means Rule 144 promulgated under the
Securities Act, as in effect from time to time.
(uu) "SEC" means the U.S. Securities and Exchange
Commission.
50
(vv) "SECOND QLT PROMISSORY NOTE" means Diomed's
Promissory Note, dated November 8, 2000, payable to QLT Inc. in the original
principal amount of $835,663.55.
(ww) "SECURITIES ACT" means the Securities Act of 1933,
as amended.
(xx) "SOFTWARE" means computer software or middleware.
(yy) "SPECIAL CONVERSION RESTRICTIONS" means restrictions
or limitations on the continuing conversion of Parent Class A Preferred Stock
into Parent Common Stock due to a determination by Parent to undertake a public
offering of its equity securities, to the extent the ability of Parent to impose
such restrictions or limitations is set forth in EXHIBIT C.
(zz) "STABLEFILE" means Stablefile Ltd., a company formed
under the laws of the United Kingdom and a wholly-owned subsidiary of DL.
(aaa) "SUBSIDIARY" of a Person means any corporation,
partnership, joint venture or other entity in which such Person (i) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (ii) is a general partner.
(bbb) "TAX" (and, with correlative meaning, "TAXES" and
"TAXABLE") means (i) any United States, state, local, municipal or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer,
stamp, or environmental tax, or any other tax, custom, duty, tariff levy,
import, governmental fee or other like assessment or charge, together with any
interest or penalty, addition to tax or additional amount imposed by any
governmental authority; (ii) in the case of Diomed or any Subsidiary, liability
for the payment of any amount of the type described in clause (i) as a result of
being or having been before the Closing Date a member of an affiliated,
consolidated, combined or unitary group; and (iii) liability of Diomed or any
Subsidiary for the payment of any amount as a result of being a party to any tax
sharing or indemnification agreement.
(ccc) "TAX RETURN" means any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(ddd) "TRADE SECRETS" means all know-how, trade secrets,
confidential information, customer lists, Software (source code and object
code), technical information, data, process technology, plans, drawings, and
blue prints.
(eee) "TRADEMARKS" means any trademark, trade name, trade
dress, logo, service mark, corporate name, domain name, URL, sign, symbol,
brand, emblem, word, motto, design or any combination thereof, whether or not
registered, together with all translations, adaptations, derivations and
combinations thereof, adopted and used by a Person to identify goods made or
sold by him or her, and to distinguish them from goods made or sold by others.
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(fff) "VGIL" means Verus Group International Limited.
(ggg) "VSSI" means Verus Support Services, Inc.
(hhh) "WINTON" means Winton Capital Holdings, Ltd.
18. SCHEDULES
(a) Disclosures in any schedule or any supplement
thereto, shall be deemed to relate to any other representation or warranty in
this Agreement.
(b) If there is any inconsistency between the statements
in the body of this Agreement and those in the schedules (other than an
exception expressly set forth in the schedules with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
19. SUCCESSORS
All of the terms, agreements, covenants, representations,
warranties, and conditions of this Agreement are binding upon, and inure to the
benefit of and are enforceable by, the Parties and their respective successors.
20. ASSIGNMENTS
No Party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written consent of Parent
and Diomed. Notwithstanding the foregoing, Diomed agrees that it will not
withhold its consent to any assignment by Parent or by any direct or indirect
successor of Parent as long as any person intending to become an assignee of
Parent's interest under this Agreement (the "ASSIGNEE") satisfies the following
conditions prior to succeeding to the interest of Parent under this Agreement:
(a) The Assignee signs a written instrument (the
"INSTRUMENT OF ASSUMPTION") in form and substance reasonably satisfactory to
Diomed and its counsel under which the Assignee agrees to become bound by and
perform each and every obligation of Parent under this Agreement and further
simultaneously acquires 100% of the issued and outstanding shares of
Acquisition;
(b) Parent delivers the executed Instrument of
Assumption to Diomed not less than 48 hours prior to the intended effectiveness
of the assignment to Assignee;
(c) Shares of the Assignee are listed for trading on The
New York Stock Exchange, the American Stock Exchange or are admitted to trading
on the NASDAQ or are quoted for trading on the Over-the Counter Bulletin Board
operated by the National Association of Securities Dealers, Inc.;
(d) Diomed receives the Instrument of Assumption
pursuant to Section 20(b) together with (i) to the extent not available through
EDGAR, financial statements of the Assignee corresponding to the periods
specified in Section 3.5 with such changes in dates as may
52
be required of the Assignee's fiscal year is other than the calendar year; (ii)
to the extent not available through EDGAR, copies of all reports filed with the
SEC during the prior 730 days (together with copies of all correspondence from
the SEC relating in any way thereto); (iii) a certificate of the Assignee's
chief executive officer, president or chief financial officer certifying that
the Assignee is current with all filing requirements applicable to it under the
Securities Act and the Exchange Act; (iv) disclosure schedules responding to the
respective Schedules listed in Section 3 as if Assignee were the original Party
to this Agreement, including such facts regarding the Assignee as are required
for the representations continued in Sections 3.1 and 3.2 to be complete and
accurate; (v) the notice data for the Assignee referenced for Parent in Section
21; and (vi) the stock ledger maintained by the Assignee's transfer agent
(together the name, address and account officer of such transfer agent);
(e) The Assignee promptly provides Diomed or its counsel
with such information to verify or amplify the Assignee's disclosures as Diomed
or its counsel shall reasonably request;
(f) The Assignee shall issue a press release conforming
with the requirement of Section 12 as if it had executed this Agreement;
(g) Diomed shall have reasonably concluded that (i) the
Assignee has no material assets or liabilities, whether contingent or otherwise;
and (ii) none of the disclosures provides a basis for concluding that a merger
with Assignee as a Party thereto in place of Parent would be less fair to the
stockholders of Diomed than would the Merger initially contemplated by this
Agreement with Parent itself; and
(h) Diomed's counsel or its independent certified public
accountants have not reasonably objected to the Assignee on the basis of their
respective due diligence investigations of the Assignee.
21. NOTICES
All notices, requests, demands, claims and other communications
hereunder will be in writing. Any notice, request, demand, claim or other
communication hereunder will be deemed duly given if (and then three Business
Days after) it is sent by registered or certified mail (if sent from the United
States to an addressee in the United States), return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to Parent or Acquisition:
Pashleth Investment Ltd.
Attn: Joel Dumaresq
#5-4360 Agar Drive
Richmond, British Columbia V7B 1A3
Canada
Tel: (604) 279-0515
Fax: (604) 276-8748
53
Copy to (which will not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attn: Willie E. Dennis
590 Madison Avenue
New York, NY 10022
Tel: (212) 872-1045
Fax: (212) 872-1002
If to Diomed:
Diomed, Inc.
Attn: Peter Klein
1 Dundee Park
Andover, MA 01810
Tel: (978) 475-7771 (X11)
Fax: (978) 475-8488
Copy to (which will not constitute notice):
Van Wert, Zimmer, Bonesteel, Conlin & McCann, P.C.
Attn: Steven R. Colin
One Militia Drive
Lexington, MA 02421-4718
Tel: (781) 863-6306
Fax: (781) 863-6301
Copy to (which will not constitute notice):
McGuire Woods, LLP
Attn: William A. Newman
9 West 57th Street, Suite 1620
New York, New York 10019-2602
Tel: (212) 548-2100
Fax: (212) 548-2150
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication will be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
22. SPECIFIC PERFORMANCE
Each Party acknowledges and agrees that the other Parties would be
damaged irreparably if any provision of this Agreement is not performed in
accordance with its specific
54
terms or is otherwise breached. Accordingly, each Party agrees that the other
Parties will be entitled to seek an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and its terms and provisions in any action instituted in any court of
the United States or any state thereof having jurisdiction over the Parties and
the matter, subject to Section 23, in addition to any other remedy to which they
may be entitled, at law or in equity.
23. SUBMISSION TO JURISDICTION; PROCESS AGENT; NO JURY TRIAL; BINDING
ARBITRATION
(a) Each Party submits to the jurisdiction of any state or
federal court sitting in the State of New York, in any action arising out of or
relating to this Agreement and agrees that all claims in respect of the action
may be heard and determined in any such court. Each Party also agrees not to
bring any action arising out of or relating to this Agreement in any other
court. Each Party agrees that a final judgment in any action so brought will be
conclusive and may be enforced by action on the judgment or in any other manner
provided at law or in equity. Each Party waives any defense of inconvenient
forum to the maintenance of any action so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto.
(b) THE PARTIES EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM RELATING TO
THE TRANSACTIONS. The scope of this waiver is intended to be all encompassing of
any and all actions that may be filed in any court and that relate to the
subject matter of the transactions, including, contract claims, tort claims,
breach of duty claims, and all other common Law and statutory claims. The
Parties each acknowledge that this waiver is a material inducement to enter into
a business relationship and that they will continue to rely on the waiver in
their related future dealings. Each Party further represents and warrants that
it has reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE
WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the
event of commencement of any action, this Agreement may be filed as a written
consent to trial by a court.
24. THIRD PARTY BENEFICIARIES
The Parties expressly agree that the Diomed Stockholders and the
holders of Diomed Options are third party beneficiaries of the obligation of
Parent set forth in Sections 6.9(a), 6.9(b), 6.11(a), 6.11(b), 6.11(c), 6.11(d),
and 6.12, respectively, and may bring a suitable action pursuant to Section 24
to enforce their rights as third party beneficiaries in accordance with the
terms thereof.
55
25. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
of which will be deemed an original but all of which together will constitute
one and the same instrument.
26. HEADINGS
The article and section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
27. GOVERNING LAW
This Agreement and the performance of the transactions and
obligations of the Parties hereunder will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law principles.
28. AMENDMENTS
Parties may amend this Agreement by action taken by or on behalf
of the respective Boards of Directors of Parent, Acquisition and the Acquired
Entities at any time prior to the Effective Time. Notwithstanding the foregoing,
after the Diomed Stockholders approve and adopt this Agreement and the Merger,
no amendment to this Agreement may be made that would reduce the amount of or
change the Merger Consideration or otherwise would require the Diomed
Stockholders to approve such amendment under the DGCL, unless the Diomed
Stockholders approve such amendment in accordance with the DGCL. Amendments to
this Agreement must be in writing and signed the Parties.
29. EXTENSIONS; WAIVER
(a) At any time prior to the Effective Time, the Parent,
on the one hand, and Diomed, on the other, to the extent legally allowed, may
(i) extend the time for the performance of any of the obligations of the other
Party up to and including the Expiration Date, (ii) waive any inaccuracies in
the representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such Party contained herein. Any
agreement on the part of a Party to any such extension or waiver will be valid
only if set forth in an instrument in writing signed on behalf of such Party.
(b) No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default,
misrepresentation, or Breach of warranty or covenant hereunder or affect in any
way any rights arising because of any prior or subsequent such occurrence.
30. SEVERABILITY
The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other
56
provisions hereof; provided that if any provision of this Agreement, as applied
to any Party or to any circumstance, is adjudged by a governmental body,
arbitrator, or mediator not to be enforceable in accordance with its terms, the
Parties agree that the governmental body, arbitrator, or mediator making such
determination will have the power to modify the provision in a manner consistent
with its objectives such that it is enforceable, and/or to delete specific words
or phrases, and in its reduced form, such provision will then be enforceable and
will be enforced.
31. CONSTRUCTION
The Parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Parties and no presumption or burden of proof will arise favoring or
disfavoring any Party because of the authorship of any provision of this
Agreement. Any reference to any federal, state, local, or foreign law will be
deemed also to refer to law as amended and all rules and regulations promulgated
thereunder, unless the context requires otherwise. The words "include,"
"includes," and "including" will be deemed to be followed by "without
limitation." Pronouns in masculine, feminine, and neuter genders will be
construed to include any other gender, and words in the singular form will be
construed to include the plural and vice versa, unless the context otherwise
requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder,"
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The Parties intend that each
representation, warranty, and covenant contained herein will have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached will not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
32. INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES
The exhibits, annexes, schedules, and other attachments identified
in this Agreement are incorporated herein by reference and made a part hereof.
33. REMEDIES
Except as expressly provided herein, the rights, obligations and
remedies created by this Agreement are cumulative and in addition to any other
rights, obligations or remedies otherwise available at law or in equity. Except
as expressly provided herein, nothing herein will be considered an election of
remedies.
34. ELECTRONIC SIGNATURES
(a) Notwithstanding the Electronic Signatures in Global
and National Commerce Act (15 U.S.C. Sec. 7001 et. seq.), the Uniform Electronic
Transactions Act, or any other law relating to or enabling the creation,
execution, delivery, or recordation of any contract or signature by electronic
means, and notwithstanding any course of conduct engaged in by the Parties, no
Party will be deemed to have executed a transaction document or other document
57
contemplated thereby (including any amendment or other change thereto) unless
and until such Party shall have executed such transaction document or other
document on paper by a handwritten original signature or any other symbol
executed or adopted by a Party with current intention to authenticate such
transaction document or such other document contemplated.
(b) Delivery of a copy of a transaction document or such
other document bearing an original signature by facsimile transmission (whether
directly from one facsimile device to another by means of a dial-up connection
or whether mediated by the worldwide web), by electronic mail in "portable
document format" (".pdf") form, or by any other electronic means intended to
preserve the original graphic and pictorial appearance of a document, will have
the same effect as physical delivery of the paper document bearing the original
signature. "Originally signed" or "original signature" means or refers to a
signature that has not been mechanically or electronically reproduced.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have duly executed this Agreement as of the date first above
written.
PASHLETH INVESTMENT LTD.
By: /s/ JOEL DUMARESQ
----------------------------------
Title: President
DIOMED ACQUISITION CORP.
By: /s/ JOEL DUMARESQ
---------------------------------
Title: President
DIOMED, INC.
By: /s/ PETER KLEIN
----------------------------------
Title: President and CEO
59