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AGREEMENT AND PLAN OF MERGER
AMONG
GELTEX PHARMACEUTICALS, INC.
SHINE ACQUISITION SUB, INC.
AND
SUNPHARM CORPORATION
DATED AS OF AUGUST 13, 1999
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TABLE OF CONTENTS
ARTICLE I THE MERGER.........................................................1
1.1 THE MERGER............................................................1
1.2 EFFECTIVE TIME........................................................2
1.3 EFFECT OF THE MERGER..................................................2
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION.....2
1.5 DIRECTORS AND OFFICERS................................................2
1.6 MAXIMUM CONSIDERATION; CONVERSION OF COMPANY COMMON SHARES AND
COMPANY PREFERRED SHARES............................................2
1.7 CANCELLATION OF TREASURY SHARES.......................................4
1.8 STOCK OPTIONS AND WARRANTS............................................4
1.9 CAPITAL STOCK OF MERGER SUB...........................................6
1.10 ADJUSTMENTS TO EXCHANGE RATIO........................................6
1.11 FRACTIONAL SHARES....................................................6
1.12 SURRENDER OF CERTIFICATES............................................7
1.13 FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON SHARES AND
COMPANY PREFERRED SHARES...........................................8
1.14 CLOSING..............................................................9
1.15 LOST, STOLEN OR DESTROYED CERTIFICATES...............................9
1.16 TAX CONSEQUENCES.....................................................9
1.17 DISSENTERS'RIGHTS....................................................9
1.18 FURTHER ASSURANCES..................................................10
1.19 CLOSING OF COMPANY TRANSFER BOOKS...................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.........................11
2.2 CERTIFICIATE OF INCORPORATION AND BY-LAWS............................11
2.3 CAPITALIZATION.......................................................12
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT; REQUIRED VOTE..................13
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS...........................14
2.6 MATERIAL AGREEMENTS..................................................15
2.7 COMPLIANCE WITH AGREEMENTS AND LAW...................................15
2.8 SEC FILINGS; FINANCIAL STATEMENTS....................................16
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.................................17
2.10 NO UNDISCLOSED LIABILITIES..........................................17
2.11 ABSENCE OF LITIGATION...............................................17
2.12 EMPLOYEE BENEFIT PLANS..............................................17
2.13 EMPLOYMENT AND LABOR MATTERS........................................20
2.14 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS..................21
2.15 ABSENCE OF RESTRICTIONS ON BUSINESS ACTIVITIES......................21
2.16 TITLE TO ASSETS; LEASES.............................................22
2.17 TAXES...............................................................22
2.18 ENVIRONMENTAL MATTERS...............................................25
2.19 INTELLECTUAL PROPERTY...............................................26
2.20 INSURANCE...........................................................28
2.21 BROKERS.............................................................28
2.22 CERTAIN BUSINESS PRACTICES..........................................29
2.23 INTERESTED PARTY TRANSACTIONS.......................................29
2.24 OPINION OF FINANCIAL ADVISOR........................................29
2.25 NO SUBSIDIARIES.....................................................29
2.26 DISCLOSURE..........................................................29
2.27 HSR FILING..........................................................29
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........30
3.1 ORGANIZATION AND QUALIFICATION.......................................30
3.2 CAPITALIZATION.......................................................30
3.3 AUTHORIZATION OF AGREEMENT...........................................31
3.4 APPROVALS............................................................31
3.5 NO VIOLATION.........................................................31
3.6 REPORTS..............................................................32
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.................................32
3.8 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS...................32
3.9 ABSENCE OF LITIGATION................................................33
3.10 COMPLIANCE WITH LAWS................................................33
3.11 TAXES...............................................................34
3.12 YEAR 2000 COMPLIANCE................................................34
3.13 PARENT INTELLECTUAL PROPERTY RIGHTS.................................34
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER...........................34
4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER................34
4.2 SOLICITATION OF OTHER PROPOSALS......................................37
ARTICLE V ADDITIONAL AGREEMENTS.............................................39
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT...................39
5.2 MEETING OF COMPANY STOCKHOLDERS......................................40
5.3 ACCESS TO INFORMATION; CONFIDENTIALITY...............................41
5.4 ALL REASONABLE EFFORTS; FURTHER ASSURANCES...........................41
5.5 STOCK OPTIONS AND WARRANTS...........................................42
5.6 REGISTRATION RIGHTS..................................................44
5.7 NOTIFICATION OF CERTAIN MATTERS......................................44
5.8 LISTING ON THE NASDAQ................................................45
5.9 PUBLIC ANNOUNCEMENTS.................................................45
5.10 TAKEOVER LAWS.......................................................45
5.11 ACCOUNTANT'S LETTERS................................................46
5.12 INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................46
5.13 COVENANTS FOR TAX-FREE STATUS.......................................46
5.14 STOCKHOLDER AGREEMENT...............................................46
5.15 RELEASE AGREEMENTS..................................................47
5.16 AFFILIATE AGREEMENTS................................................47
5.17 SEC FILINGS.........................................................48
5.18 MAINTENANCE, PROSECUTION AND FILING OBLIGATIONS.....................48
ARTICLE VI CONDITIONS OF MERGER.............................................48
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER..........48
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB........49
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY..................51
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...............................52
7.1 TERMINATION..........................................................52
7.2 EFFECT OF TERMINATION................................................53
7.3 FEES AND EXPENSES....................................................53
7.4 AMENDMENT............................................................55
7.5 WAIVER...............................................................55
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ARTICLE VIII GENERAL PROVISIONS.............................................55
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...........................55
8.2 NOTICES..............................................................55
8.3 DISCLOSURE SCHEDULES.................................................57
8.4 CERTAIN DEFINITIONS..................................................57
8.5 INTERPRETATION.......................................................61
8.6 SEVERABILITY.........................................................61
8.7 ENTIRE AGREEMENT.....................................................61
8.8 ASSIGNMENT...........................................................61
8.9 PARTIES IN INTEREST..................................................61
8.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE...............61
8.11 GOVERNING LAW.......................................................61
8.12 COUNTERPARTS........................................................62
EXHIBIT A - Form of Stockholder Agreement
EXHIBIT B - Certificate of Merger
EXHIBIT C - Form of Release Agreement
EXHIBIT D - Form of Affiliate Agreement
EXHIBIT E - Form of Opinion of Andrews & Kurth L.L.P.
EXHIBIT F - Form of Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C.
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SCHEDULES
COMPANY AND COMPANY'S SUBSIDIARIES' SCHEDULES
2.1(c) Subsidiaries
2.3(a) Stock Appreciation Rights; Other Rights
2.3(b) Capitalization: Company and Subsidiaries, Capital Stock
2.5(a) Conflict; Required Filing
2.5(b) Company Approvals
2.6 Material Agreements
2.7 Permits
2.8 SEC Filings and Financial Statements
2.11 Litigation
2.12(a) Employee Benefit Plans
2.12(e) Benefits; Acceleration
2.12(g) Medical Benefits
2.12(i) Severance Payments
2.12(k) Holders of Option, Warrant or Other Right to Purchase Capital
Stock
2.13(a) Employment and Consultant Agreements
2.13(b) Employee Controversies
2.15 Restrictions of Business Activity
2.16 Real Property
2.17 Taxes
2.17(m) Net Operating Loss; Capital Loss Carry Forwards
2.17(n) Limitations of Net Operating Loss
2.18 Environmental Matters
2.19(a) Intellectual Property: Patents, Trademarks, Copyrights
2.19(b) Intellectual Property: Non-Exclusive Intellectual Property
Rights
2.19(c) Maintenance Fees
2.20 Insurance
2.21 Broker Agreements
2.23 Interested Parties
OTHER SCHEDULES
4.1(l) Related Party Agreements, Arrangements, Understandings
5.15 Release Agreements
5.16 Affiliates
8.4 Events, Changes, and Circumstances
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AGREEMENT AND PLAN OF MERGER, dated as of August 13, 1999 (the
"Agreement") among GELTEX PHARMACEUTICALS, INC., a Delaware corporation
("Parent"), SHINE ACQUISITION SUB, INC., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and SUNPHARM CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is in the best interests of their
respective stockholders for Parent to acquire the Company upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of
Directors of Parent, Merger Sub and the Company have each approved the merger
(the "Merger") of Merger Sub with and into the Company, in accordance with the
General Corporation Law of the State of Delaware (the "DGCL") and subject to the
conditions set forth herein, which Merger will result in, among other things,
the Company becoming a wholly owned subsidiary of Parent, and all of the issued
and outstanding shares of the common stock of the Company, $.0001 par value per
share (the "Company Common Shares") and all of the issued and outstanding Series
A Redeemable Convertible Preferred Stock and Series B Redeemable Convertible
Preferred Stock of the Company, $.001 par value per share (collectively, the
"Company Preferred Shares") will be exchanged and converted into shares of
common stock, par value $0.01 per share, of Parent (the "Parent Common Stock")
with certain Parent Rights as described herein;
WHEREAS, as a condition to the willingness of, and as an inducement
to, Parent and Merger Sub to enter into this Agreement, contemporaneously with
the execution and delivery of this Agreement, certain holders of Company Common
Shares and Company Preferred Shares are entering into agreements (the
"Stockholder Agreements") in the form of EXHIBIT A attached hereto, providing
for certain actions relating to the transactions contemplated by this Agreement,
including their agreement to vote Company Common Shares and Company Preferred
Shares in favor of the Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization within the meaning of Section
368(a) of the Code and the United States Treasury Regulations promulgated
thereunder; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
provisions of the DGCL, Merger Sub shall be merged with and into the Company,
the separate corporate existence of Merger Sub shall cease and the Company
shall, as the surviving corporation in the Merger, continue its existence under
the provisions of the DGCL as a wholly owned subsidiary of Parent. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction
or, to the extent permitted hereunder, waiver of the conditions set forth in
Article VI of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing the Certificate of Merger substantially in the form of
EXHIBIT B (the "Certificate of Merger"), along with a certified copy of this
Agreement, if required, with the Secretary of State of the State of Delaware,
executed in accordance with the relevant provisions of the DGCL (the date and
time of such filing, or such later date and time as may be specified in the
Certificate of Merger by mutual agreement of Parent, Merger Sub and the Company,
being the "Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION.
Unless otherwise determined by Parent prior to the Effective Time, at the
Effective Time the Certificate of Incorporation of the Company, as amended by
the Certificate of Merger, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by the DGCL. The
by-laws of the Merger Sub shall be the by-laws of the Surviving Corporation
until thereafter amended as provided by the DGCL.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation of the Surviving Corporation. The officers of the Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and by-laws. Prior to the Effective Time, the Company shall
deliver to Parent resignation letters of each of the directors of the Company to
be effective as of such Effective Time.
1.6 MAXIMUM CONSIDERATION; CONVERSION OF COMPANY COMMON SHARES AND
COMPANY PREFERRED SHARES. Notwithstanding anything in this Agreement to the
contrary, the maximum consideration payable by Parent with respect to the
Company Common Shares and Company Preferred Shares issued and outstanding
immediately prior to the Effective Time shall be an aggregate of the number of
shares of Parent Common Stock, subject to adjustment as hereinafter provided in
this Section 1.6, as is obtained by dividing (A) the Acquisition Amount by (B)
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the Closing Average, as adjusted pursuant to Section 1.6(c) hereof, rounded to
the nearest whole share. For purposes of this Agreement, "Acquisition Amount"
shall mean the result of (x) $16,540,462, MINUS (y) the product of (1) $2.00
times (2) the number of shares covered by options or warrants (other than those
warrants issued or to be issued to Petkevich & Partners, L.L.C. for the purchase
of 200,000 Company Common Shares), which options or warrants are vested and
exercisable at an exercise price or strike price of $2.00 or less per share and
are not exercised immediately prior to the Effective Time.
At the Effective Time, by virtue of the Merger and without any action
on the part of the parties hereto or the holders of the following securities:
(a) Subject to the other provisions of this Article I, each
share of Series A Redeemable Convertible Preferred Stock, par value $.001 per
share (the "Series A Preferred Stock") and each share of Series B Redeemable
Convertible Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock") issued and outstanding immediately prior to the Effective Time (other
than any Company Preferred Shares to be canceled pursuant to Section 1.7 and any
Dissenting Shares (as defined in Section 1.17)) shall be converted automatically
into the right to receive one hundred fifty percent (150%) of the Exchange Ratio
Fraction of a fully paid and nonassessable share of Parent Common Stock,
together with cash, if any, in lieu of any fraction of a share of Parent Common
Stock, pursuant to Section 1.11 (collectively, the "Preferred Merger
Consideration").
(b) Subject to the other provisions of this Article I, each
Company Common Share issued and outstanding immediately prior to the Effective
Time (other than any Company Common Shares to be canceled pursuant to Section
1.7 and any Dissenting Shares (as defined in Section 1.17)) shall be converted
automatically into the right to receive the Exchange Ratio Fraction of a fully
paid and nonassessable share of Parent Common Stock, together with cash, if any,
in lieu of any fraction of a share of Parent Common Stock, pursuant to Section
1.11 the ("Common Merger Consideration" and, together with the Preferred Merger
Consideration, the "Merger Consideration").
(c) For purposes of this Agreement, the "Exchange Ratio
Fraction" shall mean the quotient (calculated to the nearest five (5) decimal
places) obtained by dividing (x) the Acquisition Amount by (y) the Closing
Average, and by dividing the quotient computed thereby by the Company Shares
Number (as defined below). As used herein, the "Closing Average" shall be the
average closing price per share of Parent Common Stock (rounded to the nearest
cent) on the NASDAQ National Market ("NASDAQ") (as reported in the WALL STREET
JOURNAL, or, if not reported therein, any other authoritative source selected by
Parent) for the twenty (20) consecutive trading days ending on the second
trading day immediately prior to the Effective Time; PROVIDED, HOWEVER, that if
(A) such average is $13.80 or less, then the Closing Average shall be $13.80 and
(B) such average is $16.36 or more, then the Closing Average shall be $16.36. As
used herein, "Company Shares Number" means the sum of (A) (i) all Company Common
Shares outstanding immediately prior to the Effective Time (including all
Company Common Shares issued upon the exercise or cancellation of any options to
purchase Company Common Shares or any warrants to purchase Company Common Shares
or upon the conversion or exchange of any Company Preferred Shares), minus (ii)
Company Common Shares to be canceled pursuant to Section 1.7 and any Dissenting
Shares (as defined in Section 1.17), plus (B) an amount equal to the product
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obtained by multiplying (i) one hundred fifty percent (150%), by (ii) the number
of Company Preferred Shares outstanding immediately prior to the Effective Time
(other than the Company Preferred Shares to be canceled pursuant to Section
1.7). As used herein, the "Measurement Date Average" shall be the average
closing price per share of Parent Common Stock on NASDAQ for the twenty (20)
consecutive trading days ending on August 11, 1999.
(d) Each share of Parent Common Stock to be issued upon
conversion of Company Common Shares and Company Preferred Shares in accordance
with this Section 1.6 shall include the corresponding percentage of a Series A-1
Junior Participating Preferred Stock Purchase Right of Parent (a "Parent Right")
issued pursuant to the Rights Agreement dated as of March 1, 1996 between the
Company and American Stock Transfer & Trust Company, as amended (as so amended,
the "Parent Rights Agreement"). Prior to the Distribution Date (as defined in
the Parent Rights Agreement), all references in this Agreement to the Parent
Common Stock issued in connection with the Merger shall be deemed to include
Parent Rights.
(e) As of the Effective Time, all Company Common Shares and
all Company Preferred Shares issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and all Company Common Shares and
all Company Preferred Shares shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Company Common Shares and all Company Preferred Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 1.12 hereof, without interest.
1.7 CANCELLATION OF TREASURY SHARES. Each share of Company Common
Shares or Company Preferred Shares held in the treasury of the Company and each
share of Company Common Shares or Company Preferred Shares, if any, owned by
Merger Sub or Parent, immediately prior to the Effective Time shall be canceled
and extinguished without any conversion thereof.
1.8 STOCK OPTIONS AND WARRANTS.
(a) As soon as practicable after the execution of this
Agreement, the Company shall, pursuant to the Company's Amended and Restated
1994 Stock Option Plan (the "1994 Plan"), (i) notify each holder of an
outstanding option issued pursuant to the 1994 Plan of the proposed Merger, (ii)
provide for the accelerated vesting of each outstanding option so that each such
option shall become fully exercisable, (iii) notify each such holder that each
option shall, unless exercised by the holder in accordance with its terms, be
canceled and terminate on the date which is fifteen (15) days from the date of
such notice, and (iv) cause the 1994 Plan to be terminated. As soon as
practicable after the execution of this Agreement, the Company shall use
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commercially reasonable best efforts to cause the exercise or termination of all
other then outstanding employee and consultant stock options and all
non-employee director stock options, including without limitation, the incentive
stock options and non-qualified stock options issued pursuant to the Company's
1995 Non-employee Director's Stock Option Plan (the "1995 Plan") and all stock
options granted pursuant to resolutions of the Company's Board of Directors
outside of any option plan. Notwithstanding the foregoing, under no
circumstances shall the Company be required to offer any incentives or other
consideration for the termination of such options.
(b) Subject to Section 1.8(a) of this Agreement, at the
Effective Time, each of the Company's then outstanding employee and consultant
stock options and non-employee director stock options (collectively the "Company
Options") which are outstanding and have not been terminated, exercised or
otherwise converted as of the Effective Time shall cease to represent the right
to acquire Company Common Shares, and shall, by virtue of the Merger and without
any further action on the part of any holder thereof, be converted into and
become the right to acquire a number of shares of Parent Common Stock determined
by multiplying the number of shares of Company Common Stock covered by such
Company Option immediately prior to the Effective Time by the Exchange Ratio
Fraction (rounded down to the nearest whole number of shares), at an exercise
price per share of Parent Common Stock equal to the exercise price in effect
under such Company Option immediately prior to the Effective Time divided by the
Exchange Ratio Fraction (rounded up to the nearest cent), which option to
purchase Parent Common Stock shall contain the same term, vesting schedule and
otherwise be on substantially the same terms and conditions as set forth in the
assumed Company Option, except that any Company Option qualifying or intended to
qualify as an "incentive stock option" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") shall not qualify as an "incentive stock
option" under Section 422 of the Code (any such assumed Company Option being
herein referred to as an "Assumed Option").
(c) The Company shall take all actions necessary or reasonably
requested by Parent to ensure that following the Effective Time no holder of any
Company Options or rights pursuant to, nor any participant in, the 1994 Plan,
the 1995 Plan or any other plan, program or arrangement providing for the
issuance or grant of any interest in respect of the capital stock of the Company
and any of its Subsidiaries will have any right thereunder to acquire equity
securities, or any right to payment in respect of the equity securities, of the
Company, any of its Subsidiaries or the Surviving Corporation, except as
provided in subsection (b) above.
(d) Parent shall take all corporate action necessary (i) to
reserve for issuance, and (ii) to register under the Securities Act of 1933 (the
"Securities Act") the issuance of, a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Assumed Options in accordance
with this Section 1.8.
(e) As soon as practicable after the execution of this
Agreement, the Company shall use commercially reasonable best efforts to cause
the exercise or termination of all then issued and outstanding warrants to
acquire shares of Company Common Stock or securities convertible into Common
Stock (collectively, the "Company Warrants"). At the Effective Time, each
Company Warrant that is outstanding and has not been terminated, exercised or
otherwise converted as of the Effective Time shall be assumed by Parent;
PROVIDED that such Company Warrants shall by their express terms reflect, or
5
shall be amended by the Company and the holder thereof to reflect, the different
security and the number of shares of such security covered by such agreement
based on the conversion of Company Common Shares into Parent Common Stock. All
of the holders of such Company Warrants issued and outstanding as of the date of
this Agreement are listed on Section 2.3(b) of the Company Disclosure Schedule
attached hereto. The Company shall take all actions necessary or reasonably
requested by Parent to ensure that following the Effective Time no holder of any
Company Warrant will have any right thereunder to acquire equity securities of
the Company or any of its Subsidiaries, or any right to payment in respect of
the equity securities of the Company, any of its Subsidiaries or the Surviving
Corporation, except as provided in this subsection (e).
(f) As soon as practicable after the execution of this
Agreement, the Company shall use its commercially reasonable best efforts to
cause the holders of warrants or warrant certificates issued pursuant to that
Unit Purchase Agreement dated March 28, 1997 (the "1997 Unit Purchase
Agreement") to (i) surrender such warrants or warrant certificates (the "1997
Warrants") in exchange for an aggregate of 158,512 Company Common Shares and
(ii) agree to terminate the 1997 Unit Purchase Agreement.
(g) Parent shall take all corporate action necessary (i) to
reserve for issuance, and (ii) to register under the Securities Act, a
sufficient number of shares of Parent Common Stock for delivery upon exercise of
the Company Warrants in accordance with this Section 1.8.
1.9 CAPITAL STOCK OF MERGER SUB. Each share of common stock, par value
$.01 per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock, par value $.01 per share, of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any Merger Sub Common Stock
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.10 ADJUSTMENTS TO EXCHANGE RATIO FRACTION. Without limiting any other
provision of this Agreement, the Exchange Ratio Fraction shall be
correspondingly adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Shares), reorganization,
recapitalization, reclassification, conversion, consolidation, contribution or
exchange of shares or other like change with respect to Parent Common Stock or
Company Common Shares occurring after the date hereof and prior to the Effective
Time.
1.11 FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued hereunder, but in lieu thereof each holder of Company Common
Shares who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) shall receive from Parent an amount of cash (rounded
down to the nearest whole cent) equal to the product of such fraction multiplied
by the Closing Average.
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1.12 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate one or more Persons, to act as Exchange Agent hereunder.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, through such reasonable procedures as Parent
may adopt, the shares of Parent Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding Company Common Shares and outstanding Company Preferred
Shares, together with an estimated amount of cash to be paid pursuant to Section
1.11 in lieu of fractional shares.
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
the Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding Company Common
Shares and Company Preferred Shares whose shares were converted into the right
to receive shares of Parent Common Stock pursuant to Section 1.6, a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock and cash in lieu of the fraction of a
share of Parent Common Stock, if any, pursuant to Section 1.11 hereof. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive in exchange therefor, a certificate representing the number of whole
shares of Parent Common Stock and payment in lieu of fractional shares which
such holder has the right to receive pursuant to Section 1.11, and the
Certificate so surrendered shall forthwith be canceled. Until so surrendered,
each outstanding Certificate that, prior to the Effective Time, represented
Company Common Shares or Company Preferred Shares will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such Company Common Shares and Company Preferred Shares
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.11. Any
portion of the shares of Parent Common Stock deposited with the Exchange Agent
pursuant to this Section 1.12(c) which remains undistributed to the holders of
the Certificates representing Company Common Shares or Company Preferred Shares
for twelve (12) months after the Effective Time shall be delivered to Parent,
upon demand, and any holders of Company Common Shares or Company Preferred
Shares who have not theretofore complied with this Article I shall thereafter
look only to Parent for Parent Common Stock, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or distributions with respect to
Parent Common Stock to which such holders may be entitled.
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(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable escheat
Law, following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to Parent, or any agent designated by
it, any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock in any name other than that of the
registered holder of the certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Agreement, none of the Exchange Agent, Parent, Merger Sub or the Surviving
Corporation shall be liable to a holder of Company Common Shares or Company
Preferred Shares for any Parent Common Stock or any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
(g) WITHHOLDING OF TAX. Parent or the Exchange Agent will be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Shares or any holder
of Company Preferred Shares, as the case may be, such amounts as Parent (or any
Affiliate thereof) or the Exchange Agent are required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
federal, state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts will be treated
for all purposes of this Agreement as having been paid to the holder of the
Company Common Shares or Company Preferred Shares, as the case may be, in
respect of whom such deduction and withholding were made by Parent.
1.13 FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON SHARES AND COMPANY
PREFERRED SHARES. All shares of Parent Common Stock issued upon the surrender
for exchange of Company Common Shares and Company Preferred Shares in accordance
with the terms of this Article I (including any cash paid in respect thereof)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Company Common Shares and Company Preferred Shares under this
Article I, and there shall be no further registration of transfers on the
records of the Surviving Corporation of Company Common Shares and Company
Preferred Shares which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
8
1.14 CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article VII, and subject to the provisions of Article VI, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (Eastern time) on a date
(the "Closing Date") to be mutually agreed upon by the parties, which date shall
be not later than the third Business Day after all the conditions set forth in
Article VI shall have been satisfied (or waived in accordance with Section 7.5,
to the extent the same may be waived), unless another time and/or date is agreed
to in writing by the parties. The Closing shall take place at the offices of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, Massachusetts, unless another place is agreed to in writing by the
parties.
1.15 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock and cash for fractional shares, if any, as may be required pursuant
to Section 1.11; PROVIDED, HOWEVER, that Parent may, as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.16 TAX CONSEQUENCES. For federal income tax purposes, the parties
intend that the Merger be treated as a reorganization within the meaning of
Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, and that this Agreement shall
be, and is hereby, adopted as a plan of reorganization for purposes of Section
368 of the Code. The parties shall not take a position on any Tax Return
inconsistent with this Section 1.16.
1.17 DISSENTERS' RIGHTS. All of the Persons who have executed and
delivered a Stockholder Agreement shall have consented to the Merger and shall
have delivered their stock certificates in accordance with the terms hereof.
Holders of 100% of the Company Preferred Shares and holders of the requisite
number of the Company Common Shares shall have consented to the Merger and
delivered all of their capital stock to the Parent or the Exchange Agent in
accordance with the terms hereof, and the holders of not more than 2% of the
issued and outstanding Company Common Shares shall have exercised, or shall have
any continued right to exercise, appraisal or dissenter's rights.
Notwithstanding anything in this Agreement to the contrary, any Company Common
Shares or Company Preferred Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
delivered a valid, unrevoked proxy in favor of the Merger, or consented thereto
in writing and who has delivered written notice to the Company objecting to the
Merger and demanding payment for his shares as required in accordance, and has
otherwise complied, with the applicable provisions of the DGCL ("Dissenting
Shares"), shall not be converted into the right to receive the Parent Common
Stock, unless and until such holder fails to elect to dissent from the Merger or
effectively withdraws or otherwise loses his right to payment of the fair value
of his shares under the provisions of the DGCL. If, after the Effective Time,
any such holder fails to perfect or effectively withdraws or loses his right to
9
such payment, such Dissenting Shares shall thereupon be treated as if they had
been converted as of the Effective Time into the right to receive Parent Common
Stock to which such holder is entitled, without interest or dividends thereon.
Any amounts paid to holders of Dissenting Shares in an appraisal proceeding will
be paid by the Surviving Corporation out of its own funds and will not be paid
by Parent or Merger Sub. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to any such demands or offer to
settle or settle any such demands.
1.18 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, immunities, powers, purposes, franchises, properties or
assets of the Company or Merger Sub, or (b) otherwise to carry out the purposes
of this Agreement, the Surviving Corporation and its proper officers and
directors or their designees shall be authorized to solicit in the name of the
Company or Merger Sub any third party consents or other documents required to be
delivered by any third party, to execute and deliver, in the name and on behalf
of the Company or Merger Sub, all such deeds, bills of sale, assignments and
assurances and do, in the name and on behalf of the Company or Merger Sub, all
such other acts and things necessary, desirable or proper to vest, perfect or
confirm its right, title or interest in, to or under any of the rights,
privileges, immunities, powers, purposes, franchises, properties or assets of
the Company or Merger Sub and otherwise to carry out the purposes of this
Agreement.
1.19 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Common Shares or Company Preferred Shares shall thereafter be made. If, after
the Effective Time, certificates representing shares of Company Common Shares or
Company Preferred Shares are presented to the Surviving Corporation, they shall
be canceled and presented to the Exchange Agent in accordance with Section 1.12.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that the statements contained in this Article II are correct and complete as of
the date of this Agreement and will be correct and complete on the Closing Date,
except as disclosed in the disclosure schedule dated the date hereof, certified
by the President and Chief Executive Officer of the Company and delivered by the
Company to Parent and Merger Sub simultaneously herewith (which disclosure
10
schedule shall contain specific references to the representations and warranties
to which the disclosures contained therein relate and an item on such disclosure
schedule shall be deemed to qualify only the particular subsection or
subsections specified for such item) (the "Company Disclosure Schedule") as
follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has all the requisite corporate power and authority
and is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and Orders ("Company
Approvals") necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to have such
power, authority and Company Approvals would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except in such instances where the failure to be so duly
qualified, or licensed and in good standing or to have such power, authority and
Company Approvals would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) Each Subsidiary of the Company is a legal entity, duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and has all the
requisite power and authority, and is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and Orders (with respect to each such Subsidiary, "Subsidiary Approvals")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each Subsidiary is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary.
(c) Section 2.1(c) of the Company Disclosure Schedule sets
forth, as of the date hereof, a true and complete list of all of the Company's
directly and indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity or other interest owned
by the Company or another direct or indirect Subsidiary of the Company. Except
as set forth in Section 2.1(c) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, directly or
indirectly, any equity or similar interest in, any Person.
2.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to Parent a complete and correct copy of each of its and
each of its Subsidiaries' Certificates of Incorporation and by-laws or
equivalent organizational documents, as amended or restated to the date hereof.
Such Certificates of Incorporation and by-laws, as amended, and equivalent
organizational documents of the Company and each of its Subsidiaries are in full
force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any of the provisions of its Certificate of Incorporation or
by-laws or equivalent organizational documents.
11
2.3 CAPITALIZATION.
(a) The authorized capital stock of the Company is 25,500,000
shares divided into 25,000,000 Company Common Shares and 300,000 shares of
Series A Preferred Stock and 200,000 shares of Series B Preferred Stock. As of
the date hereof, (i) 6,911,316 Company Common Shares were issued and outstanding
and 366,667 Company Preferred Shares were issued and outstanding; (ii) no
Company Common Shares were held in the treasury of the Company; (iii) 1,073,965
Company Common Shares were duly reserved for future issuance pursuant to stock
options granted and outstanding pursuant to the 1994 Plan, 1995 Plan and options
issued outside of any plan and (v) 2,939,443 Company Common Shares were duly
reserved for future issuance pursuant to issued and outstanding warrants to
purchase Company Common Shares. Except as set forth above, as of the date
hereof, no shares of voting or non-voting capital stock, other equity interests,
or other voting securities of the Company were issued, reserved for issuance or
outstanding. All options to purchase Company Common Shares were granted under
the Company's 1994 Plan or the Company's 1995 Plan, except for outstanding
options to purchase an aggregate of 400,035 Company Common Shares. Except as set
forth in Section 2.3(a) of the Company Disclosure Schedule, there are no
outstanding stock appreciation rights of the Company and no outstanding limited
stock appreciation rights or other rights to redeem for cash options or warrants
of Company. All outstanding shares of capital stock of the Company are, and all
shares which may be issued upon the exercise of stock options will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness of the Company with voting rights (or convertible into, or
exchangeable for, securities with voting rights) on any matters on which
stockholders of the Company may vote.
(b) Section 2.3(b) of the Company Disclosure Schedule sets
forth the number of authorized and outstanding shares of capital stock and the
names of the beneficial owners of such capital stock of each of the Company's
Subsidiaries as of August 11, 1999. Except as set forth in Section 2.3(b) of the
Company Disclosure Schedule, as of the date hereof, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind (contingent or otherwise) to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or of any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock (or options to acquire any such
shares) of the Company or its Subsidiaries, except for the Series A Preferred
Stock and the Series B Preferred Stock. There are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which any
person is or may be entitled or to cause the Company or any of its Subsidiaries
to file a registration statement under the Securities Act or which otherwise
relate to the registration of any securities of the Company, except as disclosed
in Section 2.3(b) of the Company Disclosure Schedule.
12
(c) There are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound with respect to the voting of any shares of capital stock of the
Company or any of its Subsidiaries, except for the Stockholder Agreements.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT; REQUIRED VOTE.
(a) Subject to the approval of this Agreement by the Company's
stockholders, the Company has all necessary corporate power and authority to
execute and deliver this Agreement, and each instrument required to be executed
and delivered by it at the Closing, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by the Company of this Agreement, the performance of
its obligations hereunder, and the consummation by the Company of the
transactions contemplated hereby, have been duly and validly authorized by all
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than, with respect to the Merger, the approval and
authorization of this Agreement by votes of the holders of at least majority of
the outstanding Company Common Shares and the Company Preferred Shares (voting
together as one class), holders of at least sixty-six and two-thirds percent (66
2/3%) of the outstanding shares of the Company's Series A Preferred Stock
(voting as a single class) and holders of at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding Series B Preferred Stock (voting as a
single class) in accordance with the applicable provisions of the DGCL and the
Company's Certificate of Incorporation and by-laws. This Agreement has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof and thereof by Parent and Merger
Sub, constitutes the legal, valid and binding obligation of the Company, subject
to the approval of the Company's stockholders and assuming Board of Directors'
approval by Parent and Merger Sub, in each case except to the extent the
enforcement thereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar law now or hereafter in effect
relating to creditor's rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(b) The Board of Directors of the Company has directed that
this Agreement be submitted to the stockholders of the Company for their
approval and authorization. The affirmative votes of holders of at least a
majority of all outstanding Company Common Shares and Company Preferred Shares
(voting together as one class), holders of at least sixty-six and two-thirds
percent (66 2/3%) of all outstanding shares of Series A Preferred Stock (voting
as a single class), and holders of at least sixty-six and two-thirds percent (66
2/3%) of all outstanding shares of Series B Preferred Stock (voting as a single
class) are the only votes of the holders of any class or series of capital stock
of the Company necessary to approve and authorize this Agreement, the Merger,
the Related Agreements and the other transactions contemplated hereby and
thereby. The holders of the Company Common Shares and Company Preferred Shares
13
that are parties to the Stockholder Agreements beneficially own and have the
right to vote, in the aggregate, approximately 34% of the total issued and
outstanding Company Common Shares and 82% of the total issued and outstanding
Company Preferred Shares.
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery by the Company of this
Agreement or any instrument required by this Agreement to be executed and
delivered by the Company or any of its Subsidiaries at the Closing do not, and
the performance by the Company or any of its Subsidiaries of their obligations
under this Agreement or any instrument required by this Agreement to be executed
and delivered by the Company or any of its Subsidiaries at the Closing, shall
not, (i) conflict with or violate the Certificate of Incorporation or by-laws or
equivalent organizational documents of the Company or any of its Subsidiaries,
(ii) conflict with or violate any Law, Regulation or Order in each case
applicable to the Company or any of its Subsidiaries or by which its or any of
their respective properties is bound or affected, or (iii) result in any breach
or violation of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair the Company's or any of
its Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien or encumbrance on any of
the properties or assets of the Company or any of its Subsidiaries pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or its or any of their respective properties is bound or affected,
except (A) as set forth in Section 2.5(a) of the Company Disclosure Schedule or
(B) in the case of clause (ii) or (iii) above, for any such conflicts, breaches,
violations, defaults or other occurrences that would not (x) individually, or in
the aggregate, have a Material Adverse Effect or (y) prevent or materially
impair or delay the consummation of the Merger.
(b) The execution and delivery by the Company of this
Agreement or any instrument required by this Agreement to be executed and
delivered by the Company or any of its Subsidiaries at Closing do not, and the
performance by the Company or any of its Subsidiaries of their obligations under
this Agreement and any instrument required by this Agreement to be executed and
delivered by the Company or any of its Subsidiaries at Closing, shall not,
require the Company or any of its Subsidiaries to obtain any consent or waiver
of any Person or the consent, approval, authorization or action by, license,
waiver, qualification, Order or Permit, observe any waiting period imposed by,
or make any filing with or notification to, any Court or Governmental Authority,
domestic or foreign, except for (A) valid approval of the Agreement by the
Company's stockholders, which approval has or will be obtained prior to the
Effective Time, (B) compliance with applicable requirements, if any, of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), state securities laws ("Blue Sky Laws"), (C) the filing of this Agreement
or (D) other documents as required by applicable provisions of the DGCL and such
other third party consents, approvals, authorization, licenses, waivers,
qualifications, Orders or Permits set forth in Section 2.5(a) of the Company
Disclosure Schedule.
14
2.6 MATERIAL AGREEMENTS. Section 2.6 of the Company Disclosure
Schedule sets forth a true and complete list of all contracts, licenses,
agreements, permits and instruments to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound which is material to the Company and/or its Subsidiaries and
including without limitation all agreements pursuant to which the Company or any
of its Subsidiaries has granted exclusive rights or have terms of one year or
longer (collectively, the "Material Agreements"). Complete copies of all
Material Agreements have been provided by the Company to Parent and no oral
Material Agreements exist. Each such Material Agreement is in full force and
effect, is a valid and binding obligation of the Company or such Subsidiary and
is enforceable against the Company or such Subsidiary in accordance with its
terms and the Company does not have Knowledge that any Material Agreement is not
a valid and binding agreement of the other parties thereto. Except as set forth
in Section 2.6 of the Company Disclosure Schedule, each Material Agreement is
enforceable in each case except to the extent the enforcement thereof may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium or other
similar law now or hereafter in effect relating to creditors' rights generally
and (B) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). Except as set forth on Section
2.6 of the Company Disclosure Schedule, no condition exists or, to the Company's
Knowledge, event has occurred which (whether with or without notice or lapse of
time or both, or the happening or occurrence of any other event) would result in
a loss of rights or an acceleration of an obligation or result in the creation
of any Lien thereunder or pursuant thereto, or would constitute a default by the
Company or any of its Subsidiaries or, to the Company's Knowledge, any other
party thereto under, or result in a right in termination of, any Material
Agreement. The Company and its Subsidiaries are in compliance in all material
respects with the terms of the Company Approvals, except as set forth in Section
2.6 of the Company Disclosure Schedule. The continuation, validity,
enforceability and effectiveness of each Material Agreement will not be affected
by the consummation of the transactions contemplated by this Agreement, except
as set forth on Section 2.5(a) of the Company Disclosure Schedule. Furthermore,
no party to a Material Agreement has repudiated any provision thereof and
communicated such repudiation to the Company, and there are no negotiations
pending or in progress to revise any material terms of any Material Agreement.
2.7 COMPLIANCE WITH AGREEMENTS AND LAW. Neither the Company nor any of
its Subsidiaries is in conflict with, or in default or violation of, any Law,
Regulation or Order applicable to the Company or such Subsidiary or by which its
or any of their respective properties is bound or affected. The Company has all
requisite licenses, permits, certificates, authorizations and approvals
including environmental, health and safety and employee health and safety
permits, from foreign, federal, state and local authorities necessary to conduct
the business as currently conducted (collectively, the "Permits"), all of which
Permits are set forth in Section 2.7 of the Company Disclosure Schedule. All of
the Permits identified in Section 2.7 of the Company Disclosure Schedule are in
full force and effect, and to the Company's Knowledge, no party thereto is in
default under any of such Permits and no event has occurred and no condition
exists which, with the giving of notice, the passage of time, or both, would
constitute a default thereunder. No action or claim is pending or, to the
Company's Knowledge, threatened to revoke or terminate any Permit identified in
Section 2.7 of the Company Disclosure Schedule. Except as set forth in Section
2.7 of the Company Disclosure Schedule, the Company is not nor has it been in
violation of any Law, rule, Regulation, ordinance or court or administrative
order (including, without limitation, those relating to building, zoning,
environmental, disposal or hazardous substances, land use, health and safety and
15
employee health and safety matters). Except as set forth on Section 2.7 of the
Company Disclosure Schedule, neither the Company nor its Subsidiaries has
received any notice or communication from any foreign, federal, state or local
governmental or regulatory authority or otherwise of any such violation and, to
the Company's Knowledge, no such notice or communication is threatened. The
Company's and, to the Company's Knowledge, its vendors' production and
documentation procedures are in all material respects consistent and in
compliance with Good Manufacturing Practices as prescribed by the United States
Food and Drug Administration as applicable to a supplier to the pharmaceutical
industry.
2.8 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has previously furnished or made available to
Parent true, complete and accurate copies, as amended or supplemented, of its
(a) Annual Reports on Form 10-KSB for the calendar years ended December 31,
1996, 1997 and 1998 and Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1999, as filed with the Securities and Exchange Commission (the
"SEC"), (b) proxy statements relating to all meetings of its stockholders
(whether annual or special) since January 1, 1998 and (c) all other reports or
registration statements, other than Registration Statements on Form S-8, filed
by the Company with the SEC since January 1, 1998. Except as set forth in
Section 2.8 of the Company Disclosure Schedule, the Company has timely filed all
reports and schedules required to be filed with the SEC (collectively, the
"Company SEC Reports") required to be filed by it pursuant to the Exchange Act
and the SEC Regulations promulgated thereunder. Except as set forth in Section
2.8 of the Company Disclosure Schedule, the Company SEC Reports were prepared in
accordance, and complied as of their respective dates in all material respects,
with the requirements of the Exchange Act and the SEC Regulations promulgated
thereunder and did not as of their respective dates (or if amended by a filing
prior to the date hereof, then as of the date of such amendment) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent superseded by a Company SEC Report filed subsequently and prior to
the date hereof.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Company SEC Reports
(i) complied in all material respects with applicable accounting requirements
and the published SEC Regulations with respect thereto, (ii) were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be expressly
described in the notes thereto) and (iii) fairly present the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
included in the Company's Form 10-QSB reports were or are subject to normal
year-end adjustments that are neither individually or in the aggregate material.
16
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since December 31, 1998, the Company and its Subsidiaries
have conducted their businesses only in the ordinary and usual course and in a
manner consistent with past practice and, since such date, there has not been
any change, event, development or circumstance affecting the Company or any of
its Subsidiaries which, individually or in the aggregate, has or is reasonably
likely to have, a Material Adverse Effect.
(b) Since December 31, 1998, there has not been any change by
the Company in its accounting methods, principles or practices, any revaluation
by the Company of any of its assets, including, writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business, and there has not been any other action or event, and
neither the Company nor any of its Subsidiaries has agreed in writing or
otherwise to take any other action, that would have required the consent of
Parent pursuant to Section 4.1 had such action or event occurred after the date
hereof and prior to the Effective Time, or any condition, event or occurrence
which could reasonably be expected to prevent, hinder or materially delay the
ability of the Company to consummate the transactions contemplated by this
Agreement.
2.10 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether absolute,
accrued, fixed, contingent or otherwise), except (a) liabilities or obligations
reflected in the Company SEC Reports through the date of the filing of the
Company's Quarterly Report on Form 10-QSB in respect of the fiscal quarter
ending March 31, 1999, (b) liabilities or obligations incurred in the ordinary
course of business consistent with past practice since March 31, 1999 which are
not, and will not have, individually or in the aggregate, a Material Adverse
Effect on the Company and (c) liabilities or obligations which are not and will
not have, individually or in the aggregate, a Material Adverse Effect on the
Company.
2.11 ABSENCE OF LITIGATION.
Except as described in Section 2.11 of the Company Disclosure Schedule,
there is no Litigation pending or, to the Company's Knowledge, threatened
against the Company or any Subsidiary of the Company, that would be or have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries is subject to any outstanding Claim or Order which, individually or
in the aggregate, has, or in the future might have, a Material Adverse Effect or
would prevent, hinder or delay the Company from consummating the transactions
contemplated by this Agreement.
2.12 EMPLOYEE BENEFIT PLANS.
(a) Section 2.12(a) of the Company Disclosure Schedule
contains a true and complete list of each deferred compensation, incentive
compensation, stock purchase, restricted stock option and other equity
compensation plan, "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); each "pension" plan, fund or program (within the meaning of Section
17
3(2) of ERISA); and each other material employee benefit plan, fund, program,
agreement or arrangement, including but not limited to vacation plans, cafeteria
plans, educational assistance or reimbursement plans, spending account plans
(for medical expenses, dependent care expenses, or other expenses), severance,
golden parachute, termination, supplemental unemployment, plant closing or
similar benefits, active health or life or other post-employment welfare or
insurance plans, bonus or performance based compensation plans or arrangements,
supplemental executive retirement plans or other supplemental or excess benefit
plans in each case, that is sponsored, maintained or contributed to or required
to be contributed to by the Company or any entity, or any of its Subsidiaries,
any trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with the Company within the
meaning of Section 414 of the Code or which could be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA (an "ERISA Affiliate"), or to
which the Company or an ERISA Affiliate is a party, whether written or oral, for
the benefit of any officer, director, employee or former employee of the Company
or any of its ERISA Affiliates, whether or not such plan has been terminated
(the "Company Plans"). Except as set forth in Section 2.12(a) of the Company
Disclosure Schedule, there are no restrictions on the ability of the Company,
its Subsidiaries or any of its ERISA Affiliates to amend, modify or terminate
any Company Plan and each Company Plan is fully and readily assignable and
transferable by its sponsor to either the Parent or the Merger Sub.
(b) With respect to each Company Plan, the Company has
heretofore made available to Parent true and complete copies of the Company Plan
and any amendments thereto (or if the Company Plan is not a written Company
Plan, a description thereof), any related trust or other funding vehicle, the
summary plan description and any summaries of material modifications, the three
(3) most recent annual reports (with all schedules) or summaries required under
ERISA or the Code, the most recent audited financial statements and most recent
determination letter received from the Internal Revenue Service with respect to
each Company Plan intended to qualify under Section 401 of the Code.
(c) No material liability under Title IV or Section 302 of
ERISA has been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to the
Company or any ERISA Affiliate of incurring any such liability.
(d) No Company Plan is subject to Title IV of ERISA or Section
412 of the Code, nor is any Company Plan a "multiemployer pension plan", as
defined in Section 3(37) of ERISA, or subject to Section 302 of ERISA. No
Company Plan is a "single-employer plan under multiple controlled groups" as
described in Section 4063 of ERISA.
(e) Each Company Plan has been operated and administered in
all respects in accordance with its terms and applicable law, including ERISA
and the Code. There has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any
Company Plan; there are no claims pending (other than routine claims for
benefits) or, to the Company's Knowledge, threatened against any Company Plan or
18
against the assets of any Company Plan, nor are there any current or, to the
Company's Knowledge, threatened Liens on the assets of any Company Plan or on
the assets of the Company under any provision of ERISA. The Company and its
ERISA Affiliates have performed all obligations required to be performed by them
under, are not in default under or violation of, and have no Knowledge of any
default or violation by any other party with respect to, any of the Company
Plans. All contributions required to be made to any Company Plan under
applicable law or the terms of the respective Company Plan have been made on or
before their due dates and a reasonable amount has been accrued for
contributions to each Company Plan for the current plan years; except as
disclosed on Section 2.12(e) of the Company Disclosure Schedule, the transaction
contemplated herein will not directly or indirectly result in an increase of
benefits, acceleration of vesting or acceleration of timing for payment of any
benefit to any participant or beneficiary under any Company Plan.
(f) Each Company Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code and the trusts maintained thereunder that
are intended to be exempt from taxation under Section 501(a) of the Code have
received a favorable determination or opinion letter indicating that they are so
qualified, and no event has occurred since the date of said letter(s) that will
adversely affect the qualification of such Company Plan.
(g) Except as set forth in Section 2.12(g) of the Company
Disclosure Schedule, no Company Plan or written or oral agreement provides
medical, surgical, hospitalization, death or similar benefits (whether or not
insured) for directors, employees or former employees of the Company or any of
its Subsidiaries or ERISA Affiliates for periods extending beyond their
retirement or other termination of service, other than (i) coverage mandated by
applicable Law, (ii) death benefits under any "pension plan" or (iii) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary).
(h) No amounts payable under any Company Plan will fail to be
deductible for federal income Tax purposes by virtue of Section 280G of the
Code.
(i) Except as set forth in Section 2.12(i) of the Company
Disclosure Schedule, the execution, delivery and performance of, and
consummation of the transactions contemplated by, this Agreement, or the
Stockholder Agreements will not (i) entitle any current or former employee or
officer of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer, or (iii) assuming the
Parent takes the action specified in Section 5.5(a), accelerate the vesting of
any stock option or of any shares of restricted stock.
(j) Except as would not be material in any respect to the
Company, there are no pending or, to the Company's Knowledge, threatened or
anticipated claims by or on behalf of any Company Plan, by any employee or
beneficiary covered under any such Company Plan or otherwise involving any such
Company Plan (other than routine claims for benefits).
19
(k) Section 2.12(k) of the Company Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer,
director or investor of the Company or any of its Subsidiaries who holds, as of
the date hereof, any option, warrant or other right to purchase Company Common
Shares or Company Preferred Shares, if any, together with the number of Company
Common Shares or Company Preferred Shares, if any, subject to such option,
warrant or right, the date of grant or issuance of such option, warrant or
right, the extent to which such option, warrant or right is vested and/or
exercisable, the exercise price of such option, warrant or right, whether such
option is intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code, and the expiration date of each such option, warrant
and right. Section 2.12(k) of the Company Disclosure Schedule also sets forth
the total number of such options, warrants and rights. True and complete copies
of each agreement (including all amendments and modifications thereto) between
the Company and each holder of such options, warrants and rights relating to the
same have been furnished to Parent and are listed in Section 2.12(k) of the
Company Disclosure Schedule.
2.13 EMPLOYMENT AND LABOR MATTERS.
(a) Section 2.13(a) of the Company Disclosure Schedule
identifies all employees and consultants employed or engaged by the Company and
sets forth each such individual's rate of pay or annual compensation (and the
portions thereof attributable to salary and bonuses, respectively), job title
and date of hire. Except as set forth in Section 2.13(a) of the Company
Disclosure Schedule, there are no employment, consulting, severance pay,
continuation pay, termination or indemnification agreement or other similar
agreements of any nature (whether in writing or not) between the Company or any
Subsidiary and any current or former stockholder, officer, director, employee,
or any consultant. Except as set forth in Section 2.13(a), Section 2.12(i) or
Section 2.12(g) of the Company Disclosure Schedule, no individual will accrue or
receive additional benefits, service or accelerated rights to payments under any
Company Plan or any of the agreements set forth in Section 2.13(a) of the
Company Disclosure Schedule, including the right to receive any parachute
payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a result of the
transaction contemplated herein that could result in the payment of any such
benefits or payments. Neither the Company nor any Subsidiary is delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses or other compensation for any services. None of the
Company's or any Subsidiary's employment policies or practices is currently
being audited or investigated by any Governmental Authority. There are no
pending, or to the Company's Knowledge, threatened claims, charges, actions,
lawsuits or proceedings alleging claims against the Company or any Subsidiary
brought by or on behalf of any employee or other individual or any Governmental
Authority with respect to employment practices, and to the Company's Knowledge,
no facts or circumstances exist that could give rise to any such claims,
charges, actions, lawsuits or proceedings.
(b) Except as set forth in Section 2.13(b) of the Company
Disclosure Schedule, there are no controversies pending or, to the Company's
Knowledge, threatened between the Company or any of its Subsidiaries and any of
their respective employees and employee relations are, in general, considered to
be good; neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
20
persons employed by the Company or its Subsidiaries nor are there any activities
or proceedings of any labor union or by any employees to organize any such
employees of the Company or any of its Subsidiaries; during the past five years
there have been no strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Company or any of its
Subsidiaries. The Company does not have nor at the Closing will the Company have
any obligation under the Worker Adjustment and Retraining Notification Act (the
"WARN Act"). The Company and each of its Subsidiaries is in material compliance
with all applicable provisions of applicable state, local, federal and foreign
employment, wage and hour, labor and other applicable laws.
2.14 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Company or required to be supplied by the Company
(except to the extent revised or superseded by amendments or supplements) for
inclusion in the registration statement on Form S-4, or any amendment or
supplement thereto, pursuant to which the shares of Parent Common Stock to be
issued in the Merger will be registered with the SEC (including any amendments
or supplements, the "Registration Statement") shall not, at the time such
documents are filed and at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by the Company for inclusion in the proxy
statement/prospectus to be sent to the stockholders of the Company in connection
with the meeting of the stockholders of the Company to consider the Merger (the
"Company Stockholders' Meeting") (such proxy statement/prospectus, as amended or
supplemented, the "Proxy Statement") will not, on the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company, at the time of the Company Stockholders' Meeting
and at the Effective Time, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made therein not false or misleading in light of
the circumstances under which they were made, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Stockholders' Meeting which has
become materially false or misleading. If at any time prior to the Effective
Time any event relating to the Company or any of its respective Affiliates,
officers or directors is discovered by the Company which should be set forth in
an amendment to the Registration Statement or an amendment or supplement to the
Proxy Statement, the Company shall promptly inform Parent and Merger Sub.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub which is
contained in any of the foregoing documents. The Proxy Statement shall comply as
to form in all material respects with the requirements of the Exchange Act and
the Regulations promulgated thereunder.
2.15 ABSENCE OF RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set
forth in Section 2.15 of the Company Disclosure Schedule or as set forth in this
Agreement, there is no Material Agreement or Order binding upon the Company or
any of its Subsidiaries or any of their properties which has had or could
21
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Company or any of its Subsidiaries or the conduct
of business by the Company or any of its Subsidiaries as currently conducted or
as proposed to be conducted by the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is subject to any non-competition or
similar restriction on their respective businesses. Neither the Company nor any
of its Subsidiaries has at any time entered into, or agreed to enter into, any
interest rate swaps, caps, floors or option agreements or any other interest
rate risk management arrangement or foreign exchange contracts.
2.16 TITLE TO ASSETS; LEASES. Except as described in Section 2.16 of
the Company Disclosure Schedule, the Company owns no real property. Section 2.16
of the Company Disclosure Statement sets forth a true and complete list of all
real property leased by the Company or any of its Subsidiaries, and the
aggregate monthly rental or other fee payable under such lease. Except as
described in Section 2.16 of the Company Disclosure Schedule, the Company and
each of its Subsidiaries has good and marketable title to all of their
properties and assets, free and clear of all Liens, charges and encumbrances,
except Liens for Taxes (as defined below) not yet due and payable and such Liens
or other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby. All
leases pursuant to which the Company or any of its Subsidiaries lease real or
personal property from others are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of material default (or event which with notice or
lapse of time, or both, would constitute a material default and in respect of
which the Company or such Subsidiary has not taken adequate steps to prevent
such a default from occurring or to cure such default) by the Company or its
Subsidiaries or, to the Company's Knowledge, any third party.
The Company or its Subsidiaries, individually or together, have good
and marketable title to or a valid leasehold interest in all of the properties
and assets that are necessary to the conduct of the business of the Company and
its Subsidiaries as it is currently being conducted, including all of the
properties and assets reflected in the Company's consolidated balance sheet as
of December 31, 1998, which was filed with the SEC as part of its report on Form
10-KSB, other than any such properties or assets that have been sold or
otherwise disposed of in the ordinary course of business since December 31,
1998.
2.17 TAXES. For purposes of this Agreement, "Tax" or "Taxes" shall mean
taxes and governmental impositions of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including but not limited to those on or measured by or referred to as income,
franchise, profits, gross receipts, capital ad valorem, custom duties,
alternative or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and interest, penalties and additions to tax imposed with respect
22
thereto; and "Tax Returns" shall mean returns, reports and information
statements, including any schedule or attachment thereto, with respect to Taxes
required to be filed with the Internal Revenue Service or any other governmental
or taxing authority or agency, domestic or foreign, including consolidated,
combined and unitary tax returns. Except as set forth in Section 2.17 of the
Company Disclosure Schedule:
(a) All federal, state, local and foreign Tax Returns required
to be filed (taking into account extensions) by or on behalf of the Company,
each of its Subsidiaries, and each affiliated, combined, consolidated or unitary
group of which the Company or any of its Subsidiaries is or has been a member
have been timely filed, and all such Tax Returns are true, complete and correct,
except to the extent that any failure to file or any inaccuracies in filed Tax
Returns would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) All Taxes payable by or with respect to the Company and
each of its Subsidiaries have been timely paid, or are adequately reserved for
(other than a reserve for deferred Taxes established to reflect timing
differences between book and Tax treatment) in accordance with GAAP on the
respective company's Balance Sheet, except to the extent that such amount would
not, individually or in the aggregate, have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, asserted or assessed either
orally or in writing against the Company or any of its Subsidiaries that are not
adequately reserved for in accordance with GAAP on the respective company's
Balance Sheet. All assessments for Taxes due and owing by or with respect to the
Company and each of its Subsidiaries with respect to completed and settled
examinations or concluded litigation have been paid. Neither the Company nor any
of its Subsidiaries has incurred a Tax liability from the date of the latest
Balance Sheet other than a Tax liability in the ordinary course of business.
(c) Neither the Company nor any of its Subsidiaries has
requested, or been granted any waiver of any federal, state, local or foreign
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax. No extension or waiver of time within which to file any
Tax Return of, or applicable to, the Company or any of its Subsidiaries has been
granted or requested, except as set forth in Section 2.17 of the Company
Disclosure Schedule which has not since expired.
(d) Other than with respect to its Subsidiaries the Company is
not and has never been (nor does the Company have any liability for unpaid Taxes
because it once was) a member of an affiliated, consolidated, combined or
unitary group, and neither the Company nor any of its Subsidiaries is a party to
any Tax allocation or sharing agreement or is liable for the Taxes of any other
party, as transferee or successor, by contract, or otherwise.
(e) Prior to the date hereof, the Company has provided Parent
with written schedules setting forth the taxable years of the Company for which
the statutes of limitations with respect to foreign, federal and material state
income Taxes have not expired and with respect to foreign, federal and material
state income Taxes, those years for which examinations have been completed and
those years for which examinations are presently being conducted.
(f) The Company is not presently and has not been a "foreign
investment company" as such term is defined in Section 1246(b) of the Code.
23
(g) The Company is not presently and has not been a "passive
foreign investment company" as such term is defined in Section 1297(a) of the
Code.
(h) The Company is not presently and has not been at any time
during the last five years a "controlled foreign corporation" as such term is
defined in Section 957(a) of the Code.
(i) The Company and its Subsidiaries have not made any
payments, are not obligated to make any payments, and are not a party to any
agreements that under any circumstances could obligate any of them to make any
payments that will not be deductible under Section 280G of the Code.
(j) No unsatisfied deficiency, delinquency or default for any
Tax has been claimed, proposed or assessed against or with respect to the
Company or any Subsidiary, nor has the Company or any Subsidiary received notice
of any such deficiency, delinquency or default which, in any such case, may have
a Material Adverse Effect.
(k) The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(l) The Company and each of its Subsidiaries have complied
with all applicable Laws relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441,
1442 and 3406 of the Code or similar provisions under any foreign Laws) and
have, within the time and in the manner required by Law, withheld from employee
wages and paid over to the proper Governmental Authorities all amounts required
to be so withheld and paid over under all applicable Laws.
(m) Section 2.17(m) of the Company Disclosure Schedule sets
forth: (i) the net operating loss ("NOL") and (ii) capital loss carry forwards
for foreign, federal income Tax purposes of each of the Company and its
Subsidiaries through the taxable year ended December 31, 1998.
(n) Except as described in Section 2.17(n) of the Company
Disclosure Schedule, the NOLs of the Company or any Subsidiary are not, as of
the date hereof, subject to Section 382 or 269 of the Code, Treasury Regulation
Section 1.1502-21T(c), or any similar provisions or regulations otherwise
limiting the use of the NOLs of the Company or any of its Subsidiaries.
(o) No property of the Company or any of its Subsidiaries is
"tax-exempt use property" as such term is defined in Section 168 of the Code.
(p) Neither the Company nor any of its Subsidiaries has made
an election under Section 341(f) of the Code.
24
2.18 ENVIRONMENTAL MATTERS. Except as described in Section 2.18 of the
Company Disclosure Schedule:
(a) the Company and its Subsidiaries are and have been in
compliance in all material respects with all applicable Environmental
Laws;
(b) the Company and its Subsidiaries have obtained all Permits
relating to the business required by any applicable Environmental Law
and all environmental permits relating to the business of the Company
and all such permits are in full force and effect in all material
respects; the environmental permits do not materially limit or affect
the processes, methods, capacity or operating hours of the persons
carrying on the business of the Company as it is currently carried on;
(c) neither the Company nor any of its Subsidiaries has, and
the Company has no Knowledge of any other Person who has, caused any
unlawful or improper release, threatened release or disposal of any
Hazardous Material at any properties or facilities previously or
currently owned, leased or occupied by the Company or its Subsidiaries;
(d) the Company has no Knowledge that any of its or its
Subsidiaries' properties or facilities are adversely affected by any
release, threatened release or disposal of a Hazardous Material
originating or emanating from any other property;
(e) neither the Company nor any of its Subsidiaries (i) has
any liability for response or corrective action, natural resources
damage, or any other harm pursuant to any Environmental Law, (ii) is
subject to, has notice or Knowledge of, or is required to give any
notice of any Environmental Claim involving an allegation against the
Company or any Subsidiary or any properties or facilities of the
Company or (iii) has Knowledge of any condition or occurrence which
could reasonably be expected to form the basis of an Environmental
Claim against the Company, any of its Subsidiaries or any of their
properties or facilities;
(f) the Company and its Subsidiaries' properties and
facilities are not subject to any, and the Company has no Knowledge of
any, imminent restriction on the ownership, occupancy, use or
transferability of their properties and facilities arising from any (i)
Environmental Law or (ii) release, threatened release or disposal of
any Hazardous Material; and
(g) there is no Environmental Claim pending, or, to the
Company's Knowledge, threatened, against the Company or, to the
Company's Knowledge, against any Person whose liability for any
Environmental Claim the Company has or may have retained or assumed
either contractually or by operation of law. No material capital
expenditure is currently required for the Company in relation to
environmental matters in order to comply with, extend, renew or obtain
any environmental permit or comply with Environmental Laws. Copies of
all environmental audits and other assessments, reviews and reports
have been previously provided to the Parent.
25
2.19 INTELLECTUAL PROPERTY.
(a) Section 2.19(a) of the Company Disclosure Schedule sets
forth a true, correct and complete list of all United States and foreign (i)
patents and patent applications, (ii) registered and unregistered trademarks and
trademark applications (including material Internet domain name registrations),
(iii) service marks and service mark applications, (iv) trade names, (v)
copyright registrations, and copyright applications, and (vi) licenses presently
used by the Company and/or its Subsidiaries, indicating for each, the applicable
jurisdiction, registration number (or applicable number), and date issued or
filed, as applicable with respect to (i), (ii), (iii), and (v) above and
including the terms of such licenses (all of which, together with patent rights,
trade secrets, confidential business information, formulas, processes, invention
records, procedures, research and development activity reports, laboratory
notebooks, copyrights, license rights and trademark rights which relate to or
are used or held for use in connection with the business of the Company, are
collectively referred to as, the "Intellectual Property Rights"). Copies of such
licenses have been previously provided to Parent. To the Company's Knowledge,
the Intellectual Property Rights are sufficient for the conduct of the Company's
business as presently conducted and as proposed to be conducted.
(b) Section 2.19(b) of the Company Disclosure Schedule sets
forth a true, correct and complete list, and where appropriate, a description of
all Intellectual Property Rights set forth in Section 2.19(a) of the Company
Disclosure Schedule to which neither the Company's nor its Subsidiary's rights
are exclusive, excluding all Intellectual Property Rights which the Company has
the right to use under a shrinkwrap or similar mass marketing license. Except as
otherwise disclosed in Section 2.19(b) of the Company Disclosure Schedule and
excluding all Intellectual Property Rights subject to a shrinkwrap or similar
mass marketing license, the Company exclusively owns or has the exclusive right
to use all of the Intellectual Property Rights listed in Section 2.19(a) of the
Company Disclosure Schedule. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees or consultants (or
individuals it currently intends to hire) made prior to their employment by the
Company.
(c) All trademarks, patents and copyrights are currently in
compliance with all legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications with
respect to trademarks, and the payment of filing, examination and maintenance
fees and proof of working or use with respect to patents), are, to the Company's
Knowledge, valid and enforceable. Section 2.19(c) of the Company Disclosure
Schedule sets forth the maintenance fees due on or before December 31, 1999. No
trademark has been or is now involved in any cancellation and, to the Company's
Knowledge and its Subsidiaries, no such action is threatened with respect to any
of the trademarks. Except as disclosed set forth on Section 2.19(c) of the
Company Disclosure Schedule, no patent has been or is now involved in any
interference, reissue, re-examination or opposing proceeding. To the Company's
Knowledge, there are no potentially conflicting trademarks or potentially
interfering patents of any third party. The Company has made available to Parent
all opinions, reviews, assessments or analyses (whether written or oral) of the
Company's ability to use patents whether owned or licensed.
26
(d) Except as would not be materially adverse to the Company
and each of its Subsidiaries:
(i) The Company or a Subsidiary of the Company owns
free and clear of all Liens, all owned Intellectual Property Rights
used in the Company's business, and has a valid and enforceable right
to use in accordance with the applicable license agreement, if any, all
of the Intellectual Property Rights licensed to the Company and used in
the Company's business;
(ii) The Company and each of its Subsidiaries have
taken reasonable steps to protect and preserve the Intellectual
Property Rights which the Company or such Subsidiary owns;
(iii) The conduct of the Company's and its Subsidiaries'
businesses as currently conducted or contemplated does not, to the
Company's Knowledge, infringe upon any intellectual property rights
owned or controlled by any third party;
(iv) There is no Litigation pending or, to the
Company's Knowledge, threatened nor has Company received any written
communication of, and the Company has no Knowledge of any basis for a
claim against it (a) alleging that the Company's activities, products,
publications or the conduct of its businesses or that of any of its
Subsidiaries infringes upon, violates, or constitutes the unauthorized
use of the intellectual property rights of any third party or (b)
challenging the ownership, use, validity or enforceability of any
Intellectual Property Rights of the Company or any of its Subsidiaries;
(v) To the Company's Knowledge, no third party is
misappropriating, infringing, diluting, or violating any Intellectual
Property Rights owned by the Company or any of its Subsidiaries and no
such claims have been brought against any third party by the Company or
any of its Subsidiaries, and the Company has not knowingly
misappropriated the trade secrets of any third party;
(vi) Except as set forth in Section 2.5(a) of the
Company Disclosure Schedule, the execution, delivery and performance by
the Company of this Agreement, and the consummation of the transactions
contemplated hereby will not result in the loss or impairment of or
give rise to any right of any third party to terminate any of the
Company's or any of its Subsidiaries' right to own any of the
Intellectual Property Rights owned by the Company or any of its
Subsidiaries or to use any Intellectual Property Rights licensed to the
Company or any of its Subsidiaries pursuant to the license Agreements,
nor require the consent of any Governmental Authority or third party in
respect of any such Intellectual Property Rights;
(e) All trademarks and trademark applications of the Company
and its Subsidiaries have been in continuous use by the Company or its
Subsidiaries. To the Company's Knowledge (i) there has been no prior use of such
trademarks by any third party which would confer upon said third party superior
rights in such trademarks, and (ii) the registered trademarks have been
continuously used in the form appearing in, and in connection with the goods and
services listed in, their respective registration certificates.
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(f) The Company and/or its Subsidiaries have taken all
reasonable steps in accordance with normal industry practice to protect the
Company's and its Subsidiaries' rights in confidential information and trade
secrets of the Company and/or its Subsidiaries. Without limiting the foregoing
and except as would not be materially adverse to the Company, the Company and
its Subsidiaries have and enforce a policy of requiring each employee,
consultant and contractor to execute proprietary information, confidentiality
and assignment agreements substantially consistent with the Company's standard
forms thereof. Except under confidentiality obligations, to the Knowledge of the
Company, there has been no material disclosure by the Company or any Subsidiary
of the Company of material confidential information or trade secrets.
(g) The Company has undertaken the review and assessment of
the business and operations of itself and its Subsidiaries that could be
adversely affected by its or their failure to be Year 2000 Compliant. The
Company has requested certification from the outside vendors listed in the
Company Disclosure Schedule that the computer system, hardware, software,
database, device and/or equipment purchased from each such vendor and used
internally by the Company, or used by such vendor in the performance of work for
the Company, is or prior to and after January 1, 2000 will be Year 2000
Compliant, and has provided copies of all such certification received to date to
Parent. Based on its review and assessment, the Company has no reason to believe
any material liability or expense will result from or arise out of failure of
any of its or its Subsidiaries, computer systems, hardware, software, databases,
devices and/or equipment to be Year 2000 Compliant.
2.20 INSURANCE. Section 2.20 of the Company Disclosure Schedule sets
forth a true and complete list of all material insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company and its Subsidiaries. There is
no claim by the Company or any of its Subsidiaries pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums payable under all
such policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in full compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage), and the
Company shall, and shall cause its Subsidiaries to, maintain in full force and
effect all such insurance during the period from the date hereof through the
Closing Date. Such policies of insurance and bonds are of the type and in
amounts customarily carried by Persons conducting businesses similar to those of
the Company and its Subsidiaries and reasonable in light of the assets of the
Company and its Subsidiaries. As of the date hereof, the Company has not
received notice of any, and to Company's Knowledge there is no threatened,
termination of or material premium increase with respect to any of such policies
or bonds.
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2.21 BROKERS. No broker, financial advisor, finder or investment banker
or other Person (other than Petkevich & Partners, L.L.C.) is entitled to any
broker's, financial advisor's, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Parent a complete and correct copy of all agreements set forth in Section 2.21
of the Company Disclosure Schedule between the Company and financial advisor
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated hereunder.
2.22 CERTAIN BUSINESS PRACTICES. As of the date hereof, neither the
Company nor any of its Subsidiaries nor any director, officer, employee or agent
of the Company or any of its Subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful payments relating to
political activity, (ii) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic political party or
campaign or violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended, (iii) consummated any transaction, made any payment, entered into
any agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended, or (iv) made any other unlawful
payment.
2.23 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Company
SEC Reports or except as set forth in Section 2.23 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is indebted to any
director, officer, employee or agent of the Company or any of its Subsidiaries
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such Person is indebted to the Company or any of its
Subsidiaries, and there have been no other transactions of the type required to
be disclosed pursuant to Items 402 and 404 of Regulation S-K under the
Securities Act and the Exchange Act.
2.24 OPINION OF FINANCIAL ADVISOR. The Company has received the written
opinion of its financial advisor, Petkevich & Partners, L.L.C., to the effect
that, in its opinion, as of the date hereof, the aggregate consideration to be
received in the Merger is fair to the holders of the capital stock of the
Company from a financial point of view, and the Company has provided copies of
such opinion to Parent.
2.25 NO SUBSIDIARIES. The Company has no Subsidiaries.
2.26 DISCLOSURE. The representations and warranties and statements of
the Company contained in this Agreement (including the Company Disclosure
Schedule) do not contain, and will not contain at the Closing Date, any untrue
statement of a material fact, and do not omit, and will not omit at the Closing
Date, to state any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under which they are
made, not misleading. There is no fact known to the Company that has not been
disclosed to the Parent in this Agreement (including in the Company SEC Filings
or the Company Disclosure Schedule) that is reasonably likely to have a Material
Adverse Effect on the Company.
2.27 HSR FILING. No filing under the HSR Act is required in connection
with the Merger, because the Company does not have annual net sales or total
assets greater than or equal to $10,000,000.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that:
3.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation or organization and Parent has
all the requisite corporate power and authority, and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and Orders ("Parent Approvals") necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so qualified, existing and in good
standing or to have such power, authority and Parent Approvals would not,
individually or in the aggregate, have a Material Adverse Effect. Each of Parent
and Merger Sub is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect. Merger Sub is
a newly-formed single purpose entity which has been formed solely for the
purposes of the Merger, has carried on no business to date and will not carry on
any business or engage in any activities other than those necessary to the
Merger.
3.2 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of
Parent consists of (i) 50,000,000 shares of Parent Common Stock of which
16,881,800 shares of Parent Common Stock were issued and outstanding as of July
28, 1999, and 2,178,517 shares of Parent Common Stock as of August 1, 1999, were
reserved for future issuance pursuant to outstanding employee stock options or
other outstanding stock options and (ii) 5,000,000 shares of preferred stock,
par value $.01 per share, of which 500,000 shares have been designated as Series
A-1 Junior Participating Preferred Stock and reserved for issuance under the
Parent's Rights Agreement, of which none are issued or outstanding. Parent has
no warrants outstanding as of the date of this Agreement. All of the outstanding
shares of Parent Common Stock are, and all shares to be issued as part of the
Common Merger Consideration and the Preferred Merger Consideration will be, when
issued in accordance with the terms hereof, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
(b) As of the date hereof, the authorized capital stock of
Merger Sub consists of 3,000 shares of Merger Sub Common Stock, of which 100
shares of Merger Sub Common Stock are outstanding. All of the outstanding shares
of Merger Sub Common Stock are owned by Parent.
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3.3 AUTHORIZATION OF AGREEMENT. Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and each instrument required hereby to be executed and delivered by it at the
Closing, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
each of Parent and Merger Sub of this Agreement and each instrument required
hereby to be executed and delivered by it at the Closing, the performance of
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of each of Parent and Merger Sub and by Parent as the sole
stockholder of Merger Sub and except for filing of the Certificate of Merger, no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and Merger
Sub and, assuming due authorization, execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, in each case except to the extent that the enforcement hereof may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium or other
similar law now or hereafter in effect relating to creditors' rights generally
and (B) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). No other corporate proceedings
are required by Parent other than the approval of the Board of Directors of
Parent and Merger Sub.
3.4 APPROVALS. The execution and delivery by Parent and Merger Sub of
this Agreement or any instrument required by this Agreement to be executed and
delivered by Parent or Merger Sub at the Closing do not, and the performance by
each of Parent and Merger Sub of its respective obligations under this Agreement
or any instrument required by this Agreement to be executed and delivered by
Parent or Merger Sub at the Closing shall not, require Parent or Merger Sub to
obtain any consent, approval, authorization, license, waiver, qualification,
Order or permit of, observe any waiting period imposed by, or require Parent or
Merger Sub to make any filing with or notification to, any Court or Governmental
Authority, except for (A) compliance with applicable requirements, if any, of
the Securities Act, the Exchange Act or Blue Sky Laws, (B) the filing of
appropriate Merger or other documents as required by Delaware Law, (C) the
filing of appropriate Merger or other documents as required by the NASDAQ or (D)
where the failure to obtain such consents, approvals, authorizations, licenses,
waivers, qualifications, Orders or permits, or to make such filings or
notifications, would not have, in the aggregate, a Material Adverse Effect.
3.5 NO VIOLATION. Assuming effectuation of all filings, notifications,
and registrations with, termination or expiration of any applicable waiting
periods imposed by and receipt of all permits or Orders of Courts and/or
Governmental Authorities set forth in Section 3.4(A), (B) or (C) above, the
execution and delivery by Parent and Merger Sub of this Agreement or any
instrument required by this Agreement to be executed and delivered by Parent or
Merger Sub at the Closing do not, and the performance of this Agreement by each
of Parent or Merger Sub of its respective obligations under this Agreement or
any instrument required by this Agreement to be executed and delivered by Parent
or Merger Sub at the Closing will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws of Parent or the Certificate of
Incorporation or By-laws of Merger Sub, (ii) conflict with or violate any Law,
Order or Regulation in each case applicable to Parent or Merger Sub or by which
31
either of its respective properties is bound or affected, or (iii) result in any
breach or violation of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Parent or Merger Sub is a party or by
which Parent or Merger Sub or any of their respective properties is bound or
affected, except in the case of clause (ii) or (iii) above, for any such
conflicts, breaches, violations, defaults or other occurrences that would not
(a) individually, or in the aggregate, have a Material Adverse Effect or (b)
prevent or materially impair or delay the consummation of the Merger.
3.6 REPORTS.
(a) As of the date of this Agreement, Parent has timely filed
all reports and schedules required to be filed with the SEC (collectively, the
"Parent SEC Reports") pursuant to the Exchange Act and the SEC Regulations
promulgated thereunder. The Parent SEC Reports were prepared in accordance, and
complied as of their respective dates in all material respects, with the
requirements of the Exchange Act and the SEC Regulations promulgated thereunder
and did not as of their respective dates (or if amended by a filing prior to the
date hereof, then as of the date of such amendment) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except to the
extent superseded by a Parent SEC Report filed subsequently and prior to the
date hereof.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in Parent SEC Reports (i)
complied in all material respects with applicable accounting requirements and
the published SEC Regulations with respect thereto, (ii) were prepared in
accordance with GAAP (except in the case of interim balance sheets, as permitted
by Regulation S-X promulgated by the SEC) applied on a consistent basis
throughout the periods involved (except as may be expressly described in the
notes thereto) and (iii) fairly presents the consolidated financial position of
the Parent as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements included in the Company's Form 10-Q
reports were or are subject to normal year-end adjustments that have not been
and are not expected to be material in amount to Parent.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1998,
Parent has conducted its business only in the ordinary and usual course and in a
manner consistent with past practice and, since such date, there has not
occurred any event, development or change which, individually or in the
aggregate, has resulted in or is reasonably likely to result in a Material
Adverse Effect.
3.8 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by Parent for inclusion in the Registration Statement shall not, at the
time it is filed with the SEC and at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
32
statements therein, in light of the circumstances under which they were made,
not misleading. The information supplied by Parent for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to the
stockholders of the Company, at the time of the Company Stockholders' Meeting
and at the Effective Time, contain any statement which, at such time, is false
or misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting which has become materially false or misleading. If at any
time prior to the Effective Time any event relating to Parent or Merger Sub or
any of their respective affiliates, officers or directors is discovered by
Parent which should be set forth in an amendment to the Registration Statement
or an amendment or supplement to the Proxy Statement, Parent shall promptly
inform the Company. The Registration Statement will comply as to form in all
material respects with the requirements provisions of the Securities Act and the
SEC Regulations promulgated thereunder. Notwithstanding the foregoing, Parent
makes no representation, warranty or covenant with respect to any information
supplied by the Company which is contained in any of the foregoing documents.
3.9 ABSENCE OF LITIGATION. Except as set forth in the Parent SEC
Reports, there is no Litigation pending, or to the Parent's Knowledge,
threatened against the Parent or Merger Sub, that would be or have a Material
Adverse Effect on the Parent. Neither the Parent nor the Merger Sub is subject
to any outstanding Claim or Order other than as set forth in the Parent SEC
Reports, which, individually or in the aggregate, has, or in the future might
have, a Material Adverse Effect on the business or results of operations of the
Parent.
3.10 COMPLIANCE WITH LAWS.
(a) Each of Parent and Merger Sub has all Permits necessary to
conduct the business of the Parent and Merger Sub as currently conducted,
respectively; such Permits are in full force and effect; and all applications
for renewal necessary to maintain any Permit in effect have been filed, except,
in each case, where the failure to own, maintain or renew such Permits would
not, individually or in the aggregate, have a Material Adverse Effect on Parent
or Merger Sub. No proceeding is pending, or to the best Knowledge of the Parent,
threatened to revoke or limit any Permit.
(b) Neither Parent nor Merger Sub is in violation of any
applicable law, ordinance or regulation or any order, judgment, injunction,
decree or other requirement of any court, arbitrator or governmental or
regulatory body, except for violations that would not, in the aggregate, have a
Material Adverse Effect on Parent or Merger Sub.
(c) To the best Knowledge of Parent, there is no investigation
or review pending by any governmental body or authority with respect to Parent.
33
3.11 TAXES. Each of the Parent and Merger Sub has filed all Tax Returns
required to be filed by it and has paid all Taxes and other charges shown as due
on such Tax Returns. All positions taken in such Tax Returns that could give
rise to a substantial understatement penalty within the meaning of Section 6662
of the Code have been disclosed therein. Neither the Parent nor Merger Sub is
delinquent in any material Tax assessment or other governmental charge
(including without limitation applicable withholding taxes). Any provision for
Taxes reflected in the Parent financial statements is adequate for payment of
any and all Tax liabilities for periods ending on or before December 31, 1998
and there are no Tax Liens on any assets of the Parent or Merger Sub for periods
ending on or before March 31, 1999.
3.12 YEAR 2000 COMPLIANCE. Parent has undertaken the review and
assessment of its business and operations that could be adversely affected by
its failure to be Year 2000 Compliant. Based on its review and assessment,
Parent has no reason to believe any material liability or expense will result
from or arise out of failure of any of its computer systems, hardware, software,
databases, devices and/or equipment to be Year 2000 Compliant.
3.13 PARENT INTELLECTUAL PROPERTY RIGHTS. To the Parent's Knowledge, no
third party is misappropriating, infringing, diluting, or violating any of the
Parent Intellectual Property Rights and no such claims have been brought against
any third party by the Parent, and the Parent has not knowingly misappropriated
the trade secrets of any third party. For purposes of this Section 3.13, "Parent
Intellectual Property Rights" shall mean all of the Parent's United States and
foreign (i) patents and patent applications, (ii) registered and unregistered
trademarks and trademark applications (including material Internet domain name
registrations), (iii) service marks and service mark applications, (iv) trade
names, (v) copyright registrations, and copyright applications, and (vi)
licenses presently used by Parent and/or its Subsidiaries, excluding all Parent
Intellectual Property Rights subject to a shrinkwrap or similar mass marketing
license.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company
covenants and agrees that, between the date hereof and the Effective Time,
except as expressly required or permitted by this Agreement or unless Parent
shall otherwise agree in writing, the Company shall conduct and shall cause the
businesses of each of its Subsidiaries to be conducted only in, and the Company
and its Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice. The Company shall use
its best efforts to preserve intact the business organization and assets of the
Company and each of its Subsidiaries, and to operate, and cause each of its
Subsidiaries to operate, according to plans and budgets provided to Parent, to
keep available the services of the present officers, employees and consultants
of the Company and each of its Subsidiaries, to maintain in effect Material
Agreements and to preserve the present relationships of the Company and each of
its Subsidiaries with advertisers, sponsors, customers, licensees, suppliers and
34
other Persons with which the Company or any of its Subsidiaries has business
relations. By way of amplification and not limitation, except as expressly
permitted by this Agreement, neither the Company nor any of its Subsidiaries
shall, between the date hereof and the Effective Time, directly or indirectly
do, or propose to do, any of the following without the prior written consent of
Parent:
(a) amend or otherwise change the Certificate of Incorporation
or By-laws or equivalent organizational document of the Company or any of its
Subsidiaries or alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of the Company or
any of its Subsidiaries;
(b) issue, sell, transfer, pledge, dispose of or encumber, or
authorize the issuance, sale, transfer, pledge, disposition or encumbrance of,
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest of the Company, any of its Subsidiaries or
Affiliates (except for the issuance of Company Common Shares issuable pursuant
to employee stock options granted prior to the date hereof under the 1994 Plan,
1995 Plan, or outside of any plan, which options are outstanding on the date
hereof or pursuant to Company Warrants outstanding on the date hereof); or sell,
transfer, pledge, dispose of or encumber, or authorize the sale, transfer,
pledge, disposition or encumbrance of any assets of the Company or any of its
Subsidiaries (except for sales of assets in the ordinary course of business and
in a manner consistent with past practice) or redeem, purchase or otherwise
acquire, directly or indirectly, any of the capital stock of the Company or
interest in or securities of any Subsidiary;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock (except that a wholly owned Subsidiary of
the Company may declare and pay a dividend to its parent); split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or amend the terms of, repurchase, redeem or
otherwise acquire, or permit any Subsidiary to repurchase, redeem or otherwise
acquire, any of its securities or any securities of its Subsidiaries, or propose
to do any of the foregoing;
(d) sell, transfer, lease, license, sublicense, mortgage,
pledge, dispose of, encumber, grant or otherwise dispose of any Intellectual
Property Rights, or amend or modify in any material way any existing agreements
with respect to any Intellectual Property Rights, except as set forth in Section
4.1(l) of the Company Disclosure Schedule.
(e) acquire (by merger, consolidation, acquisition of stock or
assets or otherwise) any corporation, limited liability company, partnership,
joint venture or other business organization or division thereof; incur any
indebtedness for borrowed money or issue any debt securities (other than a debt
financing of up to $1,000,000 (the "Bridge Loan"), which Bridge Loan shall not
include in its terms any form of equity to be issued to the lender(s) of the
Bridge Loan) or assume, guarantee (other than guarantees of bank debt of the
Company's Subsidiaries entered into in the ordinary course of business) or
endorse or otherwise as an accommodation become responsible for, the obligations
of any Person, or make any loans, advances or enter into any financial
35
commitments, except in the ordinary course of business consistent with past
practice and as otherwise permitted under any loan or credit agreement to which
the Company is a party; authorize any capital expenditures which are, in the
aggregate, in excess of $100,000 for the Company and its Subsidiaries taken as a
whole; or enter into or amend in any material respect any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 4.1(e);
(f) hire or terminate any employee or consultant, except in
the ordinary course of business consistent with past practice; increase the
compensation (including, without limitation, bonus) payable or to become payable
to its officers or employees, except for increases in salary or wages of
employees of the Company or its Subsidiaries who are not officers of the Company
in the ordinary course of business consistent with past practices, or grant any
severance or termination pay or stock options to, or enter into any employment
or severance agreement with any director, officer or other employee of the
Company or any of its Subsidiaries, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or
employees;
(g) change, any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition, payments of accounts
payable and collection of accounts receivable) unless required by statutory
accounting principles or GAAP;
(h) create, incur, suffer to exist or assume any Lien on any
of their material assets other than Liens outstanding on the date hereof;
(i) except as set forth in Section 4.1(l) of the Company
Disclosure Schedule, other than in the ordinary course of business consistent
with past practice, (A) enter into any material agreement, (B) modify, amend or
transfer in any material respect or terminate any material agreement to which
the Company or any of its Subsidiaries is a party or waive, release or assign
any material rights or claims thereto or thereunder or (C) enter into or extend
any lease with respect to real property with any third party;
(j) make any Tax election or settle or compromise any federal,
state, local or foreign income tax liability or agree to an extension of a
statute of limitations;
(k) settle any material Litigation or waive, assign or release
any material rights or claims except, in the case of Litigation, any Litigation
which settlement would not (A) impose either material restrictions on the
conduct of the business of the Company or any of its Subsidiaries or (B) for any
individual Litigation item settled, exceed $50,000 in cost or value to the
Company or any of its Subsidiaries. The Company and its Subsidiaries shall not
pay, discharge or satisfy any liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), except in the ordinary course
of business consistent with past practice in an amount or value not exceeding
$100,000 in any instance or series of related instances or $100,000 in the
aggregate or in accordance with their terms as in effect as of the date hereof;
36
(l) engage in any transaction, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any related party,
other than those contemplated pursuant to the terms of this Agreement and those
existing as of the date hereof which are listed in Section 4.1(l) of the Company
Disclosure Schedule;
(m) fail to renew or maintain in full force and effect all
insurance policies, as the case may be, currently in effect or fail to pay any
insurance premiums thereon; and
(n) authorize, recommend, propose or announce an intention to
do any of the foregoing, or agree or enter into any agreement, contract
commitment or arrangement to do any of the foregoing.
4.2 SOLICITATION OF OTHER PROPOSALS.
(a) From the date hereof until the earlier of the Effective
Time or the termination of this Agreement in accordance with its terms, the
Company shall not, nor shall it permit any of its Subsidiaries or any of its or
their respective officers, directors, employees, representatives or agents
(collectively, the "Company Representatives") to, and the Company shall use its
best efforts to cause its stockholder Affiliates not to, directly or indirectly,
(i) solicit, facilitate, initiate or encourage, or take any action to solicit,
facilitate, initiate or encourage, any inquiries or the making of any proposal
or offer that constitutes an Acquisition Proposal or (ii) participate or engage
in discussions or negotiations with, or provide any information to, any Person
concerning an Acquisition Proposal or which might reasonably be expected to
result in an Acquisition Proposal.
For purposes of this Agreement, the term "Acquisition Proposal"
shall mean any inquiry, proposal or offer from any person (other than Parent,
Merger Sub or any of their Affiliates) relating to:
(1) any merger, consolidation, recapitalization,
liquidation or other direct or indirect business combination, involving
the Company or any Subsidiary or the issuance or acquisition of shares
of capital stock or other equity securities of the Company or any
Subsidiary representing 10% or more of the outstanding capital stock of
the Company or such Subsidiary or any tender or exchange offer that if
consummated would result in any Person, together with all Affiliates
thereof, beneficially owning shares of capital stock or other equity
securities of the Company or any Subsidiary representing 10% or more of
the outstanding capital stock of the Company or such Subsidiary, or
(2) the sale, lease, exchange, license (whether
exclusive or not), or any other disposition of any significant portion
of a material Intellectual Property Right (other than as permitted
pursuant to Section 4.1(d) hereof), or any significant portion of the
business or other assets of the Company or any Subsidiary, or any other
transaction, the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the consummation of
the transactions contemplated hereby or which would reasonably be
expected to diminish significantly the benefits to Parent or its
Affiliates of the transactions contemplated hereby.
37
The Company shall immediately cease and cause to be terminated and shall cause
all Company Representatives (and shall use its best efforts to cause its
non-officer and non-director Affiliates) to terminate all existing discussions
or negotiations with any Persons conducted heretofore with respect to, or that
could reasonably be expected to lead to, an Acquisition Proposal. The Company
shall promptly notify all Company Representatives and non-officer and
non-director Affiliates of its obligations under this Section 4.2.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall:
(1) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal other than the Merger,
(2) withdraw or modify or propose to withdraw or
modify in a manner adverse to Parent or Merger Sub its approval or
recommendation of the Merger, this Agreement or the transactions
contemplated hereby,
(3) upon a request by Parent to reaffirm its approval
or recommendation of this Agreement or the Merger, fail to do so within
two (2) Business Days after such request is made,
(4) enter, or cause the Company or any Subsidiary to
enter, into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement related to any Acquisition
Proposal, or
(5) resolve or announce its intention to do any of the
foregoing.
The immediately preceding sentence notwithstanding, in the event that prior to
the Company Stockholders' Meeting the Board of Directors of the Company receives
a Superior Proposal, the Board of Directors of the Company may:
(i) approve or recommend, or propose to
approve or recommend, such Superior Proposal,
(ii) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent or Merger Sub its
recommendation of the Merger, this Agreement or the
transactions contemplated hereby,
(iii) fail to reaffirm its recommendation of
this Agreement or the Merger after a request by Parent to do
so, or
(iv) resolve or announce its intention to do
any of the actions set forth in the preceding clauses (i)
through (iii),
if (1) such Board of Directors determines in good faith, after consultation with
its outside counsel that taking such action is required to satisfy the fiduciary
duties of such directors and (2) the Company furnishes Parent two Business Days'
38
prior written notice of the taking of such action (which notice shall include a
description of the material terms and conditions of the Superior Proposal).
For purposes of the Agreement, the term "Superior Proposal" means any BONA FIDE
Acquisition Proposal to (A) effect a merger, consolidation or sale of all or
substantially all of the assets or capital stock of the Company or (B) license
or otherwise dispose of any material Intellectual Property Right (other than as
permitted pursuant to Section 4.1(d)) which is on terms which the Board of
Directors of the Company determines by a majority vote of its directors in their
good faith judgment (based on the written opinion, with only customary
qualifications, of a financial advisor reasonably acceptable to the Parent that
the consideration provided in such Acquisition Proposal likely exceeds the value
of the consideration provided for in the Merger), after taking into account all
relevant factors, including any conditions to such Acquisition Proposal, the
timing of the closing thereof, the risk of nonconsummation, the ability of the
person making the Acquisition Proposal to finance the transaction contemplated
thereby and any required governmental or other consents, filings and approvals,
to be more favorable to the stockholders of the Company than the Merger (or any
revised proposal made by Parent).
(c) In addition to the other obligations of the Company set
forth in this Section 4.2, the Company shall immediately advise Parent orally
and in writing of any request for information with respect to any Acquisition
Proposal, or any inquiry with respect to or which could result in an Acquisition
Proposal, the material terms and conditions of such request, Acquisition
Proposal or inquiry. The Company shall inform Parent on a prompt and current
basis of the status and content of any discussions regarding any Acquisition
Proposal with a third party and as promptly as practicable of any change in the
price, structure or form of the consideration or material terms of and
conditions regarding any Acquisition Proposal or of any other developments or
circumstances which could reasonably be expected to culminate in the taking of
any of the actions referred to in Section 4.2(b). Nothing contained in this
Section 4.2(c) shall prevent the Board of Directors of the Company from
complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practicable following the date of this
Agreement, Parent shall prepare and file with the SEC the Registration Statement
on Form S-4, in which the Proxy Statement shall be included as a prospectus, and
shall use reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable. Parent shall obtain and furnish
the information required to be included in the Registration Statement and, after
consultation with the Company respond promptly to any comments made by the SEC
with respect to the Registration Statement (which comments shall promptly be
39
furnished to the Company) and cause the prospectus included therein, including
any amendment or supplement thereto, to be mailed to the stockholders of the
Company at the earliest practicable date after the Registration Statement is
declared effective by the SEC, provided that no amendment or supplement to the
Registration Statement will be made by Parent without consultation with the
Company and its counsel. Parent shall also take any action required to be taken
under Blue Sky or other securities Laws in connection with the issuance of
Parent Common Stock in the Merger.
(b) The Company shall (i) as promptly as practicable following
the date hereof prepare a preliminary proxy or information statement relating to
the Merger and this Agreement, (ii) obtain and furnish the information required
to be included by the SEC in the Proxy Statement, (iii) cause the Proxy
Statement and the prospectus to be included in the Registration Statement,
including any amendment or supplement thereto, to be mailed to its stockholders
at the earliest practicable date after the Registration Statement is declared
effective by the SEC, and (iv) use all reasonable efforts to obtain the
necessary approval of the Merger and this Agreement by its stockholders. The
Company shall not file with or supplementally provide to the SEC or mail to its
stockholders the Proxy Statement or any amendment or supplement thereto without
Parent's prior consent. The Company shall allow Parent's full participation in
the preparation of the Proxy Statement and any amendment or supplement thereto
and shall consult with Parent and its advisors concerning any comments from the
SEC with respect thereto.
(c) The Proxy Statement shall include the recommendation of
the Board of Directors of the Company in favor of approval and adoption of this
Agreement and the Merger, except to the extent that the Company shall have
withdrawn or modified its recommendation of this Agreement or the Merger as
permitted by Section 4.2(b).
(d) Parent and the Company shall, as promptly as practicable,
make all necessary filings with respect to the Merger under the Securities Act
and the Exchange Act and the rules and Regulations thereunder and under
applicable Blue Sky or similar securities laws, rules and Regulations, and shall
use all reasonable efforts to obtain required approvals and clearances with
respect thereto.
5.2 MEETING OF COMPANY STOCKHOLDERS. The Company shall promptly after
the date hereof take all action necessary in accordance with the provisions of
the DGCL and the Company's Certificate of Incorporation and By-laws to duly
call, give notice of and (unless Parent requests otherwise) hold the Company
Stockholders' Meeting as soon as practicable following the date upon which the
Registration Statement becomes effective and shall consult with Parent in
connection therewith. Once the Company Stockholders Meeting has been called and
noticed, the Company shall not postpone or adjourn (other than for the absence
of a quorum and then only to a future date specified by Parent) the Company
Stockholders' Meeting without the consent of Parent. The Board of Directors of
the Company shall declare that this Agreement is advisable and, subject to
Section 4.2(b), recommend that this Agreement and the transactions contemplated
hereby be approved and authorized by the stockholders of the Company and include
in the Registration Statement and Proxy Statement a copy of such
40
recommendations; provided, HOWEVER, that the Board of Directors of the Company
shall submit this Agreement to the stockholders of the Company whether or not
the Board of Directors of the Company at any time subsequent to making such
recommendation takes any action permitted by Section 4.2(b). The Company shall
solicit from stockholders of the Company proxies in favor of the Merger and
shall take all other action necessary or advisable to secure the vote or consent
of stockholders required by the DGCL to authorize the Merger; PROVIDED, HOWEVER,
that this provision shall not prohibit the Board of Directors from taking any
action permitted by Section 4.2(b).
5.3 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Upon reasonable notice, the Company shall (and shall cause
each of its Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of Parent, reasonable access, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other all information
concerning its business, properties, books, contracts, commitments, records and
personnel as such other party may reasonably request, and each party shall make
available to the other party the appropriate individuals for discussion of such
party's business, properties and personnel as the other party may reasonably
request. No investigation pursuant to this Section 5.3(a) shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
(b) The Parent shall keep all information obtained pursuant to
Section 5.3(a) confidential in accordance with the terms of the confidentiality
agreement, dated February 11, 1999 (the "Confidentiality Agreement"), between
Parent and the Company. Anything contained in the Confidentiality Agreement to
the contrary notwithstanding, the Company and Parent hereby agree that each such
party may issue press release(s) or make other public announcements in
accordance with Section 5.9.
5.4 ALL REASONABLE EFFORTS; FURTHER ASSURANCES.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each party hereto shall use all reasonable efforts to take, or
cause to be taken, all appropriate actions, and do, or cause to be done, and to
assist and cooperate with the other party or parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated hereby. The Company and Parent shall use all reasonable efforts to:
(i) obtain all licenses, permits, consents, waivers,
approvals, authorizations, qualifications or Orders (including all
United States and foreign governmental and regulatory rulings and
approvals), required to be obtained by Parent or the Company or any of
their respective Subsidiaries, and the Company and Parent shall make
all filings (including, without limitation, all filings with United
States and foreign governmental or regulatory agencies) under
applicable Law required in connection with the authorization, execution
and delivery of this Agreement by the Company and Parent and the
consummation by them of the transactions contemplated hereby and
thereby, including the Merger (in connection with which Parent and the
Company will cooperate with each other in connection with the making of
41
all such filings, including providing copies of all such documents to
the non-filing party and its advisors prior to filings and, if
requested, will accept all reasonable additions, deletions or changes
suggested in connection therewith);
(ii) furnish all information required for any
application or other filing to be made pursuant to any applicable law
or any applicable Regulations of any Governmental Authority (including
all information required to be included in the Proxy Statement or the
Registration Statement) in connection with the transactions
contemplated by this Agreement; and
(iii) lift, rescind or mitigate the effects of any
injunction, restraining order or other order adversely affecting the
ability of any party hereto to consummate the transactions contemplated
hereby and thereby and to prevent, with respect to any threatened
injunction, restraining order or other Order, the issuance or entry
thereof,
PROVIDED, HOWEVER, that neither Parent nor any of its Affiliates shall be under
any obligation to (x) make proposals, execute or carry out agreements or submit
to Orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets material (in nature or amount) of Parent, any of its Affiliates, the
Company or the holding separate of the Company Common Shares or Company
Preferred Shares or imposing or seeking to impose any material limitation on the
ability of Parent or any of its Subsidiaries or Affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the Company Common Shares or Company Preferred Shares or (y)
otherwise take any step to avoid or eliminate any impediment which may be
asserted under any Law governing competition, monopolies or restrictive trade
practices which, in the reasonable judgment of Parent, might result in a
limitation of the benefit expected to be derived by Parent as a result of the
transactions contemplated hereby or might adversely affect the Company or Parent
or any of Parent's Affiliates. Neither party hereto will take any action which
results in any of the representations or warranties made by such party pursuant
to Articles II or III, as the case may be, becoming untrue or inaccurate in any
material respect.
(b) Parent and the Company shall use all reasonable efforts
to satisfy or cause to be satisfied all of the conditions precedent that are set
forth in Article VI, as applicable to each of them, and to cause the
transactions contemplated by this Agreement to be consummated. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other reasonable acts and
things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
5.5 STOCK OPTIONS AND WARRANTS.
(a) As soon as practicable after the execution of this
Agreement, the Company shall, pursuant to the Company's 1994 Plan, (i) notify
each holder of an outstanding option issued pursuant to the 1994 Plan of the
proposed Merger, (ii) provide for the accelerated vesting of each outstanding
42
option so that each such option shall become fully exercisable, (iii) notify
each such holder that each option shall, unless exercised by the holder in
accordance with its terms, be canceled and terminate on the date which is
fifteen (15) days from the date of such notice, and (iv) cause the 1994 Plan to
be terminated. As soon as practicable after the execution of this Agreement, the
Company shall use its commercially reasonable best efforts to cause the exercise
or termination of all other then outstanding employee and consultant stock
options and all non-employee director stock options, including without
limitation, the incentive stock options and non-qualified stock options issued
pursuant to the Company's 1995 Plan and all stock options granted pursuant to
resolutions of the Company's Board of Directors outside of any option plan.
Notwithstanding the foregoing, under no circumstances shall the Company be
required to offer any incentives or other consideration for the termination of
such options.
(b) As soon as practicable after the execution of this
Agreement, the Company shall use commercially reasonable best efforts to cause
the exercise or termination of all then issued and outstanding Company Warrants.
Notwithstanding the foregoing, under no circumstances shall the Company be
required to offer any incentives or other consideration for the termination of
such Company Warrants. At the Effective Time, each Company Warrant that is
outstanding and has not been terminated, exercised or otherwise converted as of
the Effective Time shall be assumed by Parent; provided that such Company
Warrants shall by their express terms reflect, or shall be amended by the
Company and the holder thereof to reflect, the different security and the number
of shares of such security covered by such agreement based on the conversion of
Company Common Shares into Parent Common Stock. All of the holders of such
Company Warrants issued and outstanding as of the date of this Agreement are
listed on Section 2.12(k) of the Company Disclosure Schedule attached hereto.
The Company shall take all actions necessary or reasonably requested by Parent
to ensure that following the Effective Time no holder of any Company Warrant
will have any right thereunder to acquire equity securities of the Company or
any of its Subsidiaries, or any right to payment in respect of the equity
securities of the Company, any of its Subsidiaries or the Surviving Corporation,
except as provided in Section 1.8(e).
(c) As soon as practicable after the execution of this
Agreement, the Company shall use its commercially reasonable best efforts to
cause the holders of warrants or warrant certificates issued pursuant to the
1997 Unit Purchase Agreement to (i) surrender the 1997 Warrants in exchange for
an aggregate of 158,512 Company Common Shares, and (ii) agree to terminate the
1997 Unit Purchase Agreement.
(d) The Company shall use its commercially best efforts to
terminate all Company Plans as of the Effective Time or as promptly as
practicable thereafter.
(e) With respect to any Company Options and Company Warrants,
the Company shall not permit any holder thereof to exercise such Company Option
or Company Warrant by any means other than payment of the exercise price thereof
in cash, unless the Company is contractually obligated to do so. With respect to
any such holder, the Company shall use its commercially reasonable best efforts
to encourage such holder to exercise such Company Option and/or Company Warrant
by payment in cash.
43
5.6 REGISTRATION RIGHTS.
(a) As soon as practicable after the execution of this
Agreement, the Company shall use commercially reasonable best efforts to
terminate all agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled or
to cause the Company or any of its Subsidiaries to file a registration statement
under the Securities Act, or which otherwise relate to the registration of any
securities of the Company, except as permitted in the following sentence. The
Company shall use its commercially reasonable best efforts to ensure that
following the Effective Time no holder of any voting or non-voting capital
stock, other equity interests, or other voting securities of the Company, or
debt or other instrument convertible or exchangeable for any voting or
non-voting capital stock, other equity interests, or other voting securities of
the Company, will have any right thereunder or with respect thereto to cause the
Company or any of its Subsidiaries to file a registration statement under the
Securities Act, or which otherwise relate to the registration of any securities
of the Company.
(b) Parent shall, as soon as practicable after the Closing,
but not later than sixty (60) days following the Effective Time, prepare and
file with the SEC a registration statement on Form S-8 (or any successor form
thereto) (or, if possible, amend an effective Form S-8 by filing a
post-effective amendment thereto) with respect to the shares of Parent Common
Stock which are to be issuable upon the exercise of the Assumed Options (the
"S-8") and shall use its best efforts to have the S-8 declared effective as soon
as practicable and kept effective as long as any Assumed Options are
outstanding. In addition, Parent shall, as soon as practicable after the
Closing, but not later than sixty (60) days following the Effective Time,
prepare and file with the SEC a registration statement on Form S-3 (or any
successor form thereto) to register the resale of the shares of Parent Common
Stock underlying the Company Warrants (the "S-3") and shall use its best efforts
to have the S-3 declared effective within 180 days after the Effective Time and
kept effective until the earlier of (x) the exercise, expiration or termination
of all such Company Warrants or (z) two (2) years following the Effective Time.
5.7 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to Parent, and Parent
shall give prompt notice to the Company, of the occurrence, or non-occurrence,
of any event the occurrence, or non-occurrence, of which results in any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect (or, in the case of any representation or
warranty qualified by its terms by materiality or Material Adverse Effect, then
untrue or inaccurate in any respect) and any failure of the Company, Parent or
Merger Sub, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 5.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
(b) Each of the Company and Parent shall give prompt notice to
the other of (i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the Merger,
44
(ii) any notice or other communication from any Governmental Authority in
connection with the Merger, (iii) any Litigation, relating to or involving or
otherwise affecting the Company or its Subsidiaries or the Parent that relates
to the consummation of the Merger; (iv) the occurrence of a default or event
that, with notice or lapse of time or both, will become a default under any
contract which is material to Parent or any Material Agreement of the Company;
and (v) any change that is reasonably likely to have a Material Adverse Effect
on the Company or Parent or is likely to delay or impede the ability of either
Parent or the Company to consummate the transactions contemplated by this
Agreement or to fulfill their respective obligations set forth herein.
(c) Each of the Company and Parent shall give (or shall cause
their respective Subsidiaries to give) any notices to third Persons, and use,
and cause their respective Subsidiaries to use, all reasonable efforts to obtain
any consents from third Persons (i) necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, (ii) otherwise required under
any contracts, licenses, leases or other agreements in connection with the
consummation of the transactions contemplated hereby or (iii) required to
prevent a Material Adverse Effect on the Company or Parent from occurring. If
any party shall fail to obtain any such consent from a third Person, such party
shall use all reasonable efforts, and will take any such actions reasonably
requested by the other parties, to limit the adverse effect upon the Company and
Parent, their respective Subsidiaries, and their respective businesses
resulting, or which would result after the Effective Time, from the failure to
obtain such consent.
5.8 LISTING ON THE NASDAQ. Parent shall use its reasonable best
efforts to cause the Parent Common Stock to be issued in the Merger to be
approved for listing on NASDAQ, subject to official notice of issuance, prior to
the Effective Time.
5.9 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with
and obtain the approval of the other party before issuing any press release or
other public announcement with respect to the Merger or this Agreement and shall
not issue any such press release prior to such consultation and approval, except
as may be required by applicable law or any listing agreement related to the
trading of the shares of either party on any national securities exchange or
national automated quotation system, in which case the party proposing to issue
such press release or make such public announcement shall use reasonable efforts
to consult in good faith with the other party before issuing any such press
release or making any such public announcement. Notwithstanding the foregoing,
in the event the Company's Board of Directors withdraws its recommendation of
this Agreement in compliance herewith, the Company will no longer be required to
consult with or obtain the agreement of Parent in connection with any press
release or public announcement.
5.10 TAKEOVER LAWS. If any form of anti-takeover statute, regulation
or Certificate of Incorporation provision or contract is or shall become
applicable to the Merger or the transactions contemplated hereby, the Company
and the Board of Directors of the Company shall grant such approvals and take
such actions as are necessary under such laws and provisions so that the
transactions contemplated hereby and thereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of such statute, regulation, provision or
contract on the transactions contemplated hereby or thereby.
45
5.11 ACCOUNTANT'S LETTERS. Upon reasonable notice from the other, the
Company and Parent shall use reasonable efforts to cause their respective
independent public accountants to deliver to Parent or the Company, as the case
may be, a letter covering such matters as are requested by Parent or the
Company, as the case may be, and as are customarily addressed in accountant's
"comfort" letters in connection with registration statements similar to Form
S-4.
5.12 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, Parent shall cause the
Surviving Corporation to, and Surviving Corporation shall, fulfill and honor in
all material respects the indemnification obligations of the Company contained
in the Certificate of Incorporation or by-laws or any equivalent organizational
document of the Company as in effect immediately prior to the Effective Time.
(b) For a period of six years after the Effective Time, the
Parent shall cause the Surviving Corporation to, and the Surviving Corporation
shall, maintain in effect, if available, directors' and officers' liability
insurance covering those Persons who, as of immediately prior to the Effective
Time, are covered by the Company's directors' and officers' liability insurance
policy (the "Insured Parties") on terms no less favorable to the Insured Parties
than those of the Company's present directors' and officers' liability insurance
policy; provided, however, that in no event will Parent or the Surviving
Corporation be required to expend in excess of 150% of the annual premium
currently paid by the Company for such coverage (or such coverage as is
available for 150% of such annual premium).
(c) The provisions of this Section 5.12 are intended to be for
the benefit of, and shall be enforceable by, each Person entitled to
indemnification hereunder and the heirs and representatives of such Person.
Parent shall not permit the Surviving Corporation to merge or consolidate with
any other Person unless the Surviving Corporation ensures that the surviving or
resulting entity will assume the obligations imposed by this Section 5.12.
5.13 COVENANTS FOR TAX-FREE STATUS. Prior to the Effective Time, each
party shall use all reasonable commercial efforts to cause the Merger to qualify
as a reorganization within the meaning of Section 368 (a) of the Code, and will
not take any action reasonably likely to cause the Merger not to so qualify.
5.14 STOCKHOLDER AGREEMENTS. The Company shall use its reasonable best
efforts, on behalf of Parent and pursuant to the request of Parent, to cause
each stockholder designated by the Parent (a "Consenting Stockholder") to
execute and deliver to Parent a Stockholder Agreement in the form of EXHIBIT A
attached hereto, concurrently with the execution of this Agreement. The Company
acknowledges and agrees to be bound by and comply with the provisions of
paragraph 2 of each of the Stockholder Agreements as if a party thereto with
respect to transfers of record of ownership of shares of the Company Common
46
Shares and Company Preferred Shares, and agrees to notify the transfer agent for
any Company Common Shares and provide such documentation and do such other
things as may be necessary to effectuate the provisions of such Stockholder
Agreements.
5.15 RELEASE AGREEMENTS. The Company shall use its best efforts, on
behalf of Parent and pursuant to the request of Parent, to cause each Person
identified in Section 5.15 of the Company Disclosure Schedule to execute and
deliver to Parent a written release and waiver satisfactory in form and
substance to Parent in its sole discretion and in substantially the form
attached hereto as EXHIBIT C (the "Release Agreements") prior to the Effective
Time, providing for, among other things, release of the Company, Parent and the
Surviving Corporation and their respective Affiliates from any and all claims,
known and unknown, that such Person has or may have against such Persons through
the Effective Time.
5.16 AFFILIATE AGREEMENTS.
(a) Identified in Section 5.16 of the Company Disclosure
Schedule is a list of those persons who are, in the Company's reasonable
judgment, "affiliates" of the Company, within the meaning of Rule 145
promulgated under the Securities Act ("Rule 145"). The Company shall provide
such information and documents as Parent shall reasonably request for purposes
of reviewing such list and shall notify Parent in writing regarding any change
in the identity of its affiliates prior to the Closing Date. The Company shall
use its best efforts to deliver or cause to be delivered to Parent by September
15, 1999 (and in any case prior to the Effective Time) from the Company's
affiliates, an executed Affiliate Agreement, in substantially the form attached
hereto as EXHIBIT D, by which each affiliate of the Company agrees to comply
with the applicable requirements of Rule 145 and other applicable securities
laws. Parent shall be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by such affiliates of the
Company pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Affiliate Agreements (provided that such
legends or stop transfer instructions shall be promptly removed, after the
required restricted period).
(b) Parent shall, at all times during the two (2) year period
beginning on the Closing Date, whether or not it is subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, comply with the
current public information requirements of Rule 144(c)(1) promulgated under the
Securities Act.
47
5.17 SEC FILINGS.
(a) COMPANY SEC FILINGS. Prior to the Effective Time, the
Company shall furnish the Parent with a copy of each periodic or current report
filed by it under the Exchange Act promptly after filing the same. All filings
made by the Company after the date hereof pursuant to the Exchange Act will be
made in timely fashion, will comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(b) PARENT SEC FILINGS. Prior to the Effective Time, the
Parent shall furnish the Company with a copy of each periodic or current report
filed by it under the Exchange Act promptly after filing the same. All filings
made by the Parent after the date hereof pursuant to the Exchange Act will be
made in timely fashion, will comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
5.18 MAINTENANCE, PROSECUTION AND FILING OBLIGATIONS. The Company
shall pay the costs of preparation for filing, prosecution, and maintenance of
all Intellectual Property Rights as required and shall not permit the lapse of
any filings following the execution of this Agreement. The Company shall provide
copies of all filings and evidence of payments under this Section 5.18 to
Parent.
ARTICLE VI
CONDITIONS OF MERGER
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived by the party entitled to the benefit thereof,
in whole or in part, the extent permitted by applicable Law:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The
Registration Statement shall have been declared effective; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated;
and no similar proceeding in respect of the Proxy Statement shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the SEC.
(b) STOCKHOLDER APPROVAL. This Agreement and the Merger shall
have been authorized by the requisite vote of the stockholders of the Company in
accordance with the provisions of the DGCL and the Certificate of Incorporation
and by-laws of the Company.
48
(c) NASDAQ. The shares of Parent Common Stock issuable to the
stockholders of the Company pursuant to this Agreement shall have been approved
for listing on NASDAQ subject to official notice of issuance.
(d) REGULATORY APPROVALS. All approvals and consents of
applicable Courts and/or Governmental Authorities required to consummate the
Merger shall have been received, except for such approvals and consents, the
failure of which to have been so received, shall not have a Material Adverse
Effect.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other Order (whether
temporary, preliminary or permanent) issued by any court of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect which is
non-appealable, nor shall any proceeding brought by any administrative agency or
commission or other Governmental Authority, domestic or foreign, seeking any of
the foregoing be pending, and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(f) NO ORDER. No Court or Governmental Authority having
jurisdiction over the Company or Parent shall have enacted, issued, promulgated,
enforced or entered any Law, Regulation or Order (whether temporary, preliminary
or permanent) which is then in effect and which has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger substantially
on the terms contemplated by this Agreement without an opportunity for appeal by
either party.
(g) TAX OPINIONS. Parent and the Company shall have received
written opinions of, respectively, Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. and Andrews & Kurth, L.L.P., in form and substance reasonably
satisfactory to them to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The issuance of
each of such opinions shall be conditioned on the receipt by such tax counsel of
representation letters from each of Parent, Merger Sub, the Company and each
stockholder of the Company who or which is a signatory to the Stockholders
Agreement. The specific provisions of each such representation letter shall be
in form and substance reasonably satisfactory to such tax counsel, and each such
representation letter shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to effect the Merger are also subject
to the following conditions, any or all of which may be waived by Parent and
Merger Sub, in whole or in part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement and the Related Agreements
shall be true and correct in all material respects on and as of the Effective
Time, except for changes contemplated by this Agreement (together with the
Company Disclosure Schedule) (except for those (x) representations and
49
warranties that are qualified by materiality or Material Adverse Effect, in
which case such representations and warranties shall be true and correct in all
respects and (y) representations and warranties which address matters only as of
a particular date (in which case such representations and warranties qualified
as to materiality or Material Adverse Effect shall be true and correct in all
respects, and those not so qualified shall be true and correct in all material
respects, on and as of such particular date), with the same force and effect as
if made on and as of the Effective Time, and Parent and Merger Sub shall have
received a certificate to such effect signed by the Chief Executive Officer and
Chief Financial Officer of the Company and of each of the Subsidiaries.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement and the Related Agreements to be performed or complied with by
it on or prior to the Effective Time. Parent and Merger Sub shall have received
a certificate to such effect signed by the Chief Executive Officer and Chief
Financial Officer of the Company.
(c) THIRD PARTY CONSENTS. Parent shall have received evidence,
in form and substance reasonably satisfactory to it, that those licenses,
Permits, consents, waivers, approvals, authorizations, qualifications or Orders
(including all United States and foreign governmental and regulatory rulings and
approvals) of Governmental Authorities and other third parties described in
Section 2.5(a) of the Company Disclosure Schedule (or not described in Section
2.5(a) of the Company Disclosure Schedule but required as described in Section
2.5(a) and (b) of this Agreement) have been obtained, except where failure to
have been so obtained, either individually or in the aggregate, shall not have a
Material Adverse Effect.
(d) RELATED AGREEMENTS. Each of the Related Agreements shall
be in full force and effect as of the Effective Time and become effective in
accordance with the respective terms thereof and the actions required to be
taken thereunder by the parties thereto immediately prior to the Effective Time
shall have been taken, and each Person who or which is required or contemplated
by the parties hereto to be a party to any Related Agreement who or which did
not theretofore enter into such Related Agreement shall execute and deliver such
Related Agreement.
(e) CONSULTING AGREEMENTS. Parent shall have received a copy
of the Consulting Agreement and Confidentiality Agreement between Ray Bergeron
and the Company, which Agreement is reasonably satisfactory to Parent and which
will continue in full force and effect after the Effective Time. Parent shall
have received a copy of the Consulting Agreement between Stefan Borg and the
Company, and Mr. Borg's Employment Agreement with the Company shall have been
amended to be consistent with the terms set forth on Section 2.12(i) of the
Company Disclosure Schedule.
(f) RELEASE AGREEMENTS. Parent shall have received Release
Agreements substantially in the form of EXHIBIT C executed and delivered by each
Person identified on Schedule 5.15 of the Company Disclosure Schedule.
(g) NO MATERIAL ADVERSE EFFECT. From and including the date
hereof, there shall not have occurred any event and no circumstance shall exist
which, alone or together with any one or more other events or circumstances has
had, is having or would reasonably be expected to have a Material Adverse Effect
on the Company.
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(h) DISSENTING SHARES. The Dissenting Shares shall comprise
not more than 2% of the issued and outstanding Company Common Shares and no
Company Preferred Shares.
(i) MERGER CERTIFICATE. The Company shall have executed and
delivered the Merger Certificate.
(j) OPINION OF COUNSEL TO THE COMPANY. Parent shall have
received the opinion of Andrews & Kurth, L.L.P. dated the Closing Date,
substantially in the form of EXHIBIT E.
(k) TERMINATION OF REGISTRATION RIGHTS. The Company shall have
terminated all agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled, or
to cause the Company or any of its Subsidiaries to file a registration statement
under the Securities Act, or otherwise relate to the registration of any
securities of the Company, except as permitted under Section 5.6 hereof.
(l) TERMINATION OF LIEN. Parent shall have received evidence
satisfactory to Parent that the security interest referenced on Section 2.16 of
the Company Disclosure Schedule has been terminated or otherwise expired.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions, any or all of which may be waived by Company, in whole or in part,
to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement and the Related
Agreements shall be true and correct in all material respects on and as of the
Effective Time, except for changes contemplated by this Agreement, (except for
those (x) representations and warranties that are qualified by materiality or
Material Adverse Effect, in which case such representations and warranties shall
be true and correct in all respects and (y) representations and warranties which
address matters only as of a particular date (in which case such representations
and warranties qualified as to materiality or Material Adverse Effect shall be
true and correct in all respects, and those not so qualified shall be true and
correct in all material respects, on and as of such particular date), with the
same force and effect as if made on and as of the Effective Time, and the
Company shall have received a certificate to such effect signed by the Chief
Financial Officer of Parent, with respect to Parent and the Chief Financial
Officer of Merger Sub, with respect to Merger Sub.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by the Chief Financial Officer of Parent, with respect to Parent
and the Chief Financial Officer of Merger Sub, with respect to the Merger Sub.
51
(c) MERGER CERTIFICATE. Merger Sub shall have executed and
delivered the Merger Certificate.
(d) OPINION OF COUNSEL TO PARENT. Company shall have received
the opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. dated Closing
Date, substantially in form of EXHIBIT F.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards
of Directors of Parent and the Company; or
(b) By either Parent or the Company if the Merger shall not
have been consummated on or before December 31, 1999; PROVIDED, that the right
to terminate this Agreement under this Section 7.1 shall not be available to any
party whose willful failure to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have been consummated on or before such date; or
(c) By either Parent or the Company, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action, in each
case which has become final and non-appealable which prohibits the Merger; or
(d) By either Parent or the Company, if, at the Company
Stockholders' Meeting (including any adjournment or postponement thereof), the
requisite vote of the stockholders of the Company to authorize this Agreement
shall not have been obtained; or
(e) By Parent, if the Board of Directors of the Company or any
committee thereof shall have (1) approved or recommended, or proposed to approve
or recommend, any Acquisition Proposal other than the Merger (2) failed to
present and recommend the authorization of this Agreement and the Merger to the
stockholders of the Company, or withdrawn or modified, or proposed to withdraw
or modify, in a manner adverse to Parent or Merger Sub, its recommendation of
the Merger, this Agreement or the transactions contemplated hereby, (3) failed
to mail the Proxy Statement to its stockholders within five (5) Business Days of
when the Proxy Statement was available for mailing or failed to include therein
such approval and recommendation (including the recommendation that the
52
stockholders of the Company vote in favor of the Merger), (4) upon a request by
Parent to reaffirm the approval and recommendation of the Merger, failed to do
so within two (2) Business Days after such request is made, (5) entered, or
caused the Company or any Subsidiary to enter, into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement related
to any Acquisition Proposal, (6) taken any action prohibited by Section 4.2, or
(7) resolved by the Board or announced its intention to do any of the foregoing;
or
(f) By Parent, if neither Parent nor Merger Sub is in material
breach of its obligations under this Agreement, and if (i) there has been a
breach at any time by the Company of any of its representations and warranties
hereunder such that Section 6.2(a) would not be satisfied (treating such time as
if it were the Effective Time for purposes of this Section 7.1(g)) or (ii) there
has been the willful breach on the part of the Company of any of its covenants
or agreements contained in this Agreement such that Section 6.2(b) will not be
satisfied (treating such time as if it were the Effective Time for purposes of
this Section 7.1(g)), and, in both case (i) and case (ii), such breach (if
curable) has not been cured within 10 days after written notice to the Company;
or
(g) By the Company, if it is not in material breach of its
obligations under this Agreement, and if (i) there has been a breach at any time
by Parent or Merger Sub of any of their respective representations and
warranties hereunder such that Section 6.3(a) would not be satisfied (treating
such time as if it were the Effective Time for purposes of this Section 7.1(g)),
or (ii) there has been the willful breach on the part of Parent or Merger Sub of
any of their respective covenants or agreements contained in this Agreement such
that Section 6.3(b) would not be satisfied (treating such time as if it were the
Effective Time for purposes of this Section 7.1(g)), and, in both case (i) and
case (ii), such breach (if curable) has not been cured within 10 days after
written notice to Parent and Merger Sub; or
(h) By Parent, if any Consenting Stockholder publicly
announces or makes a public statement of such Consenting Stockholder's
disapproval of the Merger or otherwise encourages other stockholders of the
Company not to vote in favor of the Merger.
7.2 EFFECT OF TERMINATION. Except as provided in this Section 7.2, in
the event of the termination of this Agreement pursuant to Section 7.1, this
Agreement (other than this Section 7.2 and Sections 5.3(b), 5.12, 7.3 and
Article VIII, which shall survive such termination) will forthwith become void,
and there will be no liability on the part of Parent, Merger Sub or the Company
or any of their respective officers or directors to the other and all rights and
obligations of any party hereto will cease, except that nothing herein will
relieve any party from liability for any breach, prior to termination of this
Agreement in accordance with its terms, of any representation, warranty,
covenant or agreement contained in this Agreement.
7.3 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; PROVIDED, HOWEVER, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' fees, incurred
53
in relation to the printing and filing of the Proxy Statement (including any
preliminary materials related thereto), the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto.
(b) In the event that any of the following occurs:
(i) Parent terminates this Agreement pursuant to
Section 7.1(e) or Section 7.1(h);
(ii) Parent or the Company terminates this Agreement
pursuant to Section 7.1(d) hereof and, at the time of such termination
or prior to the Company Stockholders' Meeting, the Company shall have
made, or proposed, communicated or disclosed in a manner which is or
otherwise becomes public (including being known by stockholders of the
Company) an intention to consummate an Acquisition Proposal (whether or
not such Acquisition Proposal or any announcement or agreement relating
to such Acquisition Proposal shall have been rejected or shall have
been withdrawn prior to the time of such termination or of the Company
Stockholders' Meeting); or
(iii) Parent or the Company terminates this Agreement
pursuant to Section 7.1(d) hereof and the Company shall have entered
into a binding agreement in connection with an Acquisition Proposal or
an Acquisition Proposal shall be consummated within twelve (12) months
following termination of this Agreement;
then, the Company shall pay to Parent, in the case of a termination
described in clause (i) or (ii) above, simultaneously with such
termination of this Agreement, a fee in cash equal to $500,000, plus
the amount of Parent Stipulated Expenses (the "Termination Fee"), which
Termination Fee shall be payable by wire transfer of immediately
available funds; PROVIDED that, if within twelve (12) months of a
termination described in clause (iii) above, the Company has entered
into a binding agreement in connection with an Acquisition Proposal or
an Acquisition Proposal is consummated, the Company shall pay to Parent
a fee in cash equal to $1,000,000 (the "Topping Fee") plus the amount
of Parent Stipulated Expenses, which Topping Fee shall be payable by
wire transfer of immediately available funds upon consummation of the
Acquisition Proposal and which Parent Stipulated Expenses shall be
payable upon such termination of this Agreement. Termination by the
Company pursuant to Section 7.1(d) under circumstances where the
Topping Fee is payable pursuant to clause (iii) above shall not be
effective until receipt of the Topping Fee by Parent.
(c) If this Agreement is terminated pursuant to Section
7.1(f), then the Company shall reimburse Parent for all Parent Stipulated
Expenses not later than two (2) Business Days after the date of such
termination.
(d) As used in this Agreement, the term "Parent Stipulated
Expenses" shall mean those reasonable fees and expenses actually incurred by
Parent in connection with this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby, including fees and expenses of
counsel,
54
investment bankers, accountants, experts, consultants and other Representatives,
including (x) Parent's efforts to acquire the Company, (y) steps taken after the
date hereof to take operational control of the Company and (z) salaries, travel
costs and expenses incurred by Parent as a result of changes to its business
plan in contemplation of the Merger.
(e) Nothing in this Section 7.3 shall be deemed to be
exclusive of any other rights or remedies Parent may have hereunder or under any
Related Agreement or at law or in equity for any breach of this Agreement or any
of the Related Agreements.
7.4 AMENDMENT. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; PROVIDED, HOWEVER, that, after approval of the
Merger by the stockholders of the Company, no amendment may be made which would
reduce the amount or change the type of consideration into which each share of
Company Common Shares and Company Preferred Shares shall be converted upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by all of the parties hereto.
7.5 WAIVER. At any time prior to the Effective Time, any party
hereto may extend the time for the performance of any of the obligations or
other acts required hereunder, waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Except as set forth in Section 8.1(b) of this Agreement,
the representations, warranties and agreements of each party hereto will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of their officers, directors, representatives or agents whether prior to or
after the execution of this Agreement.
(b) The representations and warranties in this Agreement will
terminate at the Effective Time; PROVIDED, HOWEVER, this Section 8.1(b) shall in
no way limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time or after the termination of
this Agreement pursuant to Article VII.
8.2 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
55
or certified mail, postage prepaid, return receipt requested, or by electronic
mail, with a copy thereof to be delivered by mail (as aforesaid) within 24 hours
of such electronic mail, or by telecopier, with confirmation as provided above
addressed as follows:
(a) If to Parent or Merger Sub:
GelTex Pharmaceuticals, Inc.
9 Fourth Avenue
Waltham, Massachusetts 02154
Telephone: (781) 290-5888
Telecopier: (781) 672-5822
Attention: Mark Skaletsky
With copies to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Telephone: (617) 542-6000
Telecopier: (617) 542-2241
Attention: Lewis J. Geffen, Esq.
(b) If to the Company:
SunPharm Corporation
The Veranda, Suite 301
814 Highway A-1A
Ponte Vedra Beach, Florida 32082
Telephone: (904) 394-2800
Telecopier: (904) 394-2727
Attention: Stefan Borg
And a copy to:
Andrews & Kurth, L.L.P.
2170 Buckthorne Place, Suite 150
The Woodlands, Texas 77380
Telephone: (713) 220-4801
Telecopier: (713) 220-4815
Attention: Jeffrey R. Harder, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received (a) in the case of personal
56
delivery, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the next Business Day after the date when sent (c) in the
case of facsimile transmission or telecopier or electronic mail, upon confirmed
receipt, and (d) in the case of mailing, on the third Business Day following the
date on which the piece of mail containing such communication was posted.
8.3 DISCLOSURE SCHEDULES. The Company Disclosure Schedule shall be
divided into sections corresponding to the sections and subsections of this
Agreement. Disclosure of any fact or item in any section of the Company
Disclosure Schedule shall not, should the existence of the fact or item or its
contents be relevant to any other section of the Company Disclosure Schedule, be
deemed to be disclosed with respect to such sections.
8.4 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATES" means, with respect to any Person, any other
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
Person; including, without limitation, any partnership or joint venture in which
the Company (either alone, or through or together with any other Subsidiary)
has, directly or indirectly, an interest of 5% or more of the issued and
outstanding capital stock of such Person;
(b) "BALANCE SHEET" means the balance sheet of the Company
contained in the Company's Form 10-KSB for the year ended December 31, 1998.
(c) "BENEFICIAL OWNER" or "beneficially own" with respect to a
Person's ownership of any securities means
(i) such Person or any of such Person's Affiliates or
associates (as defined in Rule 12b-2 under the Exchange Act) is deemed
to beneficially own, directly or indirectly, within the meaning of Rule
13d-3 under the Exchange Act;
(ii) such Person or any of such Person's Affiliates or
associates has
(A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, right, warrants or options, or otherwise; PROVIDED,
HOWEVER, that a Person shall not be deemed the beneficial owner of, or to
beneficially own, (x) securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
associates until such tendered securities are accepted for purchase; and
(B) the right to vote pursuant to any
agreement, arrangement or understanding; PROVIDED, HOWEVER, that a Person shall
not be deemed the beneficial owner of, or to beneficially own, any security by
reason of such agreement, arrangement or understanding if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
57
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) such securities which are beneficially owned,
directly or indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any securities of the Company;
(d) "BUSINESS DAY" means any day other than a Saturday, Sunday
or day on which banks are permitted to close in the State of New York or in the
State of Delaware.
(e) "COMPANY DISCLOSURE SCHEDULE" means a schedule of even
date herewith delivered by the Company to the Parent concurrently with the
execution of this Agreement, which, among other things, will identify exceptions
to the Company's representations and warranties contained in Article II by
specific section and subsection references;
(f) "CONTROL" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(g) "COURT" means any court or arbitration tribunal of the
United States, any domestic state, or any foreign country, and any political
subdivision thereof.
(h) "ENVIRONMENTAL CLAIM" means any claim, action, cause of
action, investigation or notice by any Person alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or resulting
from (a) the presence, release or disposal of any Hazardous Materials at any
location, whether or not owned or operated by the Company, or (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
(i) "ENVIRONMENTAL LAWS" means any Law pertaining to: (i) the
protection of health, safety and the indoor or outdoor environment; (ii) the
conservation, management or use of natural resources and wildlife; (iii) the
protection or use of surface water and ground water; (iv) the management,
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement, removal, remediation
or handling of, or exposure to, any Hazardous Material; or (v) pollution
(including any release to air, land, surface water and ground water); and
includes, without limitation, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended, and the Regulations
promulgated thereunder and the Solid Waste Disposal Act, as amended, 42 U.S.C.
ss. 6901 et seq.
58
(j) "EXCHANGE AGENT" means any bank or trust company organized
under the Laws of the United States or any of the states thereof and having a
net worth in excess of $100 million designated and appointed to act in the
capacities required under Section 1.12(a).
(k) "GOVERNMENTAL AUTHORITY" means any governmental agency or
authority (other than a Court) of the United States, any domestic state, or any
foreign country, and any political subdivision or agency thereof, and includes
any authority having governmental or quasi-governmental powers.
(l) "HAZARDOUS MATERIAL" means any substance, chemical,
compound, product, solid, gas, liquid, waste, by-product, pollutant, contaminant
or material which is hazardous or toxic and is regulated under any Environmental
Law, and includes without limitation, asbestos or any substance containing
asbestos, polychlorinated biphenyls or petroleum (including crude oil or any
fraction thereof).
(m) "INTELLECTUAL PROPERTY RIGHT" has the meaning ascribed to
such term in Section 2.19 of this Agreement.
(n) "KNOWLEDGE" means (i) in the case of an individual,
knowledge of a particular fact or other matter deemed to be possessed by the
individual if (a) such individual, after making due inquiry, is actually aware
of such fact or other matter or (ii) in the case of an entity (other than an
individual) such entity will be deemed to have "Knowledge" of a particular fact
or other matter if any individual who is serving, or has at any time served, as
a director, officer, partner, in-house counsel, patent counsel (with respect to
Intellectual Property Rights only), executor, or trustee of such Person (or in
any similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
(o) "LAW" means all laws, statutes and ordinances of any
Governmental Agency including all decisions of Courts having the effect of law
in each such jurisdiction;
(p) "LIEN" means any mortgage, pledge, security interest,
attachment, encumbrance, lien (statutory or otherwise), option, conditional sale
agreement, right of first refusal, first offer, termination, participation or
purchase or charge of any kind (including any agreement to give any of the
foregoing); provided, however, that the term "Lien" shall not include (i)
statutory liens for Taxes, which are not yet due and payable or are being
contested in good faith by appropriate proceedings, (ii) statutory or common law
liens to secure landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment insurance,
old age pension or other social security programs mandated under applicable
Laws, (iv) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens, and (v) restrictions on transfer of securities imposed by
applicable state and federal securities Laws;
(q) "LITIGATION" means any suit, action, arbitration, cause of
action, claim, complaint, criminal prosecution, investigation, demand letter,
governmental or other administrative proceeding, whether at law or at equity,
before or by any Court or Governmental Authority, before any arbitrator or other
tribunal;
59
(r) "MATERIAL ADVERSE EFFECT" means any fact, event, change,
circumstance or effect that is materially adverse to the business, condition
(financial or otherwise), operations, results of operations, assets, liabilities
or prospects of the (1) Company and its Subsidiaries, taken as a whole when such
term, is used in relation to the Company and/or the Subsidiaries or the context
otherwise so requires, provided that, the facts, events, changes, circumstances
or effects described in Section 8.4 of the Company Disclosure Schedule shall not
constitute a material adverse effect as to the Company or (2) the Parent and its
Subsidiaries, taken as a whole, when such term is used in relation to the Parent
or the context otherwise so requires.
(s) "ORDER" means any judgment, order, writ, injunction or
decree of any Court or Governmental Authority.
(t) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, limited liability company,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act);
(u) "REGULATION" means any rule or regulation of any
Governmental Authority having the effect of Law.
(v) "RELATED AGREEMENTS" means the Stockholder Agreements,
Release Agreements, Consulting Agreements and Confidentiality Agreements.
(w) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the
Surviving Corporation, Parent or any other Person means any corporation,
partnership, joint venture, limited liability company or other legal entity of
which the Company, the Surviving Corporation, Parent or such other Person, as
the case may be, (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.
(x) "YEAR 2000 COMPLIANT" shall mean the design, writing and
testing of software owned or licensed by a Person (including existing products
and owned software and technology currently under development) used in the
operation of such Person's business as presently conducted , such that such
software will at all times (i) record, store, process, calculate, manage,
manipulate and present calendar dates falling before, on and after (and if
applicable, spans of time including) December 31, 1999, including, without
limitation, single-century formulas and multi-century formulas and (ii) create,
calculate, recognize, accept, display, store, retrieve, accent, compare, sort,
manipulate, or process any information dependent on or relating to such dates or
otherwise provide use of dates or date-dependent or date-related data,
including, but not limited to, century recognition, day-of-the week recognition,
leap years, date values and interfaces of date functionalities, without loss of
accuracy, functionality, data integrity and performance and will provide that
all date-related data and user interface functionalities and data fields include
the indication of century.
60
8.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The word "herein" and similar references mean, except where a specific Section
or Article reference is expressly indicated, the entire Agreement rather than
any specific Section or Article. The table of contents and the headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
8.6 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
8.7 ENTIRE AGREEMENT. This Agreement (including all exhibits and
schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and undertakings (other than the Confidentiality Agreement), both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other Person any rights or remedies hereunder.
8.8 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any Affiliate provided that no such assignment shall
relieve the assigning party of its obligations hereunder.
8.9 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and other than with respect to
Section 5.13 which the parties hereto intend to establish third party
beneficiary rights, nothing in this Agreement, express or implied, is intended
to or shall confer upon any other Person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
8.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
8.11 GOVERNING LAW. This agreement and the agreements, instruments and
documents contemplated hereby will be governed by and construed in accordance
with the Law of the State of Delaware (exclusive of conflicts of law principles)
61
("Delaware Law"). Delaware Courts within the State of Delaware and, more
particularly to the fullest extent such Court shall have subject matter
jurisdiction over the matter, the Court of Chancery of the State of Delaware,
will have exclusive jurisdiction over any and all disputes between the parties
hereto, whether in law or equity, arising out of or relating to this Agreement
and the agreements, instruments and documents contemplated hereby. The parties
consent to and agree to submit to the jurisdiction of such Courts, PROVIDED,
HOWEVER, that such consent to jurisdiction is solely for the purpose referred to
in this Section 8.11 and shall not be deemed to be a general submission to the
jurisdiction of such Courts or in the State of Delaware other than for such
purpose. Each of the parties hereby waives, and agrees not to assert in any such
dispute, to the fullest extent permitted by applicable Delaware Law, any claim
that (i) such party is not personally subject to the jurisdiction of such
Courts, (ii) such party and such party's property is immune from any legal
process issued by such Courts or (iii) any Litigation commenced in such Courts
is brought in an inconvenient forum.
8.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
62
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement and Plan of Merger to be executed as of the date first written above
by their respective officers thereunto duly authorized.
GELTEX PHARMACEUTICALS, INC.
By /s/ MARK SKALETSKY
- --------------------------------------------
Name: Mark Skaletsky
Title: President
SHINE ACQUISITION SUB, INC.
By /s/ MARK SKALETSKY
- --------------------------------------------
Name: Mark Skaletsky
Title: President
SUNPHARM CORPORATION
By /s/ STEFAN BORG
- --------------------------------------------
Name: Stefan Borg
Title: President & Chief Executive Officer
63
Index of Defined Terms
Acquisition Amount...........................................................1.6
Acquisition Proposal......................................................4.2(a)
Affiliates................................................................8.4(a)
Agreement................................................................Caption
Assumed Option............................................................1.8(b)
Balance Sheet.............................................................8.4(b)
Beneficial owner or "beneficially own"....................................8.4(c)
Blue Sky Laws.............................................................2.5(b)
Bridge Loan...............................................................4.1(e)
Business Day..............................................................8.4(d)
DGCL....................................................................Preamble
Certificate of Merger........................................................1.2
Certificates.............................................................1.12(c)
Code......................................................................1.8(b)
Closing.....................................................................1.14
Closing Average...........................................................1.6(-)
Closing Date................................................................1.14
Common Merger Consideration...............................................1.6(b)
Company..................................................................Caption
Company Approvals.........................................................2.1(a)
Company Common Shares...................................................Preamble
Company Disclosure Schedule...................................Article II Caption
Company Employee..........................................................5.6(a)
Company Options...........................................................1.8(b)
Company Plan(s)..........................................................2.12(a)
Company Preferred Shares................................................Preamble
Company Representatives...................................................4.2(a)
Company SEC Reports.......................................................2.8(a)
Company Shares Number.....................................................1.6(-)
Company Warrants..........................................................1.8(d)
Company Stockholders' Meeting...............................................2.14
Confidentiality Agreement.................................................5.3(b)
Consenting Stockholder......................................................5.13
Consulting Agreements.....................................................6.2(e)
Control...................................................................8.4(f)
Court.....................................................................8.4(g)
Delaware Law................................................................8.11
DGCL....................................................................Preamble
Dissenting Shares...........................................................1.17
Distribution Date.........................................................1.6(d)
Effective Time...............................................................1.2
Environmental Claim.......................................................8.4(g)
64
Environmental Laws........................................................8.4(h)
ERISA....................................................................2.12(a)
ERISA Affiliate..........................................................2.12(a)
Exchange Act..............................................................2.5(b)
Exchange Agent............................................................8.4(j)
Exchange Ratio Fraction...................................................1.6(c)
GAAP......................................................................2.7(b)
Governmental Authority....................................................8.4(k)
Hazardous Material........................................................8.4(l)
HSR Act...................................................................2.5(b)
Injunction................................................................6.1(e)
Insured Parties..........................................................5.12(b)
Intellectual Property Rights.............................................2.19(a)
Knowledge.................................................................8.4(n)
Law.......................................................................8.4(o)
Lien......................................................................8.4(p)
Litigation................................................................8.4(q)
Material Adverse Effect...................................................8.4(r)
Material Agreements.......................................................2.6(a)
Subsidiary................................................................8.4(x)
Measurement Date Average..................................................1.6(b)
Merger..................................................................Preamble
Merger Consideration......................................................1.6(b)
Merger Sub...............................................................Caption
Merger Sub Common Stock......................................................1.9
NOL......................................................................2.17(m)
NASDAQ....................................................................1.6(b)
Order.....................................................................8.4(s)
Parent...................................................................Caption
Parent Approvals.............................................................3.1
Parent Common Stock.....................................................Preamble
Parent Right..............................................................1.6(d)
Parent Rights Agreement...................................................1.6(d)
Parent SEC Reports........................................................3.6(a)
Parent Stipulated Expenses................................................7.3(d)
Permits......................................................................2.7
Person....................................................................8.4(x)
Preferred Exchange Ratio..................................................1.6(a)
Preferred Merger Consideration............................................1.6(a)
Proxy Statement.............................................................2.14
Registration Statement......................................................2.14
Regulation................................................................8.4(u)
Related Agreements........................................................8.4(v)
Release Agreements..........................................................5.15
Rule 145 ...................................................................5.16
65
SEC.......................................................................2.7(a)
Securities Act............................................................2.3(b)
Series A Preferred Stock .................................................1.6(a)
Series B Preferred Stock .................................................1.6(a)
Series A-1 Junior Participating Preferred Stock...........................1.6(d)
Stockholder Agreements..................................................Preamble
Subsidiaries..............................................................8.4(w)
Subsidiary................................................................8.4(w)
Subsidiary Approvals .....................................................2.1(b)
Superior Proposal.........................................................4.2(b)
Surviving Corporation........................................................1.1
Tax.........................................................................2.17
Tax Returns.................................................................2.17
Taxes.......................................................................2.17
Termination Fee.......................................................7.3(b)(ii)
Topping Fee..........................................................7.3(b)(iii)
Warrants .................................................................2.3(a)
WARN Act ................................................................2.13(b)
Year 2000 Compliant.......................................................8.4(x)
1994 Plan.................................................................1.8(a)
1995 Plan.................................................................1.8(a)
1997 Unit Purchase Agreement..............................................1.8(f)
1997 Warrants...........................................................Preamble
66
EXHIBIT A
FORM OF STOCKHOLDER AGREEMENT
___________, 1999
GelTex Pharmaceuticals, Inc.
9 Fourth Avenue
Waltham, Massachusetts 02154
Attention: Mark Skaletsky
Re: STOCKHOLDER AGREEMENT
Gentlemen:
The undersigned (the "Stockholder") owns of record and beneficially the
number of shares (the "Shares") of common stock and/or preferred stock of
SunPharm Corporation, a Delaware corporation ("Company"), as set forth below. On
even date herewith, Company, GelTex Pharmaceuticals, Inc., a Delaware
corporation ("Parent") and Shine Acquisition Sub, Inc., a Delaware corporation
and a newly organized wholly owned subsidiary of Company ("Merger Sub"), entered
into an Agreement and Plan of Merger (the "Agreement") with respect to the
merger (the "Merger") of Merger Sub with and into Company. Such Company common
stock and preferred stock will be converted in the Merger into shares of the
common stock, $.01 par value per share, of Parent (the "Parent Common Stock").
The Stockholder wishes to facilitate the proposed Merger and acknowledge that
the proposed Merger will benefit the Stockholder.
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Stockholder agrees as follows:
1. STANDSTILL. Except in connection with the Merger, the
Stockholder will not offer, sell, contract to sell, transfer or otherwise
dispose of, or grant any option to purchase, or convert, any of the Shares until
the earlier of December 31, 1999, or the termination of the Agreement in
accordance with its terms. As security for the Stockholder's obligations under
this paragraph, the Stockholder hereby assigns to and grants to Parent a lien
upon and a security interest in the Shares.
2. PROXY.
(a) As further security for the Stockholder's obligations
under paragraph 1, the Stockholder hereby revokes any previous proxies relating
to the Shares and irrevocably appoints Mark Skaletsky, President and Chief
67
Executive Officer of Parent and Paul J. Mellett, Jr., Vice President and Chief
Financial Officer of Parent, and each of them, attorneys and proxies, with power
of substitution in each of them, of the Stockholder to attend, represent, vote
the Shares and act on behalf of the Stockholder in favor of the Merger on the
terms set forth in the Agreement as executed (with such changes as are not
material to the rights of the Stockholder in the Merger), and with respect to
other matters in connection therewith, at any meeting (and at all adjournments,
continuations or postponements, thereof) (the "Meeting") of the stockholders of
Company at which the Merger is presented for approval of such stockholders
(including executing waivers and consents in connection with the Merger), and
otherwise to act for the Stockholder in the same manner and with the same effect
as if the Stockholder were personally present at such Meeting and voting the
Shares or personally acting on any matters in connection with the Merger
submitted to the stockholders of Company for approval or consent.
(b) The Stockholder authorizes such proxies to substitute
any other person or persons to act hereunder, to revoke any such substitution
and to file this proxy and any such substitution or revocation with the
Secretary of Company.
(c) THIS PROXY IS IRREVOCABLE AND COUPLED WITH AN INTEREST
AND SHALL TERMINATE ON THE EARLIER OF DECEMBER 31, 1999 OR THE TERMINATION OF
THE AGREEMENT PURSUANT TO THE TERMS THEREOF.
3. REPRESENTATIONS AND WARRANTIES BY STOCKHOLDER. The Stockholder
represents and warrants to Parent that:
(a) the Stockholder has all necessary power and authority
to execute this letter agreement including the proxy appointment contained
herein;
(b) this letter agreement and proxy has been duly executed
and delivered by the Stockholder and constitutes a valid and binding agreement
of the Stockholder, enforceable in accordance with its terms; and
(c) neither the execution nor delivery of this letter
agreement and proxy by the Stockholder will (i) require the consent, waiver,
approval, license or authorization, or any filing with, any person or public
authority, (ii) with or without the giving of notice or the lapse of time, or
both, conflict with or constitute a violation of, or default under, or give rise
to any right of acceleration under any indenture, contract, commitment,
agreement, arrangement or other instrument of any kind to which the Stockholder
is a party or by which the Stockholder is bound, or (iii) violate any applicable
law, rule, regulation, judgment, order or degree of any governmental
instrumentality or court having jurisdiction over the Stockholder.
4. MISCELLANEOUS.
(a) The Stockholder will not take any action that would
prevent or frustrate Parent's rights hereunder.
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(b) The Stockholder acknowledges receipt of the following
documents: (i) Parent's Annual Report on Form 10-K for the year ended December
31, 1998; and (ii) Parent's 1999 Annual Report to Stockholders.
IN WITNESS WHEREOF, the Stockholder has executed this agreement and
proxy as of the date and year first above written.
STOCKHOLDER:
_________________________________
Number of Shares of
Common Stock ____________________
Number of Shares of Series A
Preferred Stock _________________
Number of Shares of Series B
Preferred Stock _________________
69
EXHIBIT B
FORM OF
CERTIFICATE OF MERGER
OF
SHINE ACQUISITION SUB, INC., A DELAWARE CORPORATION
WITH AND INTO
SUNPHARM CORPORATION, A DELAWARE CORPORATION
********************
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware, the undersigned corporations organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DO HEREBY
CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations are as follows:
NAME STATE OF INCORPORATION
1. Shine Acquisition Sub, Inc. Delaware
2. SunPharm Corporation Delaware
SECOND: That an Agreement and Plan of Merger dated August 13, 1999 by
and among Geltex Pharmaceuticals, Inc., Shine Acquisition Sub, Inc. and SunPharm
Corporation has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with the requirements of
Section 251 of the General Corporation Law of the state of Delaware.
THIRD: The name of the surviving corporation of the merger is SunPharm
Corporation (the "Surviving Corporation").
FOURTH: The Certificate of Incorporation of the Surviving Corporation
shall be Amended and Restated in its entirety to read as set forth in EXHIBIT A
attached hereto.
70
FIFTH: That the executed copy of the Agreement and Plan of Merger is on
file at the principal place of business of the Surviving Corporation. The
address of the principal place of business of the Surviving Corporation is:
The Veranda, Suite 301
814 Highway A-1A
Ponte Vedra Beach, Florida 32082
SIXTH: That a copy of the Agreement and Plan of Merger will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of the constituent corporations.
IN WITNESS WHEREOF, the undersigned, being the President of Shine
Acquisition Sub, Inc., does hereby execute this Certificate of Merger and so
certifies, affirms and acknowledges under penalties of perjury that this is his
free act and deed and that the facts stated herein are true, this _____________,
1999.
SHINE ACQUISITION SUB, INC.
By:________________________________
Mark Skaletsky, President
IN WITNESS WHEREOF, the undersigned, being the President of SunPharm
Corporation, does hereby execute this Certificate of Merger and so certifies,
affirms and acknowledges under penalties of perjury that this is his free act
and deed and that the facts stated herein are true, this __________, 1999.
SUNPHARM CORPORATION
By:_____________________________
Stefan Borg, President
71
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SUNPHARM CORPORATION
FIRST: The name of the corporation (hereinafter called the
"Corporation") is SunPharm Corporation.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 1013 Centre
Road, Wilmington, Delaware, New Castle County 19801; and the name of the
registered agent of the corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The nature of the business and the purposes to be conducted and
promoted by the Corporation, shall be any lawful business, to promote any lawful
purpose, and to engage in any lawful act or activity for which corporations may
be organized under the General Corporation law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is as follows:
3,000 shares of Common Stock, $0.01 par value.
FIFTH: The Corporation shall have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
72
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
1. The business of the Corporation shall be conducted by the
officers of the Corporation under the supervision of the Board of Directors.
2. The number of directors which shall constitute the whole Board
of Directors shall be fixed by, or in the manner provided in, the By-Laws. No
election of Directors need be by written ballot.
3. The Board of Directors of the Corporation may adopt, amend or
repeal the By-Laws of the Corporation at any time after the original adoption of
the By-Laws according to Section 109 of the General Corporation Law of the State
of Delaware; provided, however, that any amendment to provide for the
classification of directors of the corporation for staggered terms pursuant to
the provisions of subsection (d) of Section 141 of the General Corporation Law
of the State of Delaware shall be set forth in an amendment to this Certificate
of Incorporation, in an initial By-Law, or in a By-Law adopted by the
stockholders of the Corporation entitled to vote.
EIGHTH: (a) The Corporation may, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify (and advance expenses to) any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which a person indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person. No
amendment to or repeal of this paragraph (a) of this Article Eight shall
adversely affect any right or protection of a person existing at the time of, or
increase the liability of any person with respect to any acts or omissions of
such person occurring prior to such amendment or repeal.
(b) No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty of the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
73
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this paragraph (b) of
this Article Eight shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
NINTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article Nine.
74
EXHIBIT C
FORM OF RELEASE AGREEMENT
Reference is made to the Agreement and Plan of Merger dated as of
August 13, 1999 (the "Merger Agreement") by and among GelTex Pharmaceuticals,
Inc., a Delaware corporation ("Parent"), Shine Acquisition Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub") and SunPharm
Corporation, a Delaware corporation (the "Company'). All capitalized terms used,
but not defined herein shall have the meanings ascribed to such terms in the
Merger Agreement.
As an inducement for Parent and Merger Sub to consummate the
transactions contemplated by the Merger Agreement and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, effective as of the Effective Time, the undersigned (the
"Releasor") on his, her or its behalf and on behalf of his, her or its (i)
heirs, executors, administrators, agents, successors and assigns or (ii)
predecessors, parents, subsidiaries, affiliates and other related entities, as
well as any current or former benefit plan administrators, and their respective
trustees, officers, directors, stockholders or members (whether their ownership
interests are held directly or indirectly), partners, agents, attorneys,
employees, successors and assigns (the "Releasor Persons"), as applicable,
hereby irrevocably and unconditionally releases, waives and discharges the
Company, Parent and Merger Sub and their predecessors, parents, subsidiaries,
affiliates and other related entities, and all of their respective, past,
present and future officers, directors, stockholders, affiliates, agents,
representatives, successors and assigns, other than the Releasor and any
Releasor Person (collectively, the "Released Parties"), from any and all
actions, causes of action, suits, debts, dues, sums of money, accounts, bonds,
bills, covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, executions, claims and demands of every type and
nature whatsoever, known or unknown, in law or equity (each a "Claim" and
collectively, the "Claims") relating to, arising out of or in connection with
the Company, its business and/or assets, including any Claims relating to,
arising out of or resulting from the Releasor's status, relationship,
affiliation, rights, obligations and/or duties as a director, officer, employee
or securityholder of the Company, for all periods through the time immediately
prior to the Effective Time.
The undersigned hereby represents and warrants that in his, her or its
capacity as a securityholder of the Company, he, she or it has no knowledge of
any claims that he, she or it may have against the Released Parties.
This Release shall terminate upon the termination of the Merger
Agreement pursuant to the terms thereof.
75
IN WITNESS WHEREOF, the undersigned has duly executed this Release and
Waiver as of this ____ day of ________________, 1999.
________________________________________________
Name:___________________________________________
(Print)
76
EXHIBIT D
FORM OF AFFILIATE AGREEMENT
_________ ___, 1999
GelTex Pharmaceuticals, Inc.
Shine Acquisition Sub, Inc.
9 Fourth Avenue
Waltham, Massachusetts 02154
Attention: Mark Skaletsky
SunPharm Corporation
The Veranda, Suite 301
814 Highway A-1A
Ponte Vedra Beach, Florida 32082
Attention: Stefan Borg
Ladies and Gentlemen:
I/We have been advised that I/we might be considered to be an
"affiliate" of SunPharm Corporation (the "Company") for purposes of Rule 145
("Rule 145") under the Securities Exchange Act of 1933, as amended (the
"Securities Act"), as promulgated by the Securities and Exchange Commission (the
"SEC").
GelTex Pharmaceuticals, Inc. ("Parent"), Shine Acquisition Sub, Inc.
("Merger Sub") and the Company have entered into an Agreement and Plan of Merger
dated as of the 13th day of August, 1999 (the "Plan of Merger"). Upon
consummation of the transactions contemplated by the Plan of Merger (the
"Merger"), I/we will receive shares of capital stock of Parent for all of the
shares of capital stock of the Company owned by me/us or as to which I/we may be
deemed a beneficial owner. I/We own _____________ shares of the common stock,
$.0001 par value per share, of the Company (the "Company's Common Stock") and/or
____________shares of Series A Redeemable Convertible Preferred Stock, $.001 par
value per share and/or shares of Series B Redeemable Convertible Preferred
Stock, $.001 par value per share (collectively, the "Preferred Stock"). The
Company's Common Stock and the Company's Preferred Stock will be converted in
the Merger into shares of the common stock, $.01 par value per share, of Parent
(the "Parent Common Stock") as described in the Plan of Merger. The shares of
Parent Common Stock received by me/us in the Merger are hereinafter collectively
referred to as the "Exchange Stock". This agreement is hereinafter referred to
as the "Affiliate Agreement".
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I/We represent and warrant to, and agree with, Parent, Merger Sub and
the Company that:
A. I/We have read this Affiliate Agreement and the Plan of Merger
and have discussed their requirements and other applicable limitations upon
my/our ability to sell, transfer or otherwise dispose of the Exchange Stock, to
the extent I/we felt necessary, with my/our counsel or counsel for the Company.
B. I/We understand that my/our resale of Exchange Stock issued to
me/us in the Merger will be subject to certain restrictions on transfer in
accordance with Rule 145 under the Securities Act, and in connection therewith
I/we agree not to offer, sell, pledge, transfer or otherwise dispose of any of
such shares of Exchange Stock unless at such time either: (i) such transaction
shall be permitted pursuant to the provisions of Rule 145; (ii) I/we shall have
furnished to the Parent an opinion of counsel, satisfactory to the Parent, to
the effect that no registration under the Securities Act would be required in
connection with the proposed offer, sale, pledge transfer or other disposition;
(iii) a registration statement under the Securities Act covering the proposed
offer, sale, pledge, transfer or other disposition shall be effective under the
Securities Act; or (iv) an authorized representative of the SEC shall have
rendered written advice to me/us to the effect that the SEC will take no action,
or that the staff of the SEC will not recommend that the SEC take action, with
respect to the proposed offer, sale, pledge transfer or other disposition if
consummated.
C. I/We understand that all certificates representing the
Exchange Stock delivered to me/us pursuant to the Merger shall, until the
occurrence of one of the events referred to in paragraph B. above, bear a legend
substantially as follows:
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with the
requirements of Rule 145 of the Securities Act of 1933, as amended."
D. I/We also understand and agree that the Parent, in its
discretion and in a manner consistent with the legend set forth above, may cause
stop transfer orders to be placed with its transfer agent with respect to the
certificates for the shares of Exchange Stock which are required to bear the
foregoing legend.
E. To the extent I/we am/are an "affiliate" of the Company solely
by virtue of reasons other than being an officer or a director of the Company,
I/we agree to comply with the prohibition described in Section 4.2 of the
Agreement.
It is understood and agreed that this Affiliate Agreement shall
terminate and be of no further force and effect if the Plan of Merger is
terminated pursuant to the terms thereof.
The agreements made by me/us in the foregoing paragraphs are on the
understanding that Parent has agreed, in Section 5.16(b) of the Plan of Merger,
that at all times during the two (2) year period beginning on the Closing Date
(as such term is defined in the Plan of Merger) to file with the SEC or
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otherwise make publicly available all information required under Rule 144(c)(1)
promulgated under the Securities Act, to the extent available to you without
unreasonable effort or expense, necessary to enable me/us to resell shares under
the provisions of paragraph (d) of Rule 145.
This Affiliate Agreement shall be binding on my/our heirs, legal
representatives and successors.
Very truly yours,
Name:
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EXHIBIT E
FORM OF OPINION OF COUNSEL TO SUNPHARM CORPORATION
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, and has the
corporate power and authority to enter into and perform the Agreement. The
Company is duly qualified and in good standing as a foreign corporation
authorized to transact business in the State of Florida. The Company has all
requisite corporate power and authority to own or lease and to operate its
properties and assets and to conduct its business as presently conducted.
2. The execution and delivery of the Agreement and the consummation of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company. The Company has duly executed and
delivered the Agreement, and the Agreement constitutes the valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting the
rights and remedies of creditors and by general principles of equity.
3. At __________, 1999, the authorized capital stock of the Company
consisted solely of: (i) _________ shares of Preferred Stock, $.001 par value
per share, of which (a) ______ shares have been designated Series A Preferred
Stock, ______ shares of which are issued and outstanding and (b) ______ shares
have been designated Series B Preferred Stock, ______ shares of which are issued
and outstanding, and (ii) ____________ shares of the Company Common Stock,
$.0001 par value per share, of which _________ shares are issued and
outstanding. All warrants issued by the Company (the "Warrants") pursuant to
that Unit Purchase Agreement dated March 28, 1997 (the "1997 Unit Purchase
Agreement") have been exchanged for shares of the Company Common Stock and the
Warrant Agreement has been terminated prior to the date hereof, and no holder or
record or beneficial owner of any such Warrant has any basis for a claim or
cause of action against the Company by reason of such exchange of Warrants and
termination of the Warrant Agreement. All stock options granted by the Company
under its Amended and Restated 1994 Stock Option Plan (the "1994 Plan") have
either been exercised or terminated in accordance with the provisions of the
1994 Plan and the option agreements thereunder, and no option holder or
participant in the 1994 Plan has any basis under the 1994 Plan or the relevant
option agreement for a claim or cause of action against the Company by reason of
such termination. To our knowledge, except as set forth in the Agreement or the
Company Disclosure Schedule, there are no (i) outstanding or authorized
subscriptions, warrants, options or other rights granted by the Company to
purchase or acquire, or preemptive rights with respect to the issuance or sale
of, the capital stock of the Company or which obligate the Company to issue any
additional shares of its capital stock or any securities convertible into or
evidencing the right to subscribe for any shares of its capital stock, (ii)
other securities of the Company directly or indirectly convertible into or
exchangeable for shares of capital stock of the Company, (iii) restrictions on
the transfer of the Company's capital stock (other than those imposed by
relevant state and federal securities laws), (iv) special voting rights with
respect to the capital stock of the Company, or (v) stock appreciation, phantom
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stock or similar rights granted by the Company. To our knowledge, except as set
forth in the Agreement or the Company Disclosure Schedule, no holders of
securities of the Company have rights to require the Company to register such
securities for sale.
4. Except as set forth in the Agreement or the Company Disclosure
Schedule, to the best of our knowledge, there are no claims, actions, suits,
arbitrations, proceedings or investigations pending or threatened against or
involving the Company.
5. Except for (i) the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the DGCL and (ii) such
filings, notices, permits, consents and approvals as have been made, given or
obtained, the execution, delivery and performance of the Agreement by the
Company will not: (a) violate any provision of the Certificate of Incorporation
or by-laws of the Company; (b) violate, conflict with, result in modification of
the effect of, or otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any agreement or instrument known to us to which the Company is a
party or to which it may be subject; (c) violate any law or regulation or, to
the best of our knowledge, any judgment, decree or order of any court,
arbitrator or governmental or regulatory body applicable to the Company; or (d)
require any filing with, notice to, or permit, consent or approval of, any
governmental or regulatory body, excluding from the foregoing clauses (b), (c)
and (d) any exceptions to the foregoing that, in the aggregate, would not have a
material adverse effect on the business of the Company or on the ability of the
Company to consummate the transactions contemplated by the Agreement.
6. Assuming that Merger Sub has complied with all relevant provisions
of the DGCL, upon the filing and acceptance of the Certificate of Merger with
the Secretary of State of the State of Delaware, the Merger will become
effective under the DGCL at the time specified in the Certificate of Merger.
7. The Registration Statement has become effective under the Securities
Act and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or preventing the use of the Proxy
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened.
We have acted as counsel to the Company in connection with the
preparation of the Registration Statement of Parent filed with the Securities
and Exchange Commission under the Securities Act and the Proxy
Statement/Prospectus contained therein. The Registration Statement in the form
in which it was declared effective under the Securities Act and the Proxy
Statement/Prospectus in the form filed pursuant to Rule 424(b) under the
Securities Act are herein referred to as the "Registration Statement" and "Proxy
Statement/Prospectus", respectively. We have not verified, and are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the Proxy
Statement/Prospectus, and we have not participated in the preparation of the
documents incorporated by reference therein. We have, however, generally
reviewed and discussed such statements with certain officers of the Company and
with you and your counsel. In the course of this review and discussion, and
81
solely with respect to the Company, no facts have come to our attention which
have caused us to believe that: (i) the Registration Statement, at the time it
became effective or on the date hereof contained or contains an untrue statement
of a material fact relating to the Company or omitted or omits to state a
material fact relating to the Company required to be stated therein or necessary
to make the statements therein relating to the Company not misleading or (ii)
the Proxy Statement/Prospectus at the time the Registration Statement became
effective, included or includes an untrue statement of a material fact relating
to the Company or omitted or omits to state a material fact relating to the
Company necessary to make the statements therein relating to the Company, in the
light of the circumstances under which they were made, not misleading, it being
understood that we do not express any opinion or confirmation with respect to
the operating statistics, financial statements, schedules and other financial
and statistical data included in the Registration Statement or Proxy
Statement/Prospectus or omitted therefrom, or any information or its compliance
as to form concerning or furnished by Parent or Merger Sub.
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EXHIBIT F
FORM OF OPINION OF COUNSEL TO GELTEX PHARMACEUTICALS, INC. AND SHINE
ACQUISITION SUB, INC.
1. Each of Parent and Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of its state of
incorporation, and has the corporate power and authority to enter into and
perform the Agreement.
2. The execution and delivery of the Agreement and the consummation of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub. Each of Parent and Merger
Sub has duly executed and delivered the Agreement, and the Agreement constitutes
the valid and binding obligation of Parent and Merger Sub, enforceable against
each in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors and by general
principles of equity.
3. The shares of Parent Common Stock to be issued in the Merger have
been duly authorized by all necessary corporate action on the part of Parent
and, when issued in the Merger pursuant to the terms of the Agreement, such
shares will be validly issued, fully paid and nonassessable and not subject to
any preemptive rights or to any restriction on transfer imposed by the
Certificate of Incorporation or by-laws of Parent.
4. [Based solely on representations made to us by Parent and Merger Sub
in the Officers' Certificates], there are no claims, actions, suits,
arbitrations, proceedings or investigations pending or threatened against or
involving Parent or Merger Sub that individually or in the aggregate which, if
adversely determined, are reasonably likely to: (i) materially restrict or
interfere with the Agreement or any transaction contemplated thereby or (ii)
materially impair or preclude the ability of Parent or Merger Sub to consummate
the Merger or the transactions contemplated by the Agreement.
5. Except for (i) the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the DGCL and (ii) such
filings, notices, permits, consents and approvals as have been made, given or
obtained, the execution, delivery and performance of the Agreement by each of
Parent and Merger Sub will not: (a) violate any provision of the Certificate of
Incorporation or by-laws of Parent or Merger Sub; (b) violate, conflict with,
result in modification of the effect of, or otherwise give any other contracting
party the right to terminate, or constitute (or with notice or lapse of time or
both constitute) a default under, any agreement or instrument known to us to
which either of Parent or Merger Sub is a party or to which either of them may
be subject; (c) violate any law or regulation or, to the best of our knowledge,
any judgment, decree or order of any court, arbitrator or governmental or
regulatory body applicable to either of Parent or Merger Sub; or (d) require any
filing with, notice to, or permit, consent or approval of, any governmental or
regulatory body, excluding from the foregoing clauses (b), (c) and (d) any
83
exceptions to the foregoing that, in the aggregate, would not have a material
adverse effect on the ability of Parent or Merger Sub to consummate the
transactions contemplated by the Agreement.
6. Assuming that the Company has complied with all relevant provisions
of the DGCL, upon the filing and acceptance of the Certificate of Merger with
the Secretary of State of the State of Delaware, the Merger will become
effective under the DGCL at the time specified in the Certificate of Merger.
7. The Registration Statement has become effective under the Securities
Act and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or preventing the use of the Proxy
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened.
We have acted as counsel to Parent and Merger Sub in connection with
the preparation of the Registration Statement of Parent filed with the
Securities and Exchange Commission under the Securities Act and the Proxy
Statement/Prospectus contained therein. The Registration Statement in the form
in which it was declared effective under the Securities Act and the Proxy
Statement/Prospectus in the form filed pursuant to Rule 424(b) under the
Securities Act are herein referred to as the "Registration Statement" and "Proxy
Statement/Prospectus", respectively. We have not verified, and are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the Proxy
Statement/Prospectus, and we have not participated in the preparation of the
documents incorporated by reference therein. We have, however, generally
reviewed and discussed such statements with certain officers of Parent and
Merger Sub and with you and your counsel. In the course of this review and
discussion, and solely with respect to Parent and Merger Sub, no facts have come
to our attention which have caused us to believe that: (i) the Registration
Statement, at the time it became effective or on the date hereof contained or
contains an untrue statement of a material fact relating to Parent or Merger Sub
or omitted or omits to state a material fact relating to Parent or Merger Sub
required to be stated therein or necessary to make the statements therein
relating to Parent or Merger Sub not misleading or (ii) the Proxy
Statement/Prospectus at the time the Registration Statement became effective,
included or includes an untrue statement of a material fact relating to Parent
or Merger Sub or omitted or omits to state a material fact relating to Parent or
Merger Sub necessary to make the statements therein relating to Parent or Merger
Sub, in the light of the circumstances under which they were made, not
misleading, it being understood that we do not express any opinion or
confirmation with respect to the operating statistics, financial statements,
schedules and other financial and statistical data included in the Registration
Statement or Proxy Statement/Prospectus or omitted therefrom, or any information
or its compliance as to form concerning or furnished by the Company.
The schedules to the Merger Agreement have been omitted. Any
stockholder who wishes to view any of the schedules may request a copy from the
Company in writing at the Company's address set forth on the cover page of this
Form 10-Q.
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