Exhibit 10.2
S&S DRAFT
12/23/96
AGREEMENT AND PLAN OF MERGER, dated as of December 23, 1996 (this
"Agreement"), among SYNETIC, INC., a Delaware corporation (the "Parent"),
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SYNTERNET ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of the Parent (the "Purchaser"), AVICENNA SYSTEMS CORP, a
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Massachusetts corporation (the "Company"), and the individuals and entities
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listed on the signature pages hereof (each, a "Stockholder", and collectively,
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the "Stockholders").
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of providing health
care interenterprise connectivity by means of computers (the "Business");
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WHEREAS, each Stockholder owns (i) such number of shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company, (ii) such
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number of shares of Series A Convertible Preferred Stock, par value $0.01 per
share (the "Preferred Stock") of the Company, and (iii) certain convertible
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demand notes convertible into shares of the Common Stock (the "Convertible
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Notes") in such principal amounts, in each case as is set forth opposite such
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Stockholder's name in Schedule A hereto;
WHEREAS, the 400,033 shares of Common Stock currently outstanding (the
"Common Shares") and the 1,033,333 shares of Preferred Stock currently
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outstanding (the "Preferred Shares", and together with the Common Shares, the
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"Shares"), all of which are owned by the Stockholders, will, as of the
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Closing, represents all of the issued and outstanding capital stock of the
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Company;
WHEREAS, the Company has issued, to the employees and in the amounts
set forth in Schedule A hereto, employee stock options to purchase an aggregate
of 672,572 Common Shares (the "Company Options");
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WHEREAS, the Stockholders desire to sell to the Parent, and the Parent
desires to purchase from the Stockholders, the currently outstanding Shares and
the Convertible Notes in exchange for shares of the common stock, par value
$0.01 per share, of the Parent (the "Parent Shares"), upon the terms and subject
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to the conditions set forth herein;
WHEREAS, as additional consideration payable to the holders of
Preferred Shares in the Merger (as hereinafter defined), the Parent shall issue
250,000 Parent Warrants (as hereinafter defined);
WHEREAS, in furtherance thereof, the Boards of Directors of the
Parent, the Purchaser and the Company, and ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ and the holders
of the Preferred Stock, have each approved the merger (the "Merger") of the
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Purchaser with and into the Company in accordance with the General Corporation
Law of the State of Delaware ("Delaware Law") and the Massachusetts Business
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Corporation Law ("Massachusetts Law") upon the terms and subject to the
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conditions set forth herein;
WHEREAS, in connection with the Merger, the parties hereto desire to
provide for the conversion of the Company Options into options exercisable for
Parent Shares;
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WHEREAS, the total market value of the Parent Shares (determined based
upon the Signing Date Market Price (as hereinafter defined)) to be issued (i) in
consideration for the Shares, (ii) in consideration for the Convertible Notes,
(iii) for which the Company Options shall become exercisable, and (iv) after the
Merger, in satisfaction of the right held by BlueCross BlueShield of
Massachusetts to acquire 20,333 Preferred Shares, in each case as of the date of
this Agreement, shall be $30,500,000 (the "Purchase Price");
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WHEREAS, based upon the Signing Date Market Price, the total number of
Parent Shares issuable with respect to each Stockholder and each holder of
Company Options in consideration for the Common Shares, the Preferred Shares,
the Convertible Notes, and upon the exercise of the Company Options, is set
forth on Schedule A hereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
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conditions set forth in this Agreement, at the Effective Time (as defined
below), the Purchaser shall be merged with and into the Company, and the Company
shall be the surviving corporation in the Merger (in such capacity, the
"Surviving Corporation") and shall continue its corporate existence under the
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laws of the Commonwealth of Massachusetts. At the
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Effective Time, the separate corporate existence of the Purchaser shall cease.
SECTION 1.02. Effective Time of the Merger. The Merger shall become
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effective after properly executed certificates of merger (the "Certificates of
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Merger") are duly filed with the Secretary of State of the State of Delaware, in
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accordance with Delaware Law and the Secretary of State of the Commonwealth of
Massachusetts, in accordance with Massachusetts Law (the "Effective Time").
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SECTION 1.03. Certificate of Incorporation. At the Effective Time,
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the Articles of Organization of the Surviving Corporation shall be the Amended
and Restated Articles of Organization set forth in Exhibit 1.03 hereof until
thereafter amended in accordance with applicable law.
SECTION 1.04. By-laws. At the Effective Time, the By-laws of the
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Surviving Corporation shall be as set forth in Exhibit 1.03 hereto, until
thereafter amended in accordance with applicable law.
SECTION 1.05. Directors and Officers. The directors of the Purchaser
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immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Organization and By-laws of the Surviving Corporation, and the officers of the
Company 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.
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SECTION 1.06. Effect of the Merger. At and after the Effective Time,
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the effect of the Merger shall, in all respects, be as provided by Delaware Law
and Massachusetts Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges and
powers of the Purchaser shall vest in the Surviving Corporation and all debts,
liabilities and duties of the Purchaser and the Company shall become debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.07. Closing; Payment of the Purchase Price. (a) Upon the
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terms and subject to the conditions of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
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the offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ at 9:00
am, New York City time, or as promptly as practicable thereafter, on the date of
the satisfaction of the conditions set forth herein (the "Closing Date").
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(b) At the Closing, the Stockholders shall deliver or cause to be
delivered to the Parent:
(i) stock certificates evidencing the Shares;
(ii) the Convertible Notes; and
(iii) the opinions, certificates and other documents required to be
delivered pursuant to Section 5.02.
(c) At the Closing, the Parent shall deliver to the Stockholders:
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(i) stock certificates evidencing the Parent Shares, as set forth in
Sections 1.08 and 1.09 below;
(ii) the Parent Warrants; and
(iii) the opinions, certificates and other documents required to be
delivered pursuant to Section 5.01.
(d) On the Closing Date, the Certificates of Merger with respect to
the Merger shall be filed with the Secretary of State of the State of Delaware
and the Secretary of State of the Commonwealth of Massachusetts.
SECTION 1.08. Conversion of Securities. At the Effective Time, by
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virtue of the Merger and without any action on the part of the Parent, the
Purchaser, the Company or the Stockholders, and subject to Section 1.10:
(a) Each Share shall be cancelled and converted automatically into the
right to receive that number of Parent Shares equal to the quotient (the
"Exchange Ratio") obtained by dividing (i) a fraction, the numerator of
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which shall be 26,329,699 and the denominator of which shall be 2,126,271
by (ii) the Signing Date Market Price of one Parent Share. The "Signing
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Date Market Price" means the lower of (A) the arithmetic average of the
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last reported sales price of Parent Shares on the National Association of
Securities Dealers' national market system ("NASDAQ") for each of the ten
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trading days ending on the trading day immediately preceding the date of
this Agreement or (B) the last reported sales price of Parent Shares on the
NASDAQ on
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the trading day immediately preceding the date of this Agreement.
In accordance with the above formulas, the Exchange Ratio has been
calculated to be 0.2394 of a Parent Share, and the Signing Date Market
Price (based on clause (A) of the definition thereof) has been calculated
to be $51.725.
(b) Each Preferred Share shall, upon cancellation pursuant to Section
1.08(a) above and in addition to the Parent Shares referred to in such
Section 1.08(a), be converted into (i) that number of Parent Shares equal
to (A) $3.00 divided by (B) the Signing Date Market Price; and (ii) a
number of warrants, each such warrant exercisable for one Parent Share at
an exercise price equal to $54.50 (the "Parent Warrants"), equal to (x)
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250,000 divided by (y) 1,053,666.
(c) Each Share held in the Company's treasury as of the Effective Time
shall be canceled and retired and all rights in respect thereof shall cease
to exist, without any conversion thereof or payment of any consideration
therefor.
(d) From and after the Effective Time, all Shares to be converted into
Parent Shares pursuant to this Section 1.08 shall cease to be outstanding,
shall be cancelled and retired and shall cease to exist, and the holders of
certificates representing the Shares shall cease to have any rights with
respect to such Shares, except the right to receive the consideration
specified in this Section 1.08.
(e) Each share of capital stock of the Purchaser that is issued and
outstanding
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as of the Effective Time shall be converted into one share of capital stock
of the Surviving Corporation.
SECTION 1.09. Convertible Notes; Company Options. (a) In connection
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with the Merger, the Parent shall deliver to the holders of Convertible Notes,
in consideration for each Convertible Note, a number of Parent Shares equal to
(i) the aggregate outstanding principal amount and accrued interest through the
Signing Date on such Convertible Note, divided by (ii) the Signing Date Market
Price.
(b) In connection with the Merger, each outstanding Company Option
shall, in accordance with Section 4.03(a) hereof, be amended and converted into
the right to receive, upon exercise thereof, a number of Parent Shares based on
the Exchange Ratio.
SECTION 1.10. Fractional Shares. The Parent will not issue any
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fractional Parent Shares pursuant to Section 1.08(a), 1.08(b) or 1.09(a) hereof,
and the Parent will, in lieu of any such fractional shares, round the number of
Parent Shares issuable to each Stockholder to the nearest whole number of Parent
Shares, after aggregating all Parent Shares to which such Stockholder is
entitled pursuant to Sections 1.08(a), 1.08(b) and 1.09(a) hereof. In addition,
the Parent will not issue any fractional warrants pursuant to Section 1.08(b)
hereof and the Parent will, in lieu of any such fractional warrants, round the
number of Parent Warrants issuable to each holder of Preferred Shares to the
nearest whole number of Parent Warrants, after aggregating all Parent Warrants
to which such holder is entitled pursuant to Section 1.08(b). The Parent will
issue a single warrant certificate, substantially in the form attached
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hereto as Exhibit 1.10 (each such certificate a "Parent Warrant Certificate"),
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to each holder of Preferred Shares, and such Parent Warrant Certificate shall
represent the total number of Parent Warrants to which such holder is entitled
pursuant to the preceding sentence.
SECTION 1.11. Price Protection. (a) If on any Determination Date
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the Determination Date Market Price is less than the Guaranteed Price, then the
Parent will deliver to each Stockholder, as payment with respect to such
Stockholder's Protected Shares, on the next business day following such
Determination Date, an amount, payable in Parent Shares, equal to (i) the number
of Protected Shares held by such Stockholder multiplied by (ii) the number
obtained by subtracting (x) the Determination Date Market Price from (y) the
Guaranteed Price (such amount being the "Deficiency Amount"). In such event,
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the number of Parent Shares issuable to each Stockholder shall equal the
Deficiency Amount divided by the applicable Determination Date Market Price, and
such shares shall be included in a registration statement filed by the Parent.
(b) "Guaranteed Price" means 90% of the Signing Date Market Price.
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(c) "Protected Shares" means the Parent Shares issued to the
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Stockholders pursuant to Sections 1.08(a), 1.08(b) and 1.09(a) hereof; provided,
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however, that in the event that ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ terminates his employment
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with the Company for any reason other than death or Permanent Disability (as
defined in Exhibit 5.01(c)), the Parent Shares referred to in Section 4.04 shall
cease to be Protected Shares from and after the date of such termination. In no
event
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shall either the Parent Warrants or the Parent Shares issuable upon exercise of
the Parent Warrants be entitled to the benefits of this Section 1.11.
(d) "Determination Date" means, (i) with respect to all Protected
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Shares issued on the Closing Date (other than those referred to in clause (ii)
below), the first date on which any of the Protected Shares are first eligible
for sale pursuant to an effective registration statement filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
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as amended (the "Securities Act"), in accordance with the provisions of Section
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4.03 hereof, and (ii) with respect to Protected Shares referred to in Section
4.04, the second anniversary of the Closing Date.
(e) "Determination Date Market Price" means, on any Determination
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Date, the last reported sale price of Parent Shares on NASDAQ on the trading day
immediately preceding such Determination Date.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to the
Parent that, except as set forth in the disclosure schedule dated as of the date
hereof delivered to the Parent by the Stockholders (the "Disclosure Schedule")
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(which shall specify any exception to individual representations and warranties
by reference to specific Section numbers):
SECTION 2.01. Organization, Authority and Qualification of the
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Stockholders and the Company; Subsidiaries; Certificate and By-laws. (a) Each
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Stockholder has all necessary power and authority to enter into this Agreement,
to carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each
Stockholder, the performance by each Stockholder of its obligations hereunder
and the consummation by each Stockholder of the transactions contemplated hereby
have been duly authorized by all requisite action on the part of such
Stockholder. This Agreement has been duly executed and delivered by each
Stockholder, and (assuming due authorization, execution and delivery by the
Parent or the Purchaser) this Agreement constitutes a legal, valid and binding
obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms (except in each such case as enforceability may be
limited by bankruptcy, insolvency, reorganization and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally). No
person other than the Stockholders has a right or claim to any portion of the
Purchase Price or any other payments made by the Parent to any Stockholder
hereunder.
(b) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts, and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on the Business as presently conducted. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations and to consummate the transactions
contemplated
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hereunder. The execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by the Parent
and the Purchaser) this Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except in each such case as enforceability may be limited by
bankruptcy, insolvency, reorganization and other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally). 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 those jurisdictions, if any, in
which the failure to be so duly qualified or licensed and in good standing would
not, individually or in the aggregate, have a Material Adverse Effect. The
Stockholders have delivered to the Parent true, complete and correct copies of
each of the Certificate of Incorporation, the by-laws and the minutes of each
meeting of the board of directors and shareholders of the Company. For purposes
of this Agreement, "Material Adverse Effect" means any circumstance, change,
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event, transaction, loss, failure, effect or other
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occurrence that is or will be materially adverse to the business, operations,
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities, results of operations or prospects of the
Company.
(c) There are no corporations, partnerships, joint ventures,
associations or other entities in which the Company owns, of record or
beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same. The Company is not a member of
(nor is any part of the Business conducted through) any partnership. The
Company is not a participant in any joint venture or similar arrangement.
SECTION 2.02. Capitalization; Ownership. (a) The authorized capital
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stock of the Company consists of (x) 1,066,667 shares of Preferred Stock, of
which 1,033,333 shares are issued and outstanding and each share of which is
convertible into one share of Common Stock and (y) 2,162,667 shares of Common
Stock, of which (i) 400,033 shares are issued and outstanding, (ii) 672,572
shares are reserved for issuance pursuant to outstanding Company Options issued
pursuant to the Company's 1995 Stock Plan (the "Company Stock Plan"), (iii)
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44,228 shares are reserved for issuance upon the granting of additional options
pursuant to the Company Stock Plan and (iv) no shares are reserved for issuance
pursuant to the Convertible Notes.
(b) Except for the Company Options, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
the Company is a party or obligating the Company to issue or sell any
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shares of capital stock of, or other equity interests in, the Company. Except
for the Company Options, no other awards have been made pursuant to the Company
Stock Plan. There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any of the capital stock of the Company
or to provide funds to or make any material investment (in the form of a loan,
capital contribution or otherwise) in any other entity. The Company is not a
party to any agreement granting registration rights to any person with respect
to any securities of the Company. All warrants issued pursuant to the
Convertible Demand Note and Warrant Purchase Agreement dated as of October 10,
1996 among certain of the Stockholders and the Company (the "Company Warrants")
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have been exercised pursuant to the cashless exercise provisions thereof and
20,833 Common Shares have been issued in satisfaction and cancellation of all
such Company Warrants.
(c) The Shares constitute all the issued and outstanding capital stock
of the Company and are owned of record and beneficially solely by the
Stockholders free and clear of all encumbrances. All of the Shares are fully
paid and nonassessable. There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any of the Shares.
(d) The stock register of the Company accurately records: (i) the
name and address of each person owning Shares and (ii) the certificate number of
each certificate evidencing Shares issued by the Company, the number of shares
evidenced by each such certificate, the date of issuance thereof and, in
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the case of cancellation, the date of cancellation.
SECTION 2.03. No Conflict; Required Filings and Consents. (a) The
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execution and delivery of this Agreement by the Company and the Stockholders do
not, and the performance of this Agreement by the Company and the Stockholders
will not, (i) conflict with or violate the Certificate of Incorporation or by-
laws of the Company or the organizational documents of any Stockholder, as
applicable, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or the Stockholders or by which
their respective assets or properties are bound or affected, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) 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 the Stockholders, respectively, pursuant to, or result in a change in
any of the terms of any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, insurance policy or other instrument or obligation to
which the Company or any Stockholder is a party, or by which the Company or any
Stockholder or any of their respective properties are bound or affected, except
in the case of clause (iii) above for such conflicts which would not,
individually or in the aggregate, have a Material Adverse Effect or prevent or
delay the consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the Company and
the
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Stockholders do not, and the performance of this Agreement by the Company and
the Stockholders will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, on the part of the Company or any Stockholder,
except for the filing of articles of merger with the Secretary of State of the
Commonwealth of Massachusetts and the filing of a certificate of merger with the
Secretary of State of the State of Delaware.
SECTION 2.04. Compliance with Laws. The Company is not in conflict
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with, or violation of, any law, rule, regulation, order, judgment or decree
applicable to the Company or by which the Company or any of its properties are
bound or affected, except for any such conflicts or violations which would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.05. Financial Information; Books and Records. (a) True
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and complete copies of (i) the draft of the audited balance sheet of the Company
for the fiscal year ended as of December 31, 1995, and the related audited
statements of income, changes in shareholders' equity and cash flows of the
Company, together with all related notes and schedules thereto (collectively
referred to herein as the "Draft Audited Financial Statements"), and (ii) the
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unaudited balance sheet of the Company for the eleven months ended as of
November 30, 1996, and the related statements of income, changes in
shareholders' equity and cash flows of the Company, together with all related
notes and schedules thereto (collectively referred to herein as the "Interim
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Financial Statements")
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are attached as Section 2.05 of the Disclosure Schedule. The Draft Audited
Financial Statements and the Interim Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the Company,
(ii) present fairly the consolidated financial condition and results of
operations of the Company as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with the past practices of
the Company and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the financial
condition of the Company and the results of the operations of the Company as of
the dates thereof or for the periods covered thereby; provided, however, that
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the Interim Financial Statements may not include all footnotes required by U.S.
generally accepted accounting principles and were or are subject to normal and
recurring year-end adjustments which were not and are not anticipated to be
material in amount.
(b) The books of account and other financial records of the Company:
(i) reflect all items of income and expense and all assets and liabilities
required to be reflected therein in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with the past practices of
the Company, (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies and (iii) have
been maintained in accordance with good business and accounting practices.
(c) Except for (i) liabilities reflected on the balance sheet
contained in the Interim
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Financial Statements and (ii) liabilities incurred in the ordinary course of
business of the Company subsequent to November 30, 1996, the Company has no
material liabilities and there is no existing condition or set of circumstances
that could reasonably be expected to result in any such material liability.
SECTION 2.06. Absence of Certain Changes, Events and Conditions.
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Since December 31, 1995, there have not been any changes, occurrences, or
circumstances with respect to the Company which individually or in aggregate had
or have a Material Adverse Effect. Since December 31, 1995, the Company has
operated its business only in the ordinary course, consistent with past
practice, except for the transactions contemplated by this Agreement.
SECTION 2.07. Employee Benefit Plans; Labor Matters; Consultants.
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(a) Section 2.07 of the Disclosure Schedule lists each benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
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plan", as defined in Section 3(3) of the Employee Retirement Income Security Act
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of 1974, as amended ("ERISA")), maintained or contributed to by the Company for
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or with respect to any of its current or former employees, officers, directors
or independent contractors, or with respect to which the Company could incur
liability under Section 4069, 4201 or 4212(c) of ERISA (the "Company Benefit
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Plans").
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(b) None of the Company Benefit Plans promises or provides retiree
medical or life insurance benefits to any person. Each Company Benefit Plan
intended to be qualified under Section 401(a) of the Internal Revenue
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Code of 1986, as amended, together with the rules and regulations promulgated
thereunder (the "Code") has received a favorable determination letter from the
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Internal Revenue Service to the effect that it is so qualified and nothing has
occurred since the date of such letter to affect the qualified status of such
plan. None of the Company Benefit Plans in effect on the date hereof would
result, separately or in the aggregate (including, without limitation, as a
result of this Agreement or the transactions contemplated hereby), in the
payment of any "excess parachute payment" within the meaning of Section 280G of
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the Code. Each Company Benefit Plan has been operated in all material respects
in accordance with its terms and the requirements of applicable law. None of the
Company Benefit Plans is subject to Title IV of ERISA, and the Company has not
incurred, and does not reasonably expect to incur, any direct or indirect
liability under or by operation of Title IV or ERISA.
(c) With respect to the Company Benefit Plans, no event has occurred
and, to the knowledge of the Company, there exists no condition or set of
circumstances, in connection with which the Company could be subject to any
liability under the terms of such Company Benefit Plans, ERISA, the Code or any
other applicable law which would, individually or in the aggregate, have a
Material Adverse Effect.
(d) The Company is not a party to any collective bargaining or other
labor union contracts. There is no pending or, to the knowledge of the Company,
threatened labor dispute, strike or work stoppage against the Company which may
interfere with the business activities of the Company.
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Neither the Company nor, to the knowledge of the Company, its representatives or
employees, has committed any unfair labor practices in connection with the
operation of the businesses of the Company, and there is no pending or, to the
knowledge of the Company, threatened charge or complaint against the Company by
the National Labor Relations Board or any comparable state agency. The Company's
relations with its employees are good.
(e) Set forth in Section 2.07(e) of the Disclosure Schedule is a list
of all employment agreements between the Company and any of its employees,
copies of which have been delivered by the Company to the Parent. Except as set
forth in Section 2.07(e) of the disclsosure schedule, each employee has signed a
Non-Competition Agreement and an Employee Nondisclosure and Developments
Agreement, in the form set forth in Schedule 2.07(e) of the Disclosure Schedule,
and each such agreement is in full force and effect.
(f) Set forth in Section 2.07(f) of the Disclosure Schedule is a list
of all consultants engaged by the Company, and the Company has delivered to the
Parent a copy of each agreement between the Company and any such consultant.
SECTION 2.08. Litigation. There is no pending or, to the knowledge
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of ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ after due inquiry of the employees of the Company,
threatened litigation, arbitration or governmental investigation or legal,
administrative or regulatory proceeding against the Company or to which any of
its properties is or would be subject.
SECTION 2.09. Material Contracts. (a) Section 2.09(a) of the
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Disclosure Schedule
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lists each of the following written contracts and agreements of the Company
(such contracts and agreements being "Material Contracts"):
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(i) each contract and agreement for the purchase or lease of personal
property with any supplier or for the furnishing of services to the Company
or otherwise related to the Business;
(ii) each customer contract and agreement and other contract and
agreement for the sale or lease of personal property or for the furnishing
of services by the Company, and any outstanding proposals to customers or
prospective customers of the Company;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Company is a party;
(iv) all leases and subleases of real property;
(v) all contracts and agreements relating to indebtedness other than
trade indebtedness of the Company;
(vi) all contracts and agreements with any governmental authority to
which the Company is a party;
(vii) all contracts and agreements that limit or purport to limit the
ability of the Company to compete in any line of business or with any
person or in any
22
geographic area or during any period of time;
(viii) all contracts and agreements between or among the Company and
any Stockholder or any affiliate of any Stockholder;
(ix) any other material agreement of the Company which is terminable
upon or prohibits a change of ownership or control of the Company; and
(x) all other contracts and agreements whether or not made in the
ordinary course of business, which are material to the Company or the
conduct of the Business or the absence of which would have a Material
Adverse Effect.
(b) Each Material Contract: (i) is valid and binding on the respective
parties thereto and is in full force and effect and (ii) upon consummation of
the transactions contemplated by this Agreement, shall continue in full force
and effect without penalty or other adverse consequence. The Company is not in
material breach of, or material default under, any Material Contract and, to the
knowledge of the Company, no other party to any Material Contract is in material
breach thereof or material default thereunder.
(c) As of the date of this Agreement the Company has not entered into
any agreement or arrangement limiting or otherwise restricting it from engaging
or competing in any line of business or in any geographic area.
23
(d) The Company is not a party to any material oral contract or, to
its knowledge, any other oral contract.
SECTION 2.10. Intellectual Property. (a) The Company owns or has
---------------------
the legal right to use all Intellectual Property (as hereinafter defined), as is
used or held for use in the Business, including but not limited to all
Developments (as defined in Section 4.07(d)), free and clear of any encumbrance.
"Intellectual Property" means (i) trademarks, service marks, trade
---------------------
dress, logos, trade names and corporate names (including, without limitation,
the "Avicenna" name and all similar or related names, marks and logos), whether
or not registered, including all common law rights, and registrations and
applications for registration thereof, including, but not limited to, all marks
registered in the United States Patent and Trademark Office, the Trademark
Offices of the States and Territories of the United States Patent and Trademark
Office, the Trademark Offices of the States and Territories of the United States
of America, and the Trademark Offices of other nations throughout the world, and
all rights therein provided by multinational treaties or conventions, (ii)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by multinational treaties
or conventions, (iii) computer software, including, without limitation, source
code, operating systems and specifications, data, data bases, files,
documentation and other materials related thereto, data and documentation, (iv)
trade secrets and confidential, technical or business information (including
ideas, formulas, compositions, inventions and conceptions of
24
inventions whether patentable or unpatentable and whether or not reduced to
practice), (v) whether or not confidential, technology (including know-how and
show-how), manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information, (vi) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (vii) issued patents and patent
applications, (viii) all rights to obtain and rights to apply for patents, and
to register trademarks and copyrights, and (ii) all rights to ▇▇▇ and recover
and retain damages and costs and attorneys' fees for present and past
infringement of any of the Intellectual Property rights hereinabove set forth.
(b) Section 2.10(b) of the Disclosure Schedule sets forth a true and
complete list and a brief description of (i) all of the Company's registered and
applied for copyrights, trademarks and patents and all material licenses
pertaining thereto and indicates where and when such Intellectual Property has
been registered or filed with the United States Patent and Trademark Office or
the United States Copyright Office, or the corresponding office of any other
jurisdictions and (ii) all of the Intellectual Property (other than commercially
available shrink-wrap software) licensed or sublicensed to the Company from any
third party. The conduct of the Business does not conflict with or infringe
upon, and, to the best knowledge of the Company or the Stockholders after due
inquiry, no one has
25
asserted to the Company or the Stockholders that the conduct of the Business
conflicts with or infringes upon, any Intellectual Property owned, possessed,
used or claimed by any third party. The Company has not granted any outstanding
licenses or other rights, or obligated itself to grant licenses or other rights
in or to any of the Intellectual Property owned, used or licensed to it. The
consummation of the transactions contemplated by this Agreement will not result
in the termination or impairment of any of the Intellectual Property.
(c) The Stockholders have, or have caused to be, delivered to the
Parent correct and complete copies of all the licenses and sublicenses for the
Intellectual Property listed in Section 2.10(b) of the Disclosure Schedule and
any and all ancillary documents pertaining thereto (including, but not limited
to, all amendments, consents and evidence of commencement dates and expiration
dates). With respect to each of such licenses and sublicenses:
(i) such license or sublicense, together with all ancillary documents
delivered pursuant to the first sentence of this Section 2.10(c), is valid
and binding and in full force and effect and represents the entire
agreement between the respective licensor and licensee with respect to the
subject matter of such license or sublicense;
(ii) such license or sublicense will not cease to be valid and binding
and in full force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions contemplated by
this Agreement, nor will
26
the consummation of the transactions contemplated by this Agreement
constitute a breach or default under such license or sublicense or
otherwise give the licensor or sublicensor a right to
terminate such license or sublicense;
(iii) with respect to each such license or sublicense: (A) neither any
Stockholder nor the Company has received any notice of termination or
cancellation under such license or sublicense and no licensor or
sublicensor has any right of termination or cancellation under such license
or sublicense except in connection with the default of the Company
thereunder, (B) neither any Stockholder nor the Company has received any
notice of a breach or default under such license or sublicense, which
breach or default has not been cured, and (C) neither any Stockholder nor
the Company has granted to any other person any rights, adverse or
otherwise, under such license or sublicense;
(iv) neither the Company nor (to the best knowledge of the Company or
the Stockholders after due inquiry) any other party to such license or
sublicense is in breach or default in any material respect, and, to the
best knowledge of the Company or the Stockholders after due inquiry, no
event has occurred that, with notice or lapse of time would constitute such
a breach or default or permit termination, modification or acceleration
under such license or sublicense;
(v) no actions have been brought or asserted or are pending (nor, to
the best knowledge of the Stockholders after due
27
inquiry, has any such action been threatened) against the Company either
(A) based upon or challenging or seeking to deny or restrict the use by the
Company of any of such Intellectual Property or (B) alleging that any such
Intellectual Property is being licensed, sublicensed or used in violation
of any patents or trademarks, or any other rights of any person; and
(vi) to the best knowledge of the Stockholders after due inquiry, no
person is using any patents, copyrights, trademarks, service marks, trade
names, trade secrets or similar property that are confusingly similar to
such Intellectual Property or that infringe upon such Intellectual Property
or upon the rights of the Company therein.
(d) The Stockholders are not aware of any reason that would prevent
any pending applications to register trademarks, service marks or copyrights or
any pending patent applications from being granted.
(e) The Intellectual Property described in Section 2.10(b) of the
Disclosure Schedule constitutes all the Intellectual Property used or held or
intended to be used by the Company or forming a part of, used, held or intended
to be used in, and all such Intellectual Property necessary in the conduct of,
the Business and there are no other items of Intellectual Property that are
material to the Company or the Business.
SECTION 2.11. Real Property. The Company does not own any real
-------------
property.
28
SECTION 2.12. Assets. The Company owns, leases or has the legal
------
right to use all the properties and assets, including, without limitation, real
property and personal property, used or intended to be used in the conduct of
the Business or otherwise owned, leased or used by the Company and, with respect
to contract rights, is a party to and enjoys the right to the benefits of all
contracts, agreements and other arrangements used or intended to be used by the
Company in or relating to the conduct of the Business (all such properties,
assets and contract rights being the "Assets"); provided, however, that no
------ -------- -------
representation or warranty is made pursuant to this Section 2.12 with respect to
Intellectual Property. The Company has good and marketable title to, or, in the
case of leased or subleased Assets, valid and subsisting leasehold interests in,
all the Assets, free and clear of all encumbrances.
SECTION 2.13. Taxes. The Company has timely filed all returns and
-----
reports required to be filed with respect to taxes relating to the Business on
or prior to the Closing Date. All taxes required to be collected or paid by the
Company on or prior to the Closing Date have been timely collected and paid.
The Company has not received from any governmental authority any written notice
of proposed adjustment, deficiency or underpayment of any taxes, which notice
has not been satisfied by payment or been withdrawn, and there are no material
claims that have been asserted or threatened relating to such taxes against the
Company. There are no agreements for the extension of time for the assessment
of any taxes of the Company other than routine audit extensions granted in the
ordinary course of business. No consent under Section 341(f) of the Code has
been filed
29
with respect to the Company. For purposes of this Agreement, "tax" or "taxes"
--- -----
means any and all taxes, fees, levies, duties, tariffs, imposts and other
charges of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any
government or taxing authority, including, without limitation: taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added or gains taxes; license, registration and documentation
fees; and customs' duties, tariffs and similar charges.
SECTION 2.14. Certain Interests. (a) None of the Stockholders or
-----------------
their affiliates or any officer or director of the Company and, to the knowledge
of the Stockholders and the Company, no immediate relative or spouse (or
immediate relative of such spouse) who resides with, or is a dependent of, any
such officer or director:
(i) has any direct or indirect financial interest in any competitor,
supplier or customer of the Company, provided, however, that the ownership
-------- -------
of securities representing no more than five percent of the outstanding
voting power of any competitor, supplier or customer, and which are listed
on any national securities exchange or traded actively in the national
over-the-counter market, shall not be deemed to be a "financial interest"
so long as the person owning such securities has no other connection or
relationship with
30
such competitor, supplier or customer, provided further that this Section
-------- -------
2.12(a)(i) shall only apply to ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇;
(ii) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property which the Company
uses or has used in the conduct of the Business or otherwise (except for
any such ownership or interest resulting from the ownership of securities
in a public company); or
(iii) has outstanding any indebtedness to the Company.
(b) Except for the Notes and the Company Options and payment of
employee compensation in the ordinary course of business, the Company has no
liability or any other obligation of any nature whatsoever to any Stockholder or
any affiliate thereof or to any officer or director of the Company or, to the
knowledge of the Stockholders and the Company, to any immediate relative or
spouse (or immediate relative of such spouse) who resides with, or is a
dependent of, any such officer or director.
SECTION 2.15. Investment Intent; Shares Unregistered; Accredited
--------------------------------------------------
Investor. (a) The Stockholders are acquiring the Parent Shares for investment,
--------
solely for their own account and not with a view to, or for sale in connection
with, the distribution thereof in violation of United States securities laws.
(b) Shares Unregistered. The Stockholders understand and acknowledge
-------------------
that (i) the offer and issuance of the Parent Shares have not been registered
under the
31
Securities Act, (ii) the Parent Shares must be held indefinitely and the
Stockholders must continue to bear the economic risk of the investment in the
Parent Shares unless the offer and sale of such Parent Shares is subsequently
registered under the Securities Act and all applicable state securities laws or
an exemption from such registration is available and (iii) a restrictive legend
in the form set forth in Section 4.10 hereof shall be placed on the certificates
evidencing the Parent Shares.
(c) Accredited Investor. Each Stockholder is an "Accredited Investor"
-------------------
as that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
SECTION 2.16. Full Disclosure. (a) Neither any of the Stockholders
---------------
nor the Company is aware of any facts pertaining to the Company's operations or
lines of business which could have a Material Adverse Effect and which have not
been disclosed in this Agreement or the Disclosure Schedule.
(b) No representation or warranty of the Stockholders in this
Agreement, nor any statement or certificate furnished or to be furnished to the
Parent pursuant to this Agreement, or in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
SECTION 2.17. Brokers. Except as disclosed in writing to the Parent,
-------
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission
32
in connection with the transactions contemplated by this Agreement, based upon
arrangements made by or on behalf of the Company or the Stockholders. The
Stockholders shall be solely responsible for any such fees and expenses.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE PURCHASER
The Parent and the Purchaser jointly and severally represent and
warrant to the Stockholders that:
SECTION 3.01. Corporate Organization and Authority. Each of the
------------------------------------
Parent and the Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is presently conducted. Each of the Parent and the
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations and to consummate the transactions
contemplated hereunder. The execution and delivery of this Agreement by each of
the Parent and the Purchaser and the consummation by the Parent and the
Purchaser of the transactions contemplated hereby have been duly authorized by
all necessary corporate action of the Parent and the Purchaser, respectively,
and no other corporate proceedings on the part of the Parent or the Purchaser
are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has
33
been duly executed and delivered by the Parent and the Purchaser and (assuming
the due authorization, execution and delivery by the Company and the
Stockholders) constitutes the legal, valid and binding obligation of each of the
Parent and the Purchaser enforceable against each of the Parent and the
Purchaser in accordance with its terms (except in each such case as
enforceability may be limited by bankruptcy, insolvency, reorganization and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally).
SECTION 3.02. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by each of the Parent and the Purchaser
do not, and the performance of this Agreement by each of the Parent and the
Purchaser will not, (i) conflict with or violate the articles of incorporation
or by-laws of the Parent or the Purchaser, respectively, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Parent or the Purchaser, respectively, or by which either of them or their
properties are bound or affected, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) 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 property or assets of the Parent or the Purchaser,
respectively, pursuant to, or result in a change in any of the terms of any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Parent or the Purchaser
is a party or by which the Parent or the Purchaser or any of their respective
properties is bound or affected,
34
except, in the case of this clause (iii), for any such breaches, defaults or
other occurrences which would not, individually or in the aggregate, have a
material adverse effect on the business, operations, properties (including
intangible properties), condition (financial or otherwise), assets, liabilities,
results of operations or prospects of the Parent or prevent or delay the
consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by each of the Parent
and the Purchaser do not, and the performance of this Agreement by each of the
Parent and the Purchaser (including, without limitation, the consummation of
the transactions hereunder) will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, except for the registration of
Parent Shares under the Securities Act, the filing of articles of merger with
the Secretary of State of the Commonwealth of Massachusetts and the filing of a
certificate of merger with the Secretary of State of the State of Delaware.
SECTION 3.03. SEC Filings; Financial Statements. The Parent has
---------------------------------
filed all forms, reports, statements and documents required to be filed with the
SEC since June 30, 1995 (the "Parent SEC Reports"). The Parent SEC Reports (i)
------------------
were each prepared in accordance with, and at the time of filing complied in all
material respects with, the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
------------
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated
35
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of the
Parent's subsidiaries (including the Purchaser) is required to file any forms,
reports or other documents with the SEC. The financial statements included in
the Parent SEC Reports (i) were prepared in accordance with the books of account
and other financial records of the Parent, (ii) present fairly the consolidated
financial condition and results of operations of the Parent as of the dates
thereof or for the periods covered thereby, (iii) have been prepared in
accordance with U.S. generally accepted accounting principles applied on a basis
consistent with the past practices of the Parent and (iv) include all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the financial condition of the Parent and the results
of the operations of the Parent as of the dates thereof or for the periods
covered thereby.
SECTION 3.04. Common Stock; Options; Warrants. Assuming all
-------------------------------
conditions set forth in Article V are satisfied, all Parent Shares subject to
issuance pursuant to this Agreement, the Company Options, the Parent Options (as
hereinafter defined) and the Parent Warrants, upon such issuance as payment for
the Shares and the Convertible Notes as contemplated by this Agreement or upon
exercise of the Company Options, the Parent Options or the Parent Warrants, as
the case may be, shall (i) be duly authorized, validly issued, fully paid and
nonassessable and (ii) not be subject to any encumbrances created by or on
behalf of the Parent or the Purchaser. The Company Options, the Parent Options
and the Parent Warrants will be
36
exercisable for Parent Shares in accordance with the terms of the Company Stock
Plan, as amended pursuant to Section 4.03 hereof, the Parent Option Plan (as
hereinafter defined) and the Parent Warrant Certificates, respectively.
SECTION 3.05. Investment Purpose. The Parent is acquiring the Shares
------------------
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof in violation of United States
securities laws.
SECTION 3.06. Full Disclosure. (a) The Parent is not aware of any
---------------
facts pertaining to the Parent's operations or lines of business which could
have a material adverse effect on the Parent and which have not been disclosed
in this Agreement or the Parent SEC Reports.
(b) No representation or warranty of the Parent in this Agreement, nor
any statement or certificate furnished or to be furnished to the Stockholders
pursuant to this Agreement, or in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 3.07. Corporate Structure. The Purchaser is a direct wholly-
-------------------
owned subsidiary of the Parent.
SECTION 3.08. Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions hereunder
37
based upon arrangements made by or on behalf of the Parent or the Purchaser.
ARTICLE IV. ADDITIONAL AGREEMENTS
SECTION 4.01. Conduct of Business by the Company Pending the Closing.
------------------------------------------------------
Except as contemplated by this Agreement, the Stockholders covenant and agree
that, during the period between the date of this Agreement and through and
including the Closing Date, unless the Parent shall otherwise agree in writing,
the Business shall be conducted only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice. The Stockholders will not take, and will not permit the
Company to take, any action that would cause any representation or warranty made
by the Stockholders in this Agreement to become untrue in any material respect.
SECTION 4.02. Further Action; Public Announcements. Upon the terms
------------------------------------
and subject to the conditions hereof, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereunder. The Stockholders will cause the Draft
Audited Financial Statements to be delivered in audited form, accompanied by the
reports thereon of the Company's accountants, by December 27, 1996. None of the
Stockholders shall issue any press release with respect to the transactions
contemplated hereunder. None of the Stockholders shall otherwise make any public
statement (i) prior to the Closing, with respect to the transactions
contemplated hereunder and (ii) after the Closing, relating to the plans,
operations, prospects or business of the
38
Company, in each case without the prior written consent of the Parent.
SECTION 4.03. Options; Warrants; Reservation of Shares; Registration
------------------------------------------------------
Rights. (a) Prior to the Closing, the Stockholders shall use their best
------
efforts (i) to cause the Company to amend the Company Stock Plan and the Company
Options, effective as of the Closing, in the manner set forth in Exhibit 4.03(a)
hereto and (ii) to obtain the consent to such amendment of each holder of
Company Options.
(b) As promptly as practicable following the Closing, the Parent shall
adopt an option plan (the "Parent Option Plan") substantially in the form of
------------------
Exhibit 4.03(b) hereto providing for the issuance to certain of the Company's
officers and other key employees of options (the "Parent Options") to purchase
--------------
up to 800,000 Parent Shares in the aggregate.
(c) As promptly as practicable following the Closing, the Parent will
file, and will use all reasonable efforts to cause to be declared effective, a
registration statement (the "Registration Statement") with the SEC under the
----------------------
Securities Act with respect to the Parent Shares issued pursuant to Sections
1.08(a), 1.08(b) and 1.09(a) hereof (exclusive of the 50% of the Parent Shares
issued to ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ referenced in Section 4.04) (the "Registered
----------
Shares") and will cause the Registration Statement to remain effective (subject
------
to the further provisions of this Section 4.03(c)) until the earliest to occur
of (i) the sale of all Registered Shares (pursuant to the Registration Statement
39
or otherwise) by the Stockholders, (ii) the Parent Shares being tradeable
pursuant to Rule 144 (taking into account the volume restrictions contained
therein) under the Securities Act (or any similar provision then in force) or
(iii) June 30, 1998. At any time after the Registration Statement has been
maintained effective for at least 30 days, the Parent may from time to time, by
notice to the Stockholders (a "Suspension Notice"), require the Stockholders to
-----------------
suspend all offers and sales of Parent Shares pursuant to the Registration
Statement due to pending or contemplated acquisitions, financings or other
corporate transactions that the Board of Directors of the Parent determine in
good faith make it necessary or advisable to cease offers and sales of Parent
Shares; provided that notwithstanding the foregoing, the Parent will in any
--------
event permit sales during the period between the date of the Closing through
December 30, 1997 for a total of at least 120 days, and during the period from
January 1, 1998 through June 30, 1998 for a total of at least 60 days. The
Stockholders agree that, upon receipt of any Suspension Notice, the Stockholders
will (and will cause any limited partner distributees of any Parent Shares to)
forthwith discontinue the offer and sale of Parent Shares pursuant to the
Registration Statement until receipt of a notice from the Parent that such
offers and sales may recommence.
(d) The Parent will file a registration statement with the SEC on Form
S-8 (or any successor form) or another appropriate form, and will use all
reasonable efforts to cause such registration statement to be declared effective
as promptly as practicable following the Closing Date (provided that the Parent
shall have no obligation to cause such registration statement to be declared
effective prior to the effectiveness of the registration statement referred to
in Section 4.03(c) above), with respect to the Parent Shares subject to the
Company Options. With respect to the Parent Shares subject to the Parent
Options, the Parent will file a registration statement with the SEC on Form S-8,
and will use all reasonable effort to cause such registration statement to be
declared effective,
at such time as shall be required to register such Parent Shares under the
Securities Act. The Parent shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectuses contained therein) for so long as the Company Options or the
Parent Options, as applicable, remain outstanding.
41
(e) Effective at the Closing, the holders of Parent Warrants shall
have the registration rights and obligations set forth in Exhibit 4.03(e) hereto
with respect to the Parent Shares issuable upon exercise of such Parent
Warrants.
SECTION 4.04. Disposition of Certain Securities. As a material
---------------------------------
inducement for the Parent and the Purchaser to enter into this Agreement, ▇▇.
▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ agrees that he will not sell, assign or otherwise transfer in
excess of 50% of the Parent Shares received in consideration for his Common
Shares until after the second anniversary of the Closing Date. In the event
that ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ desires to sell any of such Parent Shares after the
second anniversary of the Closing Date, he shall sell such Parent Shares (i)
pursuant to Rule 144 promulgated under the Securities Act or any other
applicable exemption from registration under the Securities Act or (ii) at the
request of the Parent, pursuant to a registration statement provided by the
Parent.
42
SECTION 4.05. Board Representation. The Parent shall take all action
--------------------
necessary to appoint ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ as a member of the board of directors
of the Parent as promptly as practicable following the Closing.
SECTION 4.06. Non-Competition. (a) For a period of five (5) years
---------------
after the Closing (the "Restricted Period"), ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ shall not
-----------------
engage, directly or indirectly, in any business anywhere in the United States
that produces or supplies products or services of the kind produced or supplied
by the Business or the Company, or contemplated by the Company's business plan,
as of the Closing Date or, without the prior written consent of the Parent,
directly or indirectly, own an interest in, manage, operate, join, control, lend
money or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any person that competes with the Parent, the Business or the Company
in producing or supplying products or services of the kind produced or supplied
by the Business or the Company, or contemplated by the Company's business plan,
as of the Closing Date; provided, however, that, for the purposes of this
-------- -------
Section 4.06, ownership of securities having no more than one percent of the
outstanding voting power of any competitor which are listed on any national
securities exchange or traded actively in the national over-the-counter market
shall not be deemed to be in violation of this Section 4.06 so long as the
person owning such securities has no other connection or relationship with such
competitor.
(b) As a separate and independent covenant, (i) ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
agrees that,
43
for a period of five (5) years following the Closing, he will not in any way,
directly or indirectly, for the purpose of conducting or engaging in any
business that produces or supplies products or services of the kind produced or
supplied by the Business or the Company, or contemplated by the Company's
business plan, as of the Closing Date, call upon, solicit, advise or otherwise
do, or attempt to do, business with any customers of the Business or the Company
with whom the Business, the Company or ▇▇. ▇▇▇▇▇▇ had any dealings during the
period of time in which ▇▇. ▇▇▇▇▇▇ was affiliated with the Company, or take away
or interfere or attempt to interfere with any custom, trade, business or
patronage of the Business or the Company, and (ii) the Stockholders agree that,
for a period of five (5) years following the Closing, neither the Stockholders
nor any of their affiliates will in any way interfere with or attempt to
interfere with any officers, employees, representatives or agents of the
Business or the Company, or induce or attempt to induce any of them to leave the
employ of the Company or violate the terms of their contracts, or any employment
arrangements, with the Company.
(c) The Restricted Period shall be extended by the length of any
period during which the Stockholders are in breach of the terms of this Section
4.06.
(d) The Stockholders hereby acknowledge that any and all Developments
that have at any time been made or suggested by any Stockholder, whether acting
alone or in conjunction with others, during such Stockholder's association with
the Company, are the sole and absolute property of the Company, free of any
reserved or other rights
44
of any kind on such Stockholder's part. Each Stockholder has fully disclosed all
such Developments to the Company and, if requested by the Company, shall, at the
Company's cost and expense, do all acts and things (including, among others, the
execution and delivery under oath of patent and copyright applications and
instruments of assignment) deemed by the Company to be necessary or desirable at
any time in order to effect the full assignment to the Company of such
Stockholder's right and title, if any, to such Developments. For purposes of
------------
this Agreement, the term "Developments" means all data, discoveries, findings,
reports, designs, inventions, improvements, methods, practices, techniques,
developments, programs, concepts, and ideas, whether or not patentable, relating
to the products or services of the kind produced or supplied by the Business or
the Company, or contemplated by the Company's business plan.
(e) The Stockholders acknowledge that the covenants of the
Stockholders set forth in this Section 4.06 are an essential element of this
Agreement and that, but for the agreement of the Stockholders to comply with
these covenants, the Parent and the Purchaser would not have entered into this
Agreement. The Stockholders acknowledge that this Section 4.06 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement by the Parent or the Purchaser. The
Stockholders have independently consulted with their respective counsel and
after such consultation agree that the covenants set forth in this Section 4.06
are reasonable and proper.
45
(f) If any provision contained in this Section 4.06 is determined by a
court of competent jurisdiction to be excessively broad as to duration,
activity, geographic application or subject, it shall be construed, by limiting
or reducing it to the extent legally permitted, so as to be enforceable to the
extent compatible with then applicable law.
SECTION 4.07. Confidentiality. The Stockholders agree to, and shall
---------------
cause their respective agents, representatives, affiliates, employees, officers
and directors to: (i) treat and hold as confidential (and not disclose or
provide access to any person to) all information relating to trade secrets,
proprietary processes, patent applications and trademark application information
that has not been publicly disclosed, product development, price, customer and
supplier lists, pricing and marketing plans, policies and strategies, details of
client and consultant contracts, operations methods, product development
techniques, business acquisition plans, new personnel acquisition plans and all
other confidential information with respect to the Business and the Company,
(ii) in the event that any Stockholder or any such agent, representative,
affiliate, employee, officer or director becomes legally compelled to disclose
any such information, provide the Parent with prompt written notice of such
requirement so that the Parent or the Company may seek a protective order or
other remedy or waive compliance with this Section 4.07, (iii) in the event that
such protective order or other remedy is not obtained, or the Parent waives
compliance with this Section 4.07, furnish only that portion of such
confidential information which is legally required to be provided and exercise
its best efforts to obtain assurances that confidential treatment will be
46
accorded such information, (iv) except for ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, who may retain
such information in his possession consistent with his employment by the
Company, promptly furnish (prior to, at, or as soon as practicable following,
the Closing) to the Company or the Parent or destroy any and all copies (in
whatever form or medium) of all such confidential information then in the
possession of the Stockholders or any of their agents, representatives,
affiliates, employees, officers and directors of such information and of any
analyses, compilations, studies or other documents prepared, in whole or in
part, on the basis thereof; provided, however, that this sentence shall not
-------- -------
apply to any information
47
that, at the time of disclosure, is available publicly and was not disclosed in
breach of this Agreement by any Stockholder, its agents, representatives,
affiliates, employees, officers or directors; provided further that, with
-------- -------
respect to Intellectual Property, specific information shall not be deemed to be
within the foregoing exception merely because it is embraced in general
disclosures in the public domain. In addition, with respect to Intellectual
Property, any combination of features shall not be deemed to be within the
foregoing exception merely because the individual features are in the public
domain unless the combination itself and its principle of operation are in the
public domain. The Stockholders agree and acknowledge that remedies at law for
any breach of its obligations under this Section 4.07 are inadequate and that in
addition thereto the Parent shall be entitled to seek equitable relief,
including injunction and specific performance, in the event of any such breach.
SECTION 4.08. Cancellation of Agreements. The Stockholders and the
--------------------------
48
Company agree that, effective as of the Closing, all shareholders' agreements
(including, without limitation, the Convertible Demand Note and Warrant Purchase
Agreement dated as of October 10, 1996 among certain of the Stockholders and the
Company, the Stock Restriction Agreement dated December 28, 1995 among certain
of the Stockholders and the Company, the Voting Agreement dated December 28,
1995 among certain of the Stockholders and the Company, the Registration Rights
Agreement dated as of December 28, 1995 among certain of the Stockholders and
the Company, and The Series A Convertible Preferred Stock Purchase Agreement
dated as of December 28, 1995 among certain of the Stockholders and the Company)
to which any of the Stockholders is a party relating to the Company or the
Shares shall terminate, and neither the Parent nor the Company shall have any
liability under any such shareholders' agreement on and after the Closing Date.
No payment or other consideration shall be paid by the Company in connection
with any such termination.
SECTION 4.09. Legends. The Parent shall affix to each certificate
-------
evidencing outstanding Parent Shares that is issued to any Stockholder a legend
in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR ANY INTEREST OR
PARTICIPATION
49
HEREIN MAY BE REOFFERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION."
SECTION 4.10. BlueCross BlueShield Purchase Right. In the event that
-----------------------------------
the Parent has not, within 6 months of the Closing Date, issued to BlueCross
BlueShield of Massachusetts ("BCBS") the Parent Shares and Parent Warrants to
----
which BCBS would have been entitled had it exercised its right to acquire
Preferred Shares prior to the Closing, the Parent will issue to the holders of
Preferred Shares as additional consideration, in accordance with their
respective holdings, the Preferred Shares and Preferred Warrants that would
otherwise have been issued to BCBS. Such Parent Shares and Parent Warrants
shall be deemed to have been outstanding as of the Closing for all purposes of
this Agreement.
ARTICLE V. CONDITIONS TO THE CLOSING
SECTION 5.01. Conditions to Obligations of the Parent and the
-----------------------------------------------
Purchaser. The obligations of the Parent and the Purchaser to effect the
---------
Closing shall be subject to the prior fulfillment of each of the following
conditions:
(a) Representations and Warranties; Agreements and Covenants. (i)
--------------------------------------------------------
The representations and warranties of the Stockholders contained in this
Agreement shall be true and correct in all material
50
respects on and as of the Closing, with the same force and effect as if
made as of the Closing, (ii) all the agreements contained in this Agreement
to be performed or complied with by the Stockholders at or before the
Closing shall have been performed or complied with in all material respects
and (iii) the Parent shall have received a certificate from the
Stockholders as to the fulfillment of the conditions set forth in the
foregoing clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
----------
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency by any federal, state or foreign legislative
body, court, government or governmental, administrative or regulatory
authority or agency which shall have remained in effect and which shall
have had the effect of making illegal the consummation of any of the
transactions hereunder.
(c) Employment Agreements. The Parent shall have received from each
---------------------
individual listed on the employment agreements included as Exhibit 5.01(c)
hereto executed employment agreements in the respective forms of such
exhibit.
(d) Company Options. The Parent shall have received evidence, in form
---------------
and substance satisfactory to the Parent, of the amendment of the Company
Stock Plan and all of the Company Options, each in accordance with Article
IV hereof.
51
(e) Opinions. The Parent shall have received (i) an opinion from
--------
▇▇▇▇▇▇, Gesmer & Updergrove substantially in the form attached hereto as
Exhibit 5.01(e)(i), and (ii) an opinion from other counsel to the
Stockholders, reasonably acceptable to the Parent, substantially in the
form of Exhibit 5.01(e)(ii).
(f) Section 280G. The Parent shall have received evidence, in form
------------
and substance satisfactory to the Parent, that any payment or benefit that
would otherwise constitute a "parachute payment" (within the meaning of
Section 280G of the Code) that will be made or provided to any
"disqualified individual" (within the meaning of Section 280G(c) of the
Code) as a result of this Agreement and the transactions contemplated
hereby has been approved by a vote of the stockholders of the Company
satisfying the requirements of Section 280G(b)(5) of the Code, and the
right of any such disqualified individual to receive any such payments or
benefits shall have been made subject to the approval of the Company's
stockholders described in this sentence. The right of ▇▇. ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ to receive any amounts pursuant to Section 1.11, or any other
payment or benefit that results from this Agreement and the transactions
contemplated hereby and which would otherwise constitute a "parachute
payment" shall be subject to the approval of the Company's stockholders
described in the preceding sentence.
(g) Good Standing; Qualification to Do Business. The Parent shall
-------------------------------------------
have received a certificate of legal existence for the Company from the
Secretary of State of
52
the Commonwealth of Massachusetts, dated as of a date reasonably proximate
to the Closing Date, and telephonic confirmation thereof on the Closing
Date.
SECTION 5.02. Conditions to Obligations of the Stockholders. The
---------------------------------------------
obligations of the Stockholders to effect the Closing shall be subject to the
prior fulfillment of each of the following conditions:
(a) Representations and Warranties. (i) The representations and
------------------------------
warranties of the Parent and the Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing, with the same force and effect as if made as of the Closing, (ii)
all the agreements contained in this Agreement and in any certificates or
agreements of the Parent or the Purchaser delivered pursuant hereto to be
performed or complied with by the Parent or the Purchaser, at or before the
Closing, shall have been performed or complied with in all material
respects and (iii) the Stockholders shall have received a certificate of
each of the Parent and the Purchaser, signed by a duly authorized officer
thereof, as to the fulfillment of the conditions set forth in the foregoing
clauses (i) and (ii).
(b) Litigation. There shall have been no order or preliminary or
----------
permanent injunction entered in any action or proceeding before any
federal, state or foreign court or governmental, administrative or
regulatory authority or agency by any federal, state or foreign legislative
body, court, government or governmental, administrative or
53
regulatory authority or agency which shall have remained in effect and
which shall have had the effect of making illegal the consummation of any
of the transactions hereunder.
(c) Parent Shares and Parent Warrant Certificates. The Parent Warrant
---------------------------------------------
Certificates evidencing the right to purchase 250,000 Purchaser Shares and
stock certificates evidencing the Parent Shares issuable pursuant to
Sections 1.08(a), 1.08(b) and 1.09(c) hereof, in each case registered in
the name of the applicable Stockholder and free and clear of all
encumbrances, shall have been duly issued and delivered, or caused to be
delivered, by the Parent to the Stockholders with all required stock
transfer tax stamps affixed;
(d) Employment Agreements. The individuals listed on the employment
---------------------
agreements included as Exhibit 5.01(c) hereto shall have received executed
employment agreements from the Parent in the respective forms of such
exhibit.
(f) Opinion. The Stockholders shall have received an opinion from
-------
Shearman & Sterling substantially in the form attached hereto as Exhibit
5.02(f).
ARTICLE VI. INDEMNIFICATION
SECTION 6.01. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties contained in this Agreement shall survive
the Closing until March 31, 1998; provided, however, that the
-------- -------
representations and warranties contained in
54
Section 2.02(c) (but only applied severally to each Stockholder with
respect to such Stockholder's Share ownership) and 3.04, shall survive
indefinitely. Neither the period of survival nor the liability of the
Stockholders with respect to the Stockholders' representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Parent or the Purchaser, and neither the period of survival
nor the liability of the Parent with respect to the representations and
warranties of the Parent and the Purchaser shall be reduced by any
investigation made at any time by or on behalf of the Stockholders. If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties, then the relevant
representations and warranties shall survive as to such claim, until such
claim has been finally resolved.
SECTION 6.02. Indemnification by the Stockholders and the
-------------------------------------------
Parent. (a) The Parent and its affiliates (including, after the Closing,
the Surviving Corporation), officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by the
Stockholders for any and all liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' fees and expenses) actually suffered or incurred by
them (including, without limitation, in connection with any action brought
or otherwise initiated by any of them) (hereinafter a "Loss"), arising out
----
of or resulting from:
(i) the breach of any representation or warranty made by the
Stockholders in this Agreement; or
55
(ii) the breach of any covenant or agreement by the Stockholders
contained in this Agreement.
To the extent that the Stockholders' undertakings set forth in this Section
6.02(a) may be unenforceable, the Stockholders shall contribute the maximum
amount that they are permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by the parties entitled to
indemnification hereunder.
(b) The Stockholders and their respective affiliates, officers,
directors, employees, agents, successors and assigns shall be indemnified and
held harmless by the Parent for any and all Losses arising out of or resulting
from:
(i) the breach of any representation or warranty made by the Parent or
the Purchaser in this Agreement;
(ii) the breach of any covenant or agreement by the Purchaser
contained in this Agreement; or
(iii) any claim brought by a third party with respect to liabilities
of the Company existing or created prior to the Closing, but only in the
event that the existence of such liability or the circumstances resulting
in such liability would not have constituted or been deemed to be a breach
of any representation, warranty or covenant of the Stockholders under this
Agreement.
To the extent that the Parent's undertakings set forth in this Section 6.02(b)
may be unenforceable, the Parent shall contribute the maximum amount that it is
permitted to
56
contribute under applicable law to the payment and satisfaction of all Losses
incurred by the parties entitled to indemnification hereunder.
(c) Any party seeking indemnification under this Article VI (an
"Indemnified Party") shall give each party from whom indemnification is being
------------------
sought (each, an "Indemnifying Party") notice of any matter which such
------------------
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement, within 60 days of such determination,
stating the amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this Agreement in respect of which
such right of indemnification is claimed or arises. The obligations and
liabilities of an Indemnifying Party under this Article VI with respect to
Losses arising from claims of any third party which are subject to
the indemnification provided for in this Article VI ("Third Party Claims") shall
------------------
be governed by and contingent upon the following additional terms and
conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indemnifying Party notice of such
Third Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
-------- -------
release the Indemnifying Party from any of its obligations under this Article VI
except to the extent the Indemnifying Party is materially prejudiced by such
failure. If the Indemnifying Party acknowledges in writing its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result
from such Third Party Claim, then the Indemnifying
57
Party shall be entitled to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives notice of its
intention to do so to the Indemnified Party within ten days of the receipt of
such notice from the Indemnified Party; provided, however, that if there exists
or is reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Indemnified Party for the same counsel to
represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Indemnifying Party. In the event the Indemnifying Party
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party,
at the Indemnifying Party's expense, all witnesses, pertinent records, materials
and information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Indemnifying Party's expense, all
such witnesses, records, materials and information in the Indemnifying Party's
possession or under the Indemnifying Party's control relating thereto as is
reasonably required by the Indemnified Party. No such Third Party Claim may be
settled by the Indemnifying Party without the
58
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
SECTION 6.03. Limits on Indemnification. No amount shall be payable
-------------------------
by the Stockholders or the Parent pursuant to Section 6.02(a) or 6.02(b),
respectively, unless the aggregate dollar amount of all Losses which would
otherwise be indemnifiable pursuant to Section 6.02(a) or (b), as applicable,
exceeds $50,000, in which case the full amount of such Losses shall be payable
as provided in Section 6.02. With respect to any claim for indemnifiable Losses
made by the Parent pursuant to Section 6.02(a), each Stockholder shall indemnify
the Parent only for such portion of such indemnifiable Losses equal to (i) the
total amount of such Losses multiplied by (ii) a fraction, the numerator of
which shall be the total number of Shares held by such Stockholder immediately
prior to the Closing, as set forth on Schedule A hereto, and the denominator of
which shall be 1,433,366. Notwithstanding anything to the contrary in this
Agreement, the maximum amount of indemnifiable Losses that may be recovered from
any Stockholder pursuant to Section 6.02(a) shall be an amount equal to (x)
$2,100,000 multiplied by (y) a fraction, the numerator of which shall be the
total number of Shares held by such Stockholder immediately prior to the
Closing, as set forth on Schedule A hereto, and the denominator of which shall
be 1,433,366; provided, however, that the maximum amount of indemnifiable Losses
-----------------
that may be recovered from any Stockholder, if such Losses are a result of any
breach by such Stockholder of the representation and warranty contained in
Section 2.02(c) as applied to the Shares owned
59
by it, shall be an amount equal to the value on the Closing Date of
all Parent Shares and Parent Warrants received by such Stockholder pursuant to
this Agreement; provided, further, that there shall be no limit on the amount of
-------- -------
indemnifiable Losses that may be recovered from any Stockholder in the event
that the breach of the representation, warranty or covenant that gave rise to
such Losses resulted from or arose out of fraud on the part of such Stockholder.
Notwithstanding anything to the contrary in this Agreement, the maximum amount
of indemnifiable Losses that may be recovered from the Parent shall be
$2,100,000; provided, however, that the maximum amount of indemnifiable Losses
-------- -------
that may be recovered from the Parent by any Stockholder if such Losses are a
result of any breach of the representation and warranty contained in Section
3.04 shall be an amount equal to the value on the Closing Date of all Parent
Shares and Parent Warrants received by such Stockholder pursuant to this
Agreement; provided, further, there shall be no limit on the amount of
-------- -------
indemnifiable Losses that may be recovered from the Parent in the event that the
breach of the representation, warranty or covenant that gave rise to such Losses
resulted from or arose out of fraud on the part of the Parent or the Purchaser.
SECTION 6.04. Indemnification as Exclusive Remedy. The
-----------------------------------
indemnification provided by this Article VI, subject to the limitations set
forth herein, shall be the exclusive post-Closing remedy available to the
parties hereto for any breach of any representation or warranty contained in
this Agreement, and the parties hereto acknowledge that no party hereto has made
any representation or warranty to any other
60
party hereto other than as set forth in this Agreement. In no event shall any
party hereto be entitled to rescission of this Agreement as a result of any
breach of any representation, warranty, covenant or agreement contained herein.
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER; MISCELLANEOUS
SECTION 7.01. Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date (i) by mutual written consent of the Stockholders and the Parent or
(ii) by either the Stockholders or the Parent if there has been a material
breach of any representation, warranty, covenant or agreement on the part of the
other parties which would cause the conditions to Closing to fail to be
satisfied and which is incapable of being cured prior to January 15, 1997; or
(iii) by the Stockholders or the Parent, if the Closing shall not have occurred
by January 15, 1997; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 6.01(a)(iii) shall not be available to any party
whose wilful failure to fulfill any material obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
SECTION 7.02. Effect of Termination; Expenses. In the event of the
-------------------------------
termination of this Agreement pursuant to Section 6.01, this Agreement shall
forthwith become void and have no effect and there shall be no liability on the
part of any party hereto or its affiliates, directors, officers or shareholders;
provided,
--------
61
however, that nothing herein shall relieve any party from liability for any
-------
willful breach hereof prior to such termination. All costs and expenses,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the Company or the Stockholders in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Stockholders (except for the legal fees and expenses listed on
Schedule 2.06 of the Disclosure Schedule (up to a maximum of $25,000), which
shall be paid by the Company) and all costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by the Parent in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Parent, whether or not the
Closing shall have occurred.
SECTION 7.03. Miscellaneous. This Agreement may be amended at any
-------------
time by an instrument signed by the Parent and the Stockholders. Either the
Stockholders or the Parent may (a) extend the time for the performance of any of
the obligations or other acts of the Company or any Stockholder, or the Parent
and the Purchaser, respectively, (b) waive any inaccuracies in the
representations and warranties of the Company or any Stockholder, or the Parent
and the Purchaser, respectively, contained herein or in any document delivered
pursuant hereto by the Company or any Stockholder, or the Parent and the
Purchaser, respectively and (c) waive compliance with any of the agreements of
the Company or any Stockholder, or the Parent and the Purchaser, respectively,
or any conditions contained herein. Any such extension or waiver shall be valid
if set forth
62
in an instrument in writing signed by the party to be bound thereby. The failure
of any party to assert any of its rights hereunder shall not constitute a waiver
of any such rights. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms 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 in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible. This Agreement and the exhibits hereto constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement may
not be assigned by operation of law or otherwise without the express written
consent of the Parent and the Stockholders; provided, however, that the Parent
-------- -------
may assign this Agreement to an affiliate of the Parent without the consent of
the Stockholders, but no such assignment shall relieve the Parent of its
obligations hereunder if such assignee does not perform such obligations. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to
63
or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. 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. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were not
to be performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity. Any notices under this Agreement shall be
addressed, if to the Parent, to its principal executive office, attention: Chief
Executive Officer; if to Advanced Technology Venture IV, L.P., to its General
Partner at Somerset Court, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; if
to Nazem & Company IV, L.P., to its General Partner at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, if to CGJR Capital Management, to its General Partner at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇; if to Delphi Venture III, L.P.,
to its General Partner at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇; if to Delphi BioInvestments III, L.P., to its General Partner at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and if to ▇▇▇▇▇-
▇▇▇▇ ▇▇▇▇▇▇, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
64
IN WITNESS WHEREOF, the Parent, the Purchaser, the Company and the
Stockholders have each caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
SYNETIC, INC.
By:____________________________
Name:
Title:
_________________________
Name: ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Address:
Social Security #:
ADVANCED TECHNOLOGY VENTURES IV,
L.P., by ATV Associates IV, L.P., its General
Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
DELPHI VENTURES III, L.P.,
by Delphi Management Partners III, L.L.C., its
General Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
DELPHI INVESTMENTS III, L.P.,
by Delphi Management Partners III, L.L.C., its
General Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
NAZEM & COMPANY IV, L.P., by
Nazem & Associates IV, L.P., its General
Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
65
CGJR Health Care Services Private Equities,
L.P., by CGJR Capital Management, Inc., its
General Partner
By:_____________________________
Name:
Title:
Taxpayer ID #:
BLUECROSS BLUESHIELD OF
MASSACHUSETTS (also making the
representations and warranties contained in
Schedule B to this Agreement)
By:_____________________________
Name:
Title:
AVICENNA SYSTEMS CORP.
By:_____________________________
Name:
Title: President
Taxpayer ID #:
By:_____________________________
Name:
Title: Treasurer