AGREEMENT AND PLAN OF MERGER, dated as of December 23, 1996
(this "Agreement"), among SYNETIC, INC., a Delaware corporation (the "Parent"),
SYNTERNET ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of the Parent (the "Purchaser"), AVICENNA SYSTEMS CORP, a
Massachusetts corporation (the "Company"), and the individuals and entities
listed on the signature pages hereof (each, a "Stockholder", and collectively,
the "Stockholders").
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");
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 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 demand notes convertible into shares of the Common Stock (the
"Convertible Notes") in such principle amounts, in each case as is set forth
opposite such 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 outstanding (the "Preferred Shares", and together with the Common
Shares, the "Shares"), all of which are owned by the Stockholders, will, as of
the Closing, represent all of the issued and outstanding capital stock of the
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");
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 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
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Stock, have each approved the merger (the "Merger") of the Purchaser with and
into the Company in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law") and the Massachusetts Business Corporation Law
("Massachusetts Law") upon the terms and subject to the 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;
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");
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
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
laws of the Commonwealth of Massachusetts. At the Effective Time, the separate
corporate existence of the Purchaser shall cease.
SECTION 1.02. Effective Time of the Merger. The Merger shall
become effective after properly executed certificates of merger (the
"Certificates of Merger") are duly filed with the Secretary of State of the
State of Delaware, in accordance with Delaware Law and the Secretary of State of
the Commonwealth of Massachusetts, in accordance with Massachusetts Law (the
"Effective Time").
SECTION 1.03. Certificate of Incorporation. At the Effective
Time, the Articles of Organization of the Surviving Corporation shall be the
Amended and Restated
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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 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 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.
SECTION 1.06. Effect of the Merger. At and after the Effective
Time, 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 terms and subject to the conditions of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
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").
(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:
(i) stock certificates evidencing the Parent Shares, as set
forth in Sections 1.08 and 1.09 below;
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(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 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 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 Date Market Price" means the lower of (A) the
arithmetic average of the last reported sales price of Parent Shares on
the National Association of Securities Dealers' national market system
("NASDAQ") for each of the ten 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 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) 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
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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 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 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
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 hereto as
Exhibit 1.10 (each such certificate a "Parent Warrant Certificate"), 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 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, 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.
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(b) "Guaranteed Price" means 90% of the Signing Date Market
Price.
(c) "Protected Shares" means the Parent Shares issued to the
Stockholders pursuant to Sections 1.08(a), 1.08(b) and 1.09(a) hereof; provided,
however, that in the event that ▇▇. ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ terminates his employment
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 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 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, as amended (the "Securities Act"), in accordance with the provisions of
Section 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 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") (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
Stockholders and the Company; Subsidiaries; Certificate and By-laws. (a) Each
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
7
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 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, event, transaction,
loss, failure, effect or other 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 stock of the Company consists of (x) 1,066,667 shares of Preferred
Stock, of which 1,033,333
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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) 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 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")
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 the case of cancellation, the date of cancellation.
SECTION 2.03. No Conflict; Required Filings and Consents. (a)
The 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
9
(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 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 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 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
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
Financial Statements") 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
10
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 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 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. 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. (a) Section 2.07 of the Disclosure Schedule lists each benefit
plan, program, arrangement and contract (including, without limitation, any
"employee benefit plan", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained or contributed to
by the Company for 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 Plans").
(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 Code
of 1986, as amended, together with the rules and regulations promulgated
thereunder (the "Code") has received a favorable determination letter from the
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.
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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 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. 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 otherwise specified in Section 2.07(e) of the Disclosure 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 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.
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SECTION 2.09. Material Contracts. (a) Section 2.09(a) of the
Disclosure Schedule lists each of the following written contracts and agreements
of the Company (such contracts and agreements being "Material Contracts"):
(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 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
13
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.
(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 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.
14
(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 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 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
15
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 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.
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,
16
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 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 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
17
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 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
18
commission 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 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
19
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, 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 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
20
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 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 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.
21
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 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 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
22
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.
(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.
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
23
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, 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 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
24
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.
(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
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
25
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 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 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 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."
26
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 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.
27
(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 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
28
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) 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 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,
29
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
(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 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
30
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 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 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
31
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 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 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,
32
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, 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 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
33
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 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 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
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 #:
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:
Taxpayer ID #:
AVICENNA SYSTEMS CORP.
By:
-------------------------------------------
President
Company's Taxpayer ID #:
By:
-------------------------------------------
Treasurer