1
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
OCTOBER 7, 1999
AMONG
UNITED THERAPEUTICS CORPORATION
SQ ACQUISITION, INC.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, PH.D.
▇▇▇▇ ▇▇▇▇▇▇▇▇, PH.▇.
▇▇▇▇▇ GUO, PH.D.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ESQ.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
SYNQUEST, INC.
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TABLE OF CONTENTS
PAGE
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INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1. TERMS AND EFFECT OF MERGER . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Stockholders' Rights upon Merger . . . . . . . . . . . . . . . . . . . 3
1.5 Surrender and Exchange of Shares; Payment of Merger Consideration . . . 3
1.6 Post-Closing Purchase Price Adjustment . . . . . . . . . . . . . . . . 4
1.7 Release of UT Stock Holdback from Escrow . . . . . . . . . . . . . . . 4
1.8 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . 5
1.9 Directors and Officers of Surviving Corporation . . . . . . . . . . . . 5
1.10 Statutory Effects of the Merger . . . . . . . . . . . . . . . . . . . . 5
1.11 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . 5
1.12 Additional Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS . . . . . . . . . . . . 6
2.1 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Organization, Good Standing and Qualification . . . . . . . . . . . . . 6
2.3 Corporate Capitalization; Title to Company Shares . . . . . . . . . . . 7
2.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Approvals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Authorization; Validity . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 Absence of Specified Changes . . . . . . . . . . . . . . . . . . . . . 9
2.9 Liabilities, Debts, etc . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . 13
2.13 Equipment/Title to Properties . . . . . . . . . . . . . . . . . . . . . 14
2.14 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Permits, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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2.16 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.17 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.18 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.19 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.20 Employment and Labor Matters . . . . . . . . . . . . . . . . . . . . . 19
2.21 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.23 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.24 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.25 Certain Relationships and Interests . . . . . . . . . . . . . . . . . . 23
2.26 Business Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.27 Personnel Identification and Compensation . . . . . . . . . . . . . . . 24
2.28 Absence of Certain Commercial Practices . . . . . . . . . . . . . . . . 24
2.29 Powers of Attorney; Guarantees and Other Liabilities . . . . . . . . . 24
2.30 Exemption from Filing Requirements of ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act . . . . . . 24
2.31 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.32 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.33 Y2K Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.34 Survival of Representations and Warranties . . . . . . . . . . . . . . 25
ARTICLE 3. BUYER'S REPRESENTATIONS AND
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1 Organization, Good Standing and Qualification . . . . . . . . . . . . . 26
3.2 Authorization, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.4 Approvals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.6 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.7 Continuation of Ongoing Operations . . . . . . . . . . . . . . . . . . 27
ARTICLE 4. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . 28
4.1 Conditions to Each Party's Obligations . . . . . . . . . . . . . . . . 28
(a) Consents, Approvals . . . . . . . . . . . . . . . . . . . . . . . 28
(b) No Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Conditions to Obligations of the Acquisition Subsidiary . . . . . . . . 28
(a) Stockholders' and Company's Obligations Performed . . . . . . . . 28
(b) Accuracy of Representations and Warranties . . . . . . . . . . . . 28
(c) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Transaction Agreements . . . . . . . . . . . . . . . . . . . . . . 28
(e) No Materially Adverse Effect . . . . . . . . . . . . . . . . . . . 29
(f) Certification by Stockholders . . . . . . . . . . . . . . . . . . 29
(g) Consents; Approvals . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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(i) Opinion of Stockholders' Counsel . . . . . . . . . . . . . . . . . 30
(j) Management Agreements; Employee Relationships . . . . . . . . . . 30
(k) Approval and Deliver of Documentation . . . . . . . . . . . . . . 30
4.3 Conditions to Obligations of the Stockholders and the Company . . . . . 30
(a) Acquisition Subsidiary's Obligations Performed . . . . . . . . . . 30
(b) Accuracy of Representations and Warranties . . . . . . . . . . . . 31
(c) Deliveries upon Closing . . . . . . . . . . . . . . . . . . . . . 31
(d) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) ▇▇▇▇▇▇▇▇ Guarantee . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Acquisition Subsidiary's Deliveries at the Closing . . . . . . . . . . 31
4.5 Stockholders' Deliveries at the Closing . . . . . . . . . . . . . . . . 32
ARTICLE 5. POST-CLOSING OBLIGATIONS AND
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Conduct of Business in Normal Course . . . . . . . . . . . . . . . . . 33
5.2 Certain Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.3 Accounting Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4 Employee Stock Options . . . . . . . . . . . . . . . . . . . . . . . . 33
5.5 Board Seat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.6 Working Capital and Operating Budget . . . . . . . . . . . . . . . . . 34
5.7 ▇▇▇▇▇▇▇▇ Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.8 Split-Dollar Insurance . . . . . . . . . . . . . . . . . . . . . . . . 35
5.9 Subchapter "S" Final Return . . . . . . . . . . . . . . . . . . . . . . 35
5.10 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 6. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1 Indemnification as to Representations, Warranties, Covenants
and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.3 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.5 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 41
6.6 Exchange Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.1 Transactional Expenses . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Other Agreements Superseded; Waiver and Modification, etc . . . . . . 42
7.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 Recovery of Litigation Costs . . . . . . . . . . . . . . . . . . . . . 42
7.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.6 Law Governing; Arbitration . . . . . . . . . . . . . . . . . . . . . . 44
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7.7 Assignability; Successors . . . . . . . . . . . . . . . . . . . . . . 45
7.8 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.10 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 8. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . 47
81 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
82 References
83 Headings; Schedules
84 Fair Construction
SCHEDULES
1.9 Directors and Officers of the Surviving Corporation
2.1(a) Subsidiaries
2.1(b) Ownership and Control
2.2 Organization Good Standing and Qualification
2.3 Corporate Capitalization; Title to Company Shares
2.4 No conflict
2.5 Approvals, etc.
2.7(i) Balance sheets and related statements of income (including notes,
accounting estimates and principles) of the Company as of and for
the years ending December 31, 1997 and 1998, which are audited,
and for the first sixth months of 1999 which are reviewed
2.7(ii) Unaudited balance sheet of the Company (the "Stub Balance Sheet"),
as of October 6, 1999 (the "Stub Period Date"), together with
the related statements of income (including notes, accounting
estimates and principles) from July 1,1999 through the Closing Date
2.8 Absence of specified changes
2.9 Liabilities
2.10(a) Tax Returns and Payments - Audits or Investigations
2.10(b) Tax Returns and Payments - Resulting Tax Burden
2.10(d) Tax Returns and Payments - Tax loss carry-forwards and carry-back
receivables
2.10(e) Tax Returns and Payments - Tax or loss sharing or Tax allocation
agreements and Membership in Affiliated Groups
2.11 Real Property Leases
2.12 Condition of Properties
2.13(a) Equipment/Title to Properties - Equipment
2.13(b) Equipment/Title to Properties - Equipment Leases
2.13(c) Equipment/Title to Properties - Equipment Liens
2.14 Compliance with Law - No Violations
2.15 Environmental Matters - Hazardous Materials
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2.17(a) Proprietary Rights - Owned or Licensed Proprietary Rights
2.17(c) Proprietary Rights - Licenses and Sublicenses
2.17(d) Proprietary Rights - Claims
2.17(f) Proprietary Rights - License Agreements
2.18 Customers - 1998 and First Quarter 1999
2.19 Suppliers - Top ten for 1998 and First Quarter 1999 and Payments
2.20(a)(i) Employment - Agreements and Salaries
2.20(a)(ii) Employment - Obligations to Former Employees
2.20(a)(iv) Employment - Compensation and Compliance with Laws
2.20(a)(v) Employment - Termination
2.20(b) Employment - Labor Disputes
2.21 Employee Plans
2.22 Insurance
2.23 Contracts
2.24 Legal proceedings
2.25 Certain Relationships and Interests
2.27 Employees
2.29 Powers of Attorney; Guarantees and other Liabilities
2.32 Brokers
2.33 Y2K Readiness
4.2(g) Consent and Waivers
4.3(e) ▇▇▇▇▇▇▇▇ Guarantees
5.6 New Equipment, Employees and Consultants
5.7 ▇▇▇▇▇▇▇▇ Loans
6.1(a)(ii) Designated Claims
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Articles of Incorporation of the Surviving Corporation
Exhibit C Bylaws of the Surviving Corporation
Exhibit D Opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Exhibit E Employment Agreement of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Exhibit F Employment Agreement form for ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇
Exhibit G Registration Rights Agreement
EXHIBIT H OPINION OF ▇▇▇▇▇ PATUSKY ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, CHARTERED
Exhibit I Initial Operating Budget
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "AGREEMENT") is made and
entered into as of this 7th day of October, 1999, by and among United
Therapeutics Corporation, a Delaware corporation having its principal office at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("UT"), SQ Acquisition,
Inc., an Illinois corporation and wholly owned subsidiary of UT ("ACQUISITION
SUBSIDIARY"), SynQuest, Inc., an Illinois corporation having its principal
office at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "COMPANY") and
all of the current Shareholders of the Company: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D.
residing at ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇▇▇
residing at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇
▇▇▇ residing at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("GUO)"),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. residing at ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ residing at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), (collectively, Moriarty, Penmasta, Guo, Davis, and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ are referred to herein as the "STOCKHOLDERS"). Capitalized
terms used herein are defined as set forth in Section 8.1.
RECITALS
A. The respective Boards of Directors of the Company, Acquisition
Subsidiary and UT have determined that the merger (the "MERGER") of Acquisition
Subsidiary with and into the Company in accordance with the laws of the State
of Illinois and the provisions of this Agreement is to the long term benefit of
the shareholders of each entity and shall provide strategic benefits to each of
UT and the Company, and accordingly, the respective Boards of Directors have
approved the Merger, as have the Stockholders.
B. The Company, UT, Acquisition Subsidiary and the Stockholders
desire to make certain representations, warranties and agreements in connection
with and establish various conditions precedent to the Merger.
C. For federal income tax purposes, it is intended that the
Merger of the Company and Acquisition Subsidiary shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"), and that this Agreement shall be and
hereby is, adopted as a plan of reorganization for the purposes of Section 368
of the Code.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
ARTICLE 1. TERMS AND EFFECTS OF THE MERGER
1.1 The Merger.
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Upon the terms and subject to the conditions of this Agreement, the
Merger shall be consummated in accordance with the Illinois Compiled Statutes
(the "ILLINOIS CODE"). At the Effective Time (as defined below), upon the
terms and subject to the conditions of this Agreement, Acquisition Subsidiary
shall be merged with and into the Company in accordance with the Illinois Code
and the separate existence of Acquisition Subsidiary shall thereupon cease and
the Company, as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"), shall continue its corporate existence under the laws of the
State of Illinois as a wholly owned subsidiary of UT. The parties shall
prepare and execute a certificate of merger (the "CERTIFICATE OF MERGER") in
order to comply in all respects with the requirements of the Illinois Code and
with the provisions of this Agreement.
1.2 Effective Time.
The Merger shall become effective at the time of the filing of the
Certificate of Merger with the Secretary of the State of Illinois in accordance
with the applicable provisions of the Illinois Code. The Certificate of Merger
shall be filed as soon as practicable after all of the conditions set forth in
this Agreement have been satisfied or waived by the party or parties entitled
to the benefit of the same. UT and the Company shall mutually determine the
time of such filing and the closing of the Merger (the "CLOSING") shall occur
at the Chicago offices of the Company. The time when the Merger shall become
effective is herein referred to as the "EFFECTIVE TIME" and the date on which
the Effective Time occurs is herein referred to as the "CLOSING DATE".
1.3 Merger Consideration.
(a) Subject to the provisions of this Agreement and any applicable
backup or other withholding requirements, each of the issued and outstanding
shares (the "COMPANY SHARES") of common stock, no par value, of the Company
(the "COMPANY COMMON STOCK"), as of the Effective Time shall be converted into
the right to receive, and there shall be paid and issued as hereinafter
provided, in exchange for each of the Company Shares, 67.5 shares (the
"EXCHANGE RATIO") of the common stock of UT, par value $0.01 per share (the "UT
Stock") and Two Hundred Thousand Dollars ($200,000) (the "MERGER
CONSIDERATION") as provided in Section 1.5 below.
(b) As of the Effective Time, by virtue of the Merger, each issued
and outstanding share of the capital stock of Acquisition Subsidiary shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
(c) No fractional shares of UT Stock shall be issued pursuant to
the Merger. Any such fractional shares shall be rounded to the nearest whole
number of shares and otherwise disregarded.
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(d) Each share of Company Common Stock held in the treasury of the
Company shall be canceled as of the Effective Time and no Merger Consideration
shall be payable with respect thereto.
1.4 Stockholders' Rights upon Merger.
Upon consummation of the Merger, the certificates which theretofore
represented the Company Shares (the "CERTIFICATES") shall cease to represent
any rights with respect thereto and, subject to applicable law and this
Agreement, shall only represent the right to receive the Merger Consideration.
1.5 Surrender and Exchange of Shares; Payment of Merger Consideration.
(a) Prior to the Closing Date, UT shall deposit, or cause to be
deposited with its transfer agent, Bank of New York (the "TRANSFER AGENT"),
such certificates evidencing such number of shares of UT Stock in order to
enable the Transfer Agent to issue the UT Stock pursuant to this Agreement.
(b) On the Closing Date, each Stockholder shall surrender his
Company Shares to UT with a duly completed and executed stock power in favor of
UT. Upon such surrender and delivery, each Stockholder shall receive a
certificate representing the following number of whole shares of UT Stock into
which such Stockholder's Company Shares have been converted pursuant to this
Agreement less such Stockholder's pro rata share of the UT Stock Holdback with
the exception of ▇▇▇▇▇ who is not participating in the UT Stock Holdback
(defined below) (determined based on the Stockholder's percentage ownership of
the Company on the Closing Date) and a cashier's check representing the
following cash payable to each Stockholder:
Name Shares at Closing Cash
---------------------------------- ----------------- -----------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D. 56,080 $ 133,334
▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D. 12,058 $ 28,666
▇▇▇▇▇ ▇▇▇, Ph.D. 12,058 $ 28,666
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 2,692 $ 6,400
▇▇▇▇▇▇ ▇▇▇▇▇, Esq. 1,485 $ 2,934
c) On the Closing Date, the parties shall deliver into a strict
joint order escrow (the "ESCROW") with Chicago Title and Trust Company (the
"ESCROW AGENT") pursuant to a mutually acceptable Escrow Agreement at Exhibit
A, the UT Stock Holdback, which shall consist of 16,878 shares of UT common
stock (the "UT STOCK HOLDBACK"). The certificate for the UT Stock Holdback
shall be held in the name of "SynQuest Acquisition Escrow" or such comparable
name as may be required by the Transfer Agent.
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1.6 Post-Closing Purchase Price Adjustment.
As soon as practicable following the Closing Date, but in no event
later than ninety (90) days therefrom, UT shall prepare a closing balance sheet
of the Company indicating the amount of Company Indebtedness (as defined in
Article 8 below) as of the Closing Date. To the extent that the Company
Indebtedness as of the Closing Date exceeds Seven Hundred Seventy-Seven
Thousand Forty-Nine Dollars ($777,049), the UT Stock Holdback shall be reduced
by such amount and the number of shares of the UT Stock Holdback of each
Stockholder other than ▇▇▇▇▇ shall be reduced by the return to UT of such
Stockholder's pro rata share of such shares of UT Stock based on the per share
Market Price used to determine the number of shares of the UT Stock Holdback as
of the Closing Date. The certificate held in Escrow shall be replaced with new
certificates issued to each of the Stockholders other than ▇▇▇▇▇ for his pro
rata share of the reduced number of shares of UT Stock Holdback.
1.7 Release of UT Stock Holdback from Escrow.
(a) On the date which is one year from the Closing Date, the
Escrow Agent shall distribute from Escrow to the Stockholders other than ▇▇▇▇▇,
pro rata in accordance with their percentage ownership of the Company on the
date hereof, certificates representing all remaining shares of the UT Stock
Holdback less (i) that number of shares of UT Stock then equal in value (based
on the then Market Price of UT Stock) to the amount of the Offset under Section
6.3 below, if any; and (ii) that number of shares of UT Stock then equal in
value to the sum of $200,000 (based on the then Market Price of UT Stock).
(b) On the date which is four years from the Closing Date, the
Escrow Agent shall distribute from Escrow to the Stockholders other than ▇▇▇▇▇,
pro rata in accordance with their percentage ownership of the Company on the
date hereof, certificates representing all remaining shares of the UT Stock
Holdback less that number of shares of UT Stock then equal in market value
(based on the then Market Price of UT Stock) to the amount of any Offset under
Section 6.3 below, if any, which Offset has not otherwise been taken into
account in connection with the Escrow disbursement contemplated by Section
1.7(a) above.
1.8 Certificate of Incorporation and Bylaws.
At and after the Effective Time, the Certificate of Incorporation of
the Surviving Corporation shall be amended as set forth on Exhibit B hereto and
the Bylaws of the Surviving Corporation shall be amended as set forth in
Exhibit C.
1.9 Directors and Officers of Surviving Corporation.
The individuals set forth on Schedule 1.9 shall, at and after the
Effective Time, be the directors of the Board of Directors of the Surviving
Corporation, and the individuals set forth on such Schedule shall, at and after
the Effective Time, be the officers of the Surviving Corporation; provided,
however, that the term of office for each person set forth on Schedule 1.9 who
is a
11
designee of the Company shall commence on the fifth day immediately following
the Effective Date.
1.10 Statutory Effects of the Merger.
The Merger shall have all further effects as specified in the
applicable provisions of the Illinois Code.
1.11 Tax-Free Reorganization.
The parties intend that the Merger qualify as a reorganization within
the meaning of Section 368(a) of the Code. None of the parties will knowingly
take any action that would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code. Following the
Effective Time, UT shall use its reasonable best efforts to conduct its
business in a manner that would not jeopardize the characterization of the
Merger as a reorganization within the meaning of Section 368(a). UT presently
intends to continue and shall continue for periods after the Effective Time at
least one significant historic business line of the Company, or use at least a
significant portion of the Company's historic business assets in a business, in
each case within the meaning of Treasury Regulation Section 1.368-1(d).
1.12 Additional Actions.
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or
assets of Acquisition Subsidiary or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Acquisition
Subsidiary or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Acquisition
Subsidiary or the Company, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Company represents and warrants, and Moriarty, Penmasta, Guo and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
hereby jointly and severally (except as otherwise expressly provided herein),
and ▇▇▇▇▇ (only to the extent of Sections 2.3, 2.4(a) and 2.6) represent and
warrant to UT and the Acquisition Subsidiary, as follows:
2.1 Subsidiaries.
(a) The Company has no subsidiaries and there are no other
entities owned or controlled
12
by the Company other than as provided in Schedule 2.1(a).
(b) Except as otherwise set forth on Schedule 2.1(b), the Company
neither owns, directly or indirectly, nor has the right to acquire, any share
of capital stock, partnership interest, joint venture interest or other
security or equity interest in any corporation, limited liability company,
partnership, joint venture, or other entity, nor does any representative of the
Company serve as a director in law or in fact of any companies or entities
whatsoever.
2.2 Organization, Good Standing and Qualification.
The Company is a corporation duly organized and validly existing under
the laws of Illinois. The Company has all necessary power and authority to own
its Properties and to carry on its business as now owned and operated by it.
The Company is engaged in the business of research, development, organic
synthesis of complex molecules, and the manufacture of pharmaceutical
intermediates (the "BUSINESS"). The Company is duly qualified to do business
or is otherwise approved or validly registered and is in good standing in every
jurisdiction where the character of the Properties owned or leased by it or the
nature of the business conducted by it makes such qualification, approval or
registration necessary. Schedule 2.2 sets forth all of the jurisdictions in
which the Company is qualified to do business or otherwise is approved or
registered or has branch offices or representative offices. All of the
registers, account books, minute books, and corporate documents of the Company,
as delivered to Acquisition Subsidiary, have been, through the date of
delivery, and continue to be, maintained, and give a true and accurate account
of the activities of the Company through the date of such delivery as required
by laws, governmental regulations, rules or corporate constituent documents.
The only business engaged in by the Company is the Business.
2.3 Corporate Capitalization; Title to Company Shares.
The current corporate capital and capital stock (including, where
applicable, the authorized capital and the issued and outstanding shares of
capital) of the Company including, without limitation, all of the shares of
capital stock, by type and number, are accurately and completely set forth at
Schedule 2.3, and all of the Company Shares are represented in the stock ledger
of the Company. Schedule 2.3 further sets forth an accurate and complete list
of the holders of capital stock in the Company, specifying the name and address
of such holders, the type and number of shares held by such holders, and the
percentages of capital, voting rights and dividend rights of the shares
specified at Schedule 2.3. All shares of capital stock of the Company
currently issued and outstanding have been duly authorized and validly issued
and are fully paid and nonassessable and no personal liability, having its
origin prior to or which may arise as a result of the transactions contemplated
hereby, attaches to the ownership thereof. Except for this Agreement, and
except as otherwise disclosed on Schedule 2.3, there are no outstanding
options, warrants, agreements, conversion rights, preemptive rights or other
rights to subscribe for, purchase or otherwise acquire the Company Shares or
any other shares of Company Common Stock, any unissued or treasury shares of
capital stock of the Company, or any securities convertible into or
exchangeable for any shares of capital stock of the Company. The Stockholders
have valid and marketable title to the Company Shares free and clear of any
Liens having their origin prior to or which may arise as a result of the
transactions contemplated hereby. None of the shares of capital stock
indicated on
13
Schedule 2.3 as being currently outstanding have been redeemed. There are no
voting trusts, shareholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any shares
of capital stock or any other interest in the Company.
2.4 No Conflict.
Except as provided in Schedule 2.4, the execution and delivery of this
Agreement and the Transaction Agreements to be entered into pursuant hereto, do
not, and the performance of and compliance with this Agreement and such
Transaction Agreements, will not:
(a) give rise to, accelerate the maturity of or otherwise modify
any obligation of any of the Stockholders or the Company or result in a
material breach of or constitute (with or without the giving of notice or the
passage of time or both) a material default under any material obligation of
any of the Stockholders or the Company or result in the creation of a Lien on
the Company Shares or any of the assets of the Company pursuant to the terms of
(i) any statute, law, ordinance, rule or regulation, or (ii) the terms,
conditions or provisions of the constituent documents of the Company, or any
Contract, permit, concession, grant, franchise, license, judgment, order,
decree or other instrument or arrangement to which any of the Stockholders or
the Company is a party or by which any of the Stockholders or the Company or
any of the Property of any of the Stockholders or the Company is bound; or
(b) give rise to (i) any loss of subsidies, bonuses, exemptions,
rebates, discounted loans or other advantages, (ii) any early termination or
significant modification of any Contract to which the Company is a party, (iii)
any obligation to pay a bonus, or indemnitee or other payment to any employee
or contractor or manager of the Company, (iv) any calls for early repayment of
any loans or financing granted to the Company, (v) any modification, suspension
or withdrawal of any permits or authorizations granted to the Company, or of
any favorable fiscal or corporate regime in place as a result of an agreement
or otherwise, (vi) payment of any taxes, fees or duties, (vii) any entitlement
for any Person to be released from its obligations under the terms of any
guarantee, comfort letter or other similar document issued as a security or in
support of any undertakings on the part of the Company, and (viii) any
registration or constitution of a pledge or other security on the assets of
Company.
2.5 Approvals, etc.
Except as provided in Schedule 2.5, no consent, permit or approval of,
filing with or notice to any Governmental Agency or any other Person (whether
or not governmental in character) has been or is required to be obtained, made
or given by any of the Stockholders or the Company in connection with the
execution and delivery of this Agreement or the Transaction Agreements to be
entered into pursuant hereto or the performance of and compliance with this
Agreement and such Transaction Agreements, other than those which have been
obtained.
2.6 Authorization; Validity.
Each of the Stockholders and the Company has full power, legal
capacity and authority to
14
enter into, perform and comply with this Agreement and each of the Transaction
Agreements to which it is or will be a party. This Agreement and each of the
Transaction Agreements have been, or will at Closing be, duly executed by each
of the Stockholders and the Company, as the case may be, and constitute, or
will constitute at Closing, the valid and binding obligations of Stockholders
and the Company, enforceable against the Stockholders and the Company, as the
case may be, in accordance with their terms, except as the same may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and by general equitable
principles.
2.7 Financial Statements.
Schedule 2.7(i) includes the balance sheets and related statements of
income (including notes, accounting estimates and principles) of the Company
prepared in accordance with generally accepted accounting principles
consistently applied as of and for the years ending December 31, 1997 and 1998,
and for the first six months of 1999, which balance sheets and related
statements of income for 1997 and 1998 are audited, subject to any limiting
conditions or statements set forth therein. Schedule 2.7(ii) to this Agreement
sets forth the unaudited balance sheet of the Company (the "STUB BALANCE
SHEET"), as of October 6, 1999 (the "STUB PERIOD DATE"), together with the
related statements of income (including notes, accounting estimates and
principles) from July 1, 1999 to the Closing Date. The financial statements in
Schedules 2.7(i) and 2.7(ii) are referred to collectively as the "FINANCIAL
STATEMENTS." The Financial Statements (a) have been prepared in accordance
with generally accepted accounting principles consistently applied, (b) subject
to any limiting conditions or statements set forth therein, fairly present the
financial position of the Company as of the respective dates indicated and the
results of the Company's operations for the respective periods indicated, and
(c) were prepared from existing books, records, descriptions and
representations of the Company relating to the audit periods and audit times,
which books, records, descriptions and representations of the Company, when
taken in conjunction with the audit statement and work papers, are
substantially complete and correct in all material respects and do not contain
or reflect any material inaccuracies or discrepancies.
2.8 Absence of Specified Changes.
Except as set forth in Schedule 2.8, as contemplated by the Financial
Statements as of the Stub Period Date, and as otherwise expressly contemplated
by this Agreement, since December 31, 1998, there has not been any:
(a) Materially Adverse change in the financial condition,
liabilities, assets, business or prospects of the Company or the Business;
(b) Transactions by the Company except in the Ordinary Course of
Business as conducted through that date;
(c) Capital expenditure by the Company exceeding $25,000
individually or $100,000 in the aggregate (for all purposes relevant to this
Article 2, expenditures or costs in a currency other than Dollars shall be
converted into Dollars at a rate of purchase of such other currencies with
15
Dollars at the Designated Exchange Rate on the date of execution of this
Agreement);
(d) Destruction or loss of or damage to any Property of the
Company that is Materially Adverse;
(e) Labor trouble or other event or condition in respect of the
officers or employees of the Company that is Materially Adverse;
(f) Entering into or assumption of any material Contract or
obligation by the Company, except in the Ordinary Course of Business or as
contemplated hereby;
(g) Change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by
the Company;
(h) Revaluation by the Company of any of its assets for book or
tax purposes, except for possible adjustments made as part of or arising out of
the preparation of the Financial Statements;
(i) Except as disclosed on Schedule 2.27, increase in the salary
or other compensation payable or to become payable by the Company to any of its
officers, directors, employees, consultants, or contractors, or the
declaration, payment or commitment or obligation of any kind for the payment of
a bonus or other additional salary or compensation to any such individual,
except as dictated by applicable law;
(j) Except for any sale or disposal of used Equipment, the
aggregate net book value of which is $25,000 or less individually and $50,000
or less in the aggregate, sale, lease or other disposition or transfer of any
Property of the Company other than in the Ordinary Course of Business for fair
consideration in transactions in which the sales price has either been paid or
is represented by trade accounts receivable described in the first sentence of
Section 2.16;
(k) Amendment or termination of any Contract or license to which
either the Company is a party or by which the Company or any of the Property of
the Company is or may be bound, except in the Ordinary Course of Business and
which is not Materially Adverse or as contemplated hereby;
(l) Loan by the Company to any Person, or Guarantee by the Company
of any obligation of any Persons;
(m) Other than drawing on lines of credit in the Ordinary Course
of Business with disclosure to Acquisition Subsidiary prior to Closing, any
increase in the level of Company Indebtedness or any new borrowings or loans by
the Company or any of its Subsidiaries;
(n) Waiver or release of any right or claim of the Company, except
in the Ordinary Course of Business and which is not Materially Adverse;
(o) Except for dividends, distributions or other such payments to
the Company, any
16
dividends, distributions or other payments to any of the shareholders of or
equity holders in, the Company or the Stockholders or any Affiliates, in each
case in any form, or any loans, advances or capital contributions to, or
investments in, any other Person;
(p) Imposition of any Lien (other than a Permitted Lien) on any
Property of the Company;
(q) Any failure to pay the trade payables and other obligations of
the Company in excess of $5,000 individually within 60 days of the date of
receipt of invoices therefor or pursuant to their agreed payment terms, or any
change in the practices or procedures of the Company with respect to the
payment of trade payables or other obligations of the Company or the collection
of accounts receivable and revenues (whether by way of acceleration of
collections or otherwise); or
(r) Any significant deterioration in accounts receivable aging of
the Company, recognizing, however, the nature of the type of contracts
constituting the Company's Business, the cyclical nature of deliverables,
performance and accounts receivable, billing and payment cycles.
(s) Payment, discharge or satisfaction of any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), in accounts which in the aggregate do not exceed the sum of
$25,000, other than the payment, discharge or satisfaction, in the Ordinary
Course of Business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent audited financial statements (or the notes thereto) of the Company;
(t) Exclusive license or other license or arrangement outside the
Ordinary Course of Business with respect to Proprietary Rights;
(u) Failure to maintain adequate insurance consistent with past
practices for the Business and Properties; and
(v) Loss of key employees, loss of key customers, or the sale or
assignment of any customer order or contract.
2.9 Liabilities, Debts, etc.
Except for the Company Liabilities set forth in Schedule 2.9, the
Company does not have any liabilities, debts or obligations (and is subject to
no claims), known or unknown, fixed or contingent, liquidated or unliquidated,
secured or unsecured, direct or indirect, or of any other kind, other than (a)
liabilities specifically disclosed and identified as to nature and amount on
the Stub Balance Sheet or in the Schedules attached hereto (but only to the
extent of such amounts specifically disclosed in such Schedules or to the
extent the Contracts giving rise to any such liabilities have been specifically
identified in such Schedules), and (b) liabilities, debts, obligations or
responsibilities arising since the Stub Period Date which have been incurred by
the Company in the Ordinary Course of Business and which are consistent with
the representations and warranties in Section 2.8.
17
2.10 Tax Returns and Payments.
(a) All Tax declarations, returns and other filings required to be
filed or made by the Company have been timely filed and are true, correct and
complete, and all Taxes, assessments, fees, interest, penalties and other
governmental charges shown to be due and payable on such declarations, returns
or filings have been paid or will be paid on a timely basis. Stockholders have
delivered complete copies of all such Tax declarations, returns and other
filings made within the past three years to Acquisition Subsidiary prior to the
execution of this Agreement. The Company has not received any written notice of
a proposed deficiency or additional assessment for any Taxes, assessments,
fees, interest, penalties or governmental charges against the Company, and no
claim for assessment or collection of Taxes has been made at any time since
September 1, 1995 or, to the extent not resolved as of the date hereof; at any
time prior to September 1, 1995, by an authority in a jurisdiction where the
Company does not file Tax Returns. Except as set forth at Schedule 2.10(a),
there is no completed, pending, or threatened Tax audit or investigation with
respect to the Company and the Company neither is the subject of any inspection
or inquiry, nor received any request or notice from any Governmental Authority
with respect to, the Tax declarations, returns or filings of the Company or
Taxes that may be due by the Company. All Taxes resulting from or relating to
the operations of the Company which were or will be required to have been paid,
withheld or collected and remitted to the proper taxing authority by the
Company at any time prior to the Closing, have been, or will prior to Closing
be, paid, withheld or collected and remitted in full, except as provided on
Schedule 2.10(a)
(b) The Company shall not incur any tax burden as a result of the
cessation, due to the sale of the Company Shares, of any integration or
consolidation regime applicable to any of them, except as provided on Schedule
2.10(b).
(c) The Company has not benefited from any fiscal advantage or
favorable regime by reason of its status or activities. The Company has not
benefited from any fiscal advantage or favorable tax regime in exchange for
existing undertakings or obligations by which it is still bound. The Company
is not bound by any obligation nor shall it incur any additional tax burden as
a result of its enjoyment of any fiscal advantages, carry-forward or
postponement of taxation, or of any favorable tax regime, other than with
respect to accelerated depreciation.
(d) The Company is the beneficiary of the tax loss carry-forwards
(including deferred depreciation) carry-back receivables and similar items set
forth in Schedule 2.10(d).
(e) Except for Permitted Liens, there are no Liens for Taxes upon
the assets of Company. No consent or agreement has been made under Section
341(f) of the Code, by or on behalf of Company or any predecessor thereof.
Except as set forth on Schedule 2.10(e), the Company is not nor has it been a
party to any Tax or loss sharing or Tax allocation agreement. No item of
income or gain reported by Company for financial accounting purposes in any
pre-Closing period is required to be included in Taxable income in any post-
Closing period, except for contracts in progress. Except as disclosed on
Schedule 2.10(e), the Company is not nor has it been a member of any affiliated
group of corporations within the meaning of Section 1504 of the Code. The
18
Company has neither participated in, nor cooperated with, an international
boycott within the meaning of Section 999 of the Code. The Company is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any fixture Taxable period, by reason of a change in accounting method; nor
does the Company have any knowledge that the IRS (or other Taxing authority)
has proposed, or is considering, any such change in accounting method except as
may be otherwise disclosed on Schedule 2.10(a). The Company is not nor has it
been a party to any agreement, contract, or arrangement that would result in
the payment of any "excess parachute payment" within the meaning of Section
280(G) of the Code ("EXCESS PARACHUTE PAYMENT"). The Company will take all
action required by Section 280(G) of the Code and the regulations thereunder
necessary to ensure that no payment in connection with the acquisition of the
Company constitutes an Excess Parachute Payment. There are no outstanding
rulings or requests for rulings from any Tax authority with respect to the
Company. The use of any net operating loss carryover, net capital loss
carryover, unused investment credit or other credit carryover of the Company is
not subject to any limitation pursuant to Section 382 of the Code or otherwise
that arose prior to the Closing Date.
(f) None of the assets of Company is property that is required to
be treated as owned by any other Person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code and in effect immediately
prior to the enactment of the Tax Reform Act of 1986 and none of the assets of
the Company is "Tax exempt use property" within the meaning of Section 168(h)
of the Code. None of the assets of Company secures any debt the interest on
which is Tax exempt under Section 103 of the Code.
(g) The Company has elected to be taxed as a Subchapter "S"
corporation under the Code and nothing has occurred which has caused the
Subchapter "S" status to be terminated prior to Closing.
2.11 Real Property Leases.
Schedule 2.11 contains a list of the leases of real property (the
"REAL PROPERTY") under which the Company is the lessor or lessee (the "REAL
PROPERTY LEASES"), which list identifies the date of each such Real Property
Lease and the address of the Real Property which is the subject thereof. True
and complete copies of each of the leases identified on Schedule 2.l1 and any
and all amendments thereto have been made available to Acquisition Subsidiary.
All of the assets of the Company are located on the parcels of Real Property
described in the Real Property Leases. The Company does not own any real
property.
2.12 Condition of Properties.
All buildings, improvements and Equipment owned, leased or otherwise
used by the Company and material to the operation of the Business are in good
operating condition and repair, with no material defects. The buildings,
improvements and Equipment owned, leased or otherwise used by the Company are
suitable for the operations of the Company as currently conducted. None of the
Real Property used by the Company is the subject, and to the Knowledge of the
Stockholders and the Company is not likely to become the subject, of any
actions for hidden defects, failure to
19
conform with laws, regulations, rules, codes or other applicable legal
requirements, or actions invoking the builders' liability, subject to periodic
building code, fire and life safety inspections in the normal course of
business which could result in building, tenant space, tenant equipment or
other modifications or compliance adjustments from time to time. The
activities carried out on the Real Property covered by Real Property Leases of
the Company are duly authorized thereby and are not in material violation of
any applicable law, regulation, ordinance, zoning code, or similar enactments
and which would have a Materially Adverse effect on the Company or the Business
of the Company, except as set forth in Schedule 2.12.
2.13 Equipment/Title to Properties.
Schedule 2.13(a) sets forth a complete and accurate list of each item
of Equipment owned by the Company on September 1, 1999, the gross value of
which is in excess of $15,000, and each such item of Equipment acquired or
disposed of by the Company since then and the address at which each item of
Equipment is located. Schedule 2.13(b) sets forth a complete and accurate list
of each lease pursuant to which the Company leases any item of Equipment and
under which the monthly rental payment exceeds $1,000 individually. True and
complete copies of each of the leases identified on Schedule 2.13(b) and any
and all amendments thereto have been made available to Acquisition Subsidiary.
The Company is not in default under any of the leases set forth on Schedule
2.13(b). The Company has good and marketable title to all its Properties, in
each case free and clear of any Lien except: (i) those listed in Schedule
2.13(c); (ii) Permitted Liens; (iii) Liens imposed by law and incurred in the
Ordinary Course of Business for obligations not yet due to materialmen,
warehousemen and the like; and (iv) Liens on the landlord's interest in Real
Property leased by the Company.
2.14 Compliance with Law.
(a) No Violations. Except as set forth in Schedule 2.14, to the
best of the Knowledge of the Stockholders and the Company, the Company is not
in violation of nor, since September 1, 1995, has the Company materially
violated any applicable United States or other foreign country central,
provincial, regional, federal, state, local, municipal or other governmental or
quasi-governmental statute, law, order, judgment, decree, requirement or
regulation applicable to the business, operations or Properties of the Company.
Except as set forth in Schedule 2.14, to the best of the Knowledge of the
Stockholders and the Company, neither the Stockholders nor the Company have
received (i) any notice, claim or assertion, formal or informal, oral or
written (oral notices shall so qualify only if given to a Designated Individual
and given after September 1, 1995), of any such violation by the Company from
any Person, or (ii) any request from any Governmental Agency that the Company
modify or terminate any of its operations or modify or dispose of any of its
Properties.
(b) Permits, etc. To the best of the Knowledge of the
Stockholders and the Company, the Company has or has applied for and is
diligently processing all material permits, licenses and approvals, and has
made all filings and registrations, necessary to its operation, including
without limitation its operation of the Business.
20
2.15 Environmental Matters.
(a) Hazardous Materials. Except as stated in Schedule 2.15,
neither the Company nor, to the Knowledge of the Stockholders and the Company,
any previous owner, tenant, occupant or user of the Real Property, has used,
handled, generated, produced, manufactured, installed, treated, stored,
transported, released, spilled, discharged or disposed of any Hazardous
Materials in material violation of any applicable Environmental Requirements or
in any manner which could result in material liability to the Company or the
imposition of obligations, fines or penalties on the Company. To the Knowledge
of the Stockholders and the Company, there has been no Release and there is no
Release into the environment (land, soils, surface waters, ground waters,
surface or subsurface, or air) of a Hazardous Material on, under or in the
vicinity of the Real Property.
(b) Compliance. Neither the Company nor, to the Knowledge of the
Stockholders and the Company, any previous owner, tenant, occupant or user of
the Real Property or any current operator of or tenant on the Real Property,
has received any oral or written notice or other communication (oral notices
shall so qualify only if given to a Designated Individual and given after
September 1, 1995) concerning any alleged violation of or under any
Environmental Requirement or the suspected presence of any Hazardous Material
in violation of any applicable Environmental Requirement on, under, or in the
vicinity of the Real Property, or any oral or written notice or other
communication (oral notices shall so qualify only if given to a Designated
Individual and given after September 1, 1995) or other communication concerning
alleged liability for any environmental related damages or claims in connection
with the Real Property or otherwise, including without limitation any oral or
written notice or other communication (oral notices shall so qualify only if
given to a Designated Individual and given after September 1, 1995) or other
communication concerning any potential liability as a potentially responsible
or liable party with respect to any environmental investigation or remediation,
or the incurrence of response costs regarding the Real Property or otherwise.
In addition, neither the Stockholders nor the Company has received any oral or
written notice or other communication (oral notices shall so qualify only if
given to a Designated Individual and given after September 1, 1995) concerning
any violation, alleged violation, liability or alleged liability including
without limitation as a potential responsible or liable party, of or under any
Environmental Requirement, or in regard to the presence or suspected presence
of Hazardous Materials on or in the vicinity of property owned or controlled by
any third Person which Hazardous Material was generated, transported, treated,
stored, released or disposed by or on behalf of the Company. There are no
Liens on any of the Properties of the Company arising under any Environmental
Requirements. The Company is not in violation of nor has the Company violated
at any time since September 1, 1995 any applicable United States or other
foreign country central, provincial, regional, federal, state, local, municipal
or other governmental or quasi-governmental statute, law, order, judgment,
decree, requirement or regulation relating to the environment, Hazardous
Materials, or Environmental Requirements.
2.16 Accounts Receivable.
The accounts receivable and notes receivable reflected on the Stub
Balance Sheet and the accounts receivable and notes receivable arising since
the date thereof are to the best of the Knowledge of the Stockholders and the
Company valid and binding obligations of the debtors
21
arising from a bona fide transaction in the Ordinary Course of Business and are
not subject to any defenses, counterclaims or rights of setoff. Said accounts
receivable and notes receivable have been collected or are fully collectible in
accordance with past collection practices in the Ordinary Course of Business,
except in the case of accounts receivable shown on the Stub Balance Sheet, to
the extent of the appropriate reserves set forth on the Stub Balance Sheet,
and, in the case of accounts receivable arising since the date of the Stub
Balance Sheet, subject to a reasonable allowance for bad debt which does not
reflect a rate of bad debt more than that reflected by the reserve for bad debt
on the Stub Balance Sheet.
2.17 Proprietary Rights.
(a) Schedule 2.17(a) contains a true, complete and correct list of
each Proprietary Right which is (i) owned by the Company (the "OWNED
PROPRIETARY RIGHTS") or (ii) licensed to the Company (the "LICENSED PROPRIETARY
RIGHTS") (excluding, in the case of Licensed Proprietary Rights, any
prepackaged software that may be acquired commercially for less than $25,000).
Schedule 2.17(a) identifies which of the Proprietary Rights are Owned
Proprietary Rights and which are Licensed Proprietary Rights.
(b) In each case where a patent or other registration or
application listed on Schedule 2.17(a) is held by assignment, the assignment
has been duly recorded with the Governmental Authority from which the patent or
other registration issued or before which the application for registration is
pending. The rights of the Company in or to any Proprietary Rights, and the
Exploitation of any Proprietary Rights for the continued operation of the
businesses of the Company, as currently conducted, do not and will not conflict
with, misappropriate, or infringe upon any Proprietary Right of any third
party, subject, as to future Exploitation, to the possibility of termination or
expiration of the rights of the Company to the Licensed Proprietary Rights.
(c) Each Owned Proprietary Right is exclusively owned by the
Company. Each Owned Proprietary Right and all of the rights of the Company in
or to each Licensed Proprietary Rights are held free and clear of any Liens,
other than Permitted Liens. Except as set forth on Schedule 2.17(c), the
Company has not granted any license, sublicense or other right to any other
Person with respect to the Owned Proprietary Rights or the Licensed Proprietary
Rights.
(d) Except as set forth on Schedule 2.17(d), no claims have at any
time since September 1, 1995 been made, asserted, or, to the Knowledge of
Stockholders and the Company, threatened in writing, and no claims are
presently pending or threatened, against the Company either (i) based upon or
challenging or seeking to deny or restrict the Exploitation by the Company of
any of the Proprietary Rights, or (ii) alleging that (A) the Exploitation of
the Proprietary Rights, or (B) any services provided by, processes used by, or
products manufactured or sold by the Company, does or may conflict with,
misappropriate or infringe upon the Proprietary Rights of any third party.
(e) To the Knowledge of the Stockholders and the Company, no
Person is engaging in any activity or using any Proprietary Right that
infringes upon the Proprietary Rights or upon the rights of the Company
therein. The consummation of the transactions contemplated by this
22
Agreement and the Transaction Agreements will not result in the termination or
impairment of any of the Owned Proprietary Rights.
(f) Schedule 2.17(f) sets forth a complete and accurate list of
the titles and dates of all licenses and sublicenses for the Licensed
Proprietary Rights (including all amendments of such licenses and sublicenses).
Stockholders have made available to Acquisition Subsidiary true, complete and
correct copies of such licenses and sublicenses. With respect to each such
license and sublicense (together with all amendments, consents and evidence of
commencement dates and expiration dates pertaining thereto):
(i) such license or sublicense is legal, valid, binding
and enforceable and in full force and effect;
(ii) the consummation of the transactions contemplated by
this Agreement and the Transaction Agreements will not cause such license or
sublicense to cease to be legal, valid, binding and enforceable and in full
force and effect on terms substantially identical to those currently in effect,
nor will the consummation of the transactions contemplated by this Agreement or
the Transaction Agreements constitute a breach or default under such license or
sublicense or otherwise give the licensor or sublicensor a right to terminate
or materially modify such license or sublicense;
(iii) with respect to each such license or sublicense: (A)
the Company has not received any written notice of termination or cancellation
under such license or sublicense and no licensor or sublicensor will have any
right of termination or cancellation under such license or sublicense as a
result of the consummation of the transactions contemplated by this Agreement
and the Transaction Agreements, and (B) the Company has not received any notice
of a breach or default under such license or sublicense, which breach or
default has not been cured; and
(iv) the Company is not in breach or default in any
material respect under such license or sublicense.
(g) The rights of the Company to the Owned Proprietary Rights,
and, to the Knowledge of Stockholders and the Company, the rights of the
source(s) of each of the Licensed Proprietary Rights in or to such Licensed
Proprietary Rights, have not been adjudged invalid or unenforceable as a whole
or in part and, to the Knowledge of the Stockholders and the Company, all
Proprietary Rights are valid and enforceable.
(h) All prepackaged software presently or in the past use by the
Companies was and is being used pursuant to valid license or other use
arrangements.
2.18 Customers.
Schedule 2.18 sets forth the customers of the Company for the first
three months of 1999 and the year 1998, together with revenues attributable to
sales to such customers during each such period. Neither the Stockholders nor
the Company has Knowledge indicating that any of the
23
customers who have generated revenues for the Company since January 1, 1998 is
either dissatisfied with the performance of the Company which would have a
Materially Adverse effect on the loss of anticipated future business, or
intends to cease purchasing, or materially reduce the amount of its purchasing,
from the Company, if the loss of or reduction in such purchasing by any single
customer or in the aggregate would have a Materially Adverse effect on the
Company.
2.19 Suppliers.
Schedule 2.19 sets forth the top ten suppliers of materials to the
Company for the first three months of 1999 and the year 1998, together with
payments attributable to such supplier during each such period. Neither the
Stockholders nor the Company has Knowledge indicating that any of the suppliers
who have provided materials to the Company since January 1, 1998 intends to
cease providing materials, or materially reduce the amount of materials it
provides, to the Company, if the loss of or reduction in the provision of such
materials by any single supplier or in the aggregate would have a Materially
Adverse effect on the Company.
2.20 Employment and Labor Matters.
(a) Employment.
(i) Schedule 2.20(a)(i) sets forth a complete and
accurate list of all written employment and independent contractor Contracts to
which the Company is a party or by which the Company is bound which are not
terminable by the Company at will. The Company is not a party to, nor is it
bound by, any oral employment contracts. All other employees of the Company
are employees terminable at will under Illinois law. All of such written
employment and independent contractor Contracts are in full force and effect,
and no event has occurred and no condition exists which constitutes, or with
notice or lapse of time or both would constitute, a default by the Company, or
to the Knowledge of Seller and the Company, by any other party, under any of
such Contracts. Schedule 2.20(a)(i) sets forth a list of the annual salaries
for all employees of the Company and the amount and payment terms for payments
to consultants of the Company.
(ii) Schedule 2.20(a)(ii) sets forth severance and other
obligations of the Company to former employees or corporate officers of the
Company and which are still outstanding. Neither the Stockholders nor the
Company has undertaken to grant any benefits to any employees or corporate
officers of the Company as a result of the completion of the transactions
provided for herein. Since December 31, 1998, the Company has not changed its
hiring or termination policies or practices in any material respect.
(iii) No officers or employees of the Company have
resigned, or made known his or her intention to resign, within the three months
preceding the Closing Date.
(iv) Except as set forth on Schedule 2.20(a)(iv), as of
the date hereof, the
24
Company has paid when due to any of the Company's employees, officers or
directors, any wages, salaries, commissions, bonuses, benefits, paid holidays,
reimbursements or any other material compensation. Except as set forth on
Schedule 2.20(a)(iv), the Company is in material compliance with all applicable
laws, rules, regulations, ordinances, and other requirements of governmental
and quasi-governmental entities, the non-compliance of which would be
Materially Adverse to the Company or the Company's business, and all employment
and other Contracts that govern labor, employment and employment practices,
terms and conditions of employment, wages, hours and benefits, including,
without limitation, all laws, rules, regulations, ordinances, and other
requirements relating to employee health and safety, wage and hour, civil or
human rights, and employment discrimination.
(v) Except as set forth on Schedule 2.20(a)(v), no
director or officer or employee of the Company is serving the Company on terms
that require the Company to provide more than one month prior notice to
lawfully terminate his or her employment. Except as set forth on Schedule
2.20(a)(v), no employee is serving the Company on terms that require that the
Company provide more notice than is required under the laws of the applicable
jurisdiction. The removal of any such director, officer or employee will not
result in the creation or acceleration of any rights of third parties against
the Company, including any right to acquire Proprietary Rights, or shares of
the Company.
(vi) To the best Knowledge of the Stockholders and the
Company, the Company is in full compliance with and has not violated the terms
and provisions of any applicable United States or other foreign country
central, provincial, regional, federal, state, local, municipal or other
governmental or quasi-governmental statute, law, order, judgment, decree,
requirement or regulation pertaining to immigration and the hiring of
non-citizens (collectively, "IMMIGRATION LAWS"). To the Knowledge of
Stockholders and the Company, the Company has not been the subject of any
inspection or investigation relating to its compliance with or violation of
Immigration Laws, nor has it been warned, fined or otherwise penalized by
reason of any failure to comply with Immigration Laws, nor is any such
proceeding pending or, to the Knowledge of the Stockholders and the Company,
threatened. The Company has provided, or will provide prior to the Closing
Date, to the Acquisition Subsidiary all employees' Form I-9 (Employment
Eligibility Verification Form) and all other records, documents or other papers
which are retained with the Form I-9 by the Company pursuant to applicable
Immigration Laws.
(b) Labor Disputes. There is no pending or, to the Knowledge of
Stockholders and the Company, threatened dispute, controversy (including any
representation question), strike, work stoppage or claimed violation of the
terms of a collective bargaining agreement or employment contract affecting or
relating to any employee or group of employees (in each case, whether union or
nonunion) of the Company that is reasonably likely to be Materially Adverse to
the Business. Schedule 2.20(b) sets forth a complete and accurate list of all
such disputes, controversies, strikes, stoppages and grievances which have
existed since September 1, 1995. Schedule 2.20(b) describes all current labor
litigation involving the Company and states the parties thereto, the subject of
the dispute, the amount claimed from the Company and the provisions made in the
Financial Statements in connection with such litigation, if any.
25
2.21 Employee Plans.
Schedule 2.21 lists each employee benefit plan (including but not
limited to incentive, bonus, vacation, severance, pension, profit sharing,
retirement, stock option or appreciation, insurance or other benefit plans)
covering active, former or retired employees of the Company and that is
sponsored or maintained by the Company or any affiliates thereof or to which
the Company or any affiliates thereof are required to make contributions. For
purposes of the preceding sentence, an employee benefit plan is "material" if
with respect to such plan, the amount spent or liability incurred or accrued by
the Company, its employees or such plan exceeded $10,000 in either of the
previous two calendar years, or is reasonably expected to exceed $10,000 in the
current or a future calendar year. Stockholders have made available to
Acquisition Subsidiary a copy of each employee benefit plan (including without
limitation to incentive, bonus, vacation, severance, pension, profit sharing,
retirement, stock option or appreciation, insurance or other benefit plans)
(each a "Plan"), and where applicable, any related trust agreement, annuity or
insurance contract and, where applicable, the most recent annual report (Form
5500) filed with the Internal Revenue Service. To the extent applicable, each
Plan complies, in all material respects, with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal
Revenue Code of 1986, as amended (the "CODE"), and, except as provided on
Schedule 2.21, a favorable determination letter has been issued by the Internal
Revenue Service with respect to each Plan intended to be qualified under
Section 401(a) of the Code and to the Knowledge of the Stockholders and the
Company, no condition exists that presents a material risk of any such letter
being revoked. No Plan is covered by Title IV of ERISA or Section 412 of the
Code. No "prohibited transaction" as defined in ERISA Section 406 or Code
Section 4975 has occurred with respect to any Plan that could reasonably be
expected to result in a material liability to the Company. Each Plan has been
maintained and administered in compliance, in all material respects, with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such Plans. There are no pending or anticipated (by
Stockholders or the Company) material claims against or otherwise involving any
of the Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Plan activities) has been brought
against or with respect to any Plan that could reasonably be expected to result
in a material liability to the Company. All material contributions, reserves
or premium payments to the Plan, accrued to the date hereof have been made or
provided for to the extent required by law or U.S. generally accepted
accounting principles. The Company has not incurred any liability under
Subtitle C or D of Title IV of ERISA with respect to any "single-employer
plan," within the meaning of Section 4001(a)(1 5) of ERISA, currently or
formerly maintained by the Company, or any entity which is considered one
employer with the Company under Section 4001 of ERISA that has not been
satisfied in full. The Company has not incurred any withdrawal liability under
Subtitle E of Title IV of ERISA with respect to any "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA that has not been satisfied
in full. The Company has made no additional binding agreements or commitments
(whether written or oral, formal or informal) to any current or former employee
of the Company that amends or modifies any Plan. The Company has not engaged
in and is not a successor or parent corporation to an entity that has engaged
in a transaction that presents a material risk of the Company incurring any
liability under ERISA Section 4069. Except as disclosed in the Financial
Statements, the Company has no current or projected liability in respect of
post-
26
employment or post-retirement welfare benefits for retired or former employees
of the Company, other than with respect to benefits provided in accordance with
Section 498GB of the Code or Tide I, Subtitle B, Part VI of ERISA or other
applicable law. No material tax under Section 49803 of the Code has been
incurred by the Company in respect of any Plan that is a group health plan, as
defined in Section 5000(b)(l) of the Code that has not been satisfied in full.
The transactions contemplated by this Agreement shall not, by themselves,
result in, and are not a pre-condition to, an increase in or acceleration of
benefit payments or vesting in Plan benefits.
2.22 Insurance.
Schedule 2.22 lists all policies of liability, theft, fire, title,
workers' compensation and other forms of insurance and surety bonds insuring
the Company and its directors, officers, employees, Properties, assets and
businesses. All policies listed in Schedule 2.22 are in full force and effect
and all premiums have been paid promptly by the Company. The Company has not
failed to give any notice or to present any claim under any such policy or
binder in a due or timely fashion. Except as set forth on Schedule 2.22, there
have not been any claims in excess of $10,000 under any of the policies listed
in Schedule 2.22 or against any insurers in relation to the operation of the
Company since September 1, 1995.
2.23 Contracts.
Schedule 2.23 sets forth a complete and accurate list of each Contract
to which the Company is a party other than (i) Contracts under which no party
thereto has any remaining liability, absolute or contingent, (ii) Contracts
included or listed in another Schedule under this Article 2, (iii) purchase
orders for goods or services placed in the Ordinary Course of Business and
Contracts in the Ordinary Course of Business for facility services, (iv)
contracts terminable at will by the Company without liability to the Company,
(v) contracts for or related to employment, and (vi) Contracts entered into in
the Ordinary Course of Business, no one of which involves outstanding
obligations by or to the Company of $10,000.
The Contracts included or listed in Schedule 2.23 or in the other
Schedules to this Article 2 (the "DESIGNATED CONTRACTS") are and shall be at
Closing in full force and effect and are valid and enforceable in accordance
with their respective terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general equitable principles. No
event has occurred and no condition exists which constitutes, or with notice or
lapse of time or both would constitute, a material default by the Company, or
to the Knowledge of Stockholders and the Company, by any other party, under any
of the Designated Contracts. None of the Stockholders or the Company has
received any oral or written notice (oral notices shall so qualify only if
given to a Designated Individual and given after September 1, 1995) that any
party to any of the Designated Contracts intends to cancel or terminate any of
them or to exercise or not exercise any options under any of them. The Company
is not a party to, nor is the Property of the Company bound by, any non-written
contract material to the Business or the Company, taken as a consolidated
whole, not disclosed in this Agreement or the schedules hereto. None of the
Designated Contracts is contrary to any legal or regulatory provisions, or to
any judicial or administrative decision.
27
2.24 Legal Proceedings.
Schedule 2.24 sets forth a complete and accurate list of all claims,
suits, actions, arbitrations, legal, administrative or other proceedings or
governmental investigations (i) to which the Company is a party or which are,
to the Knowledge of Stockholders and the Company, threatened against the
Company, (ii) to which any employee or representative of the Company is a party
and in respect of which the Company is obligated to provide indemnification or
reimbursement, or (iii) to which the Company or any employee or representative
of the Company was a party (with respect to the latter, only to the extent the
Company was obligated to provide indemnification or reimbursement in respect
thereof) at any time since September 1, 1995. Schedule 2.24 sets forth, for
each of the matters identified therein, a brief summary of such matter and the
parties involved therein, the total maximum amount claimed by the plaintiff
against the Company if not yet settled or resolved as of the Closing Date, and,
to the extent settled or resolved, the amount paid by the Company in judgment
or settlement and any other remedies imposed upon the Company as a result
thereof. There are no claims, suits, actions, arbitrations, legal,
administrative or other proceedings or governmental investigations pending or,
to the Knowledge of Stockholders and the Company, threatened which seek to
question, delay, or prevent the consummation of the transactions contemplated
by this Agreement or any of the Transaction Agreements. The Company is not in
default with respect to any judgment, order, writ, injunction, decree or award
of any Governmental Agency or of any arbitrator or arbitration panel. To the
Knowledge of Stockholders and the Company, there is presently outstanding no
reasonable basis for any other material claim, suit, action, arbitration or
other proceeding to be brought against the Company.
2.25 Certain Relationships and Interests.
Except as set forth in Schedule 2.25, and as may be disclosed by the
Financial Statements, the Company does not have, and since September 1, 1995
the Company has not had, any Contract with, any outstanding loans to or from,
any outstanding liabilities to, or any sharing arrangements (whether for
compensation or otherwise) with any officer, director, employee, stockholder,
member or Affiliate of the Stockholders, the Company, or any relative of any
such Person or any Person in which any such individual is an officer, director
or partner or has a material financial interest, direct or indirect. Except as
set forth in Schedule 2.25, no officer, director, employee, stockholder, member
or Affiliate of the Stockholders or the Company, nor any relative of any of
such individual, owns or has any direct or indirect interest in any Property
owned by or leased to the Company or any Proprietary Right licensed to or by
the Company. Except as set forth in Schedule 2.25, neither the Company nor any
officer, director, stockholder, member or Affiliate of the Stockholders, the
Company, nor any relative of any such individual, owns or has any direct or
indirect interest in any business which is a competitor, supplier or customer
of the Company or in any Person with whom the Company is doing business in any
way.
2.26 Business Records.
All records of the Company, including without limitation all customer,
supplier, accounting, personnel and computer records, are maintained with
reasonable completeness and accuracy.
28
2.27 Personnel Identification and Compensation.
Schedule 2.27 sets forth a true and complete list of the name, title,
base salary, bonus, commission and total 1998 and 1999 to date compensation of
all current employees and independent contractors of the Company and the
amount, if any, by which the base salary of each such employee was increased or
decreased for calendar year 1999.
2.28 Absence of Certain Commercial Practices.
Neither the Company nor any of the officers, directors, employees and
agents of the Company have, directly or indirectly, since September 1, 1995
(and, to the Knowledge of the Company and the Stockholders, prior thereto),
given or made or agreed to give or make any illegal commission, payment,
gratuity, gift, political contribution or similar benefit to any customer,
supplier, governmental employee or Person who is or may be in a position to
help or hinder the Company (or assist it in connection with any actual or
proposed transaction). All sales and supply Contracts concluded by the Company
have been concluded on an arms-length basis. There are no Contracts which may
oblige the Company in the future to accept imposed purchase prices or any
restrictions whatsoever or its freedom to do business.
2.29 Powers of Attorney; Guarantees and Other Liabilities.
The Company does not have any powers of attorney outstanding (other
than those issued in the Ordinary Course of Business consistent with commercial
practices typical for the jurisdiction in question). Except as set forth in
Schedule 2.29, the Company does not have any obligations or liabilities
(absolute or contingent) as guarantor, surety, cosigner, endorser, co-maker,
indemnitor, or otherwise respecting the obligations or liabilities of any
Person, corporation, partnership, limited liability company, joint venture,
association, organization, or other entity.
2.30 Exemption from Filing Requirements of ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
The Company did not, on a cumulative basis, have net sales in the
United States in excess of $25,000,000 annually. Without regard to the total
Purchase Price to be paid hereunder, the Company has total United States assets
of less than $15,000,000. For purposes of the preceding sentence only, "total
assets" shall mean the total of all cash, deposits in financial institutions,
other money market or government obligation instruments, voting securities, and
other income-producing property of the Company.
2.31 Full Disclosure.
The representations and warranties contained in this Article 2 taken
together with the matters described in the Schedules as a whole, do not and
will not contain any untrue statement of a material fact and, to the Knowledge
of Stockholders and the Company, do not omit any material fact the omission of
which would make the statements made herein or therein misleading. To the
Knowledge of Stockholders and the Company, there is no fact which Materially
Adversely affects,
29
or which Stockholders believe will in the future Materially Adversely affect,
the condition, assets, liabilities, operations or prospects of the Company or
the Business which has not been set forth herein.
2.32 Brokers.
Except as set forth on Schedule 2.32, no broker, agent, finder,
consultant or other Person has been retained by, or has acted on behalf of the
Company or the Stockholders (other than legal and accounting advisors) or is
entitled to be paid based upon any agreements or understandings made by the
Company or the Stockholders in connection with any of the transactions
contemplated by this Agreement.
2.33 Y2K Readiness.
To the best Knowledge of Stockholders and the Company, except as set
forth on Schedule 2.33, the Company has adequately prepared for Y2K to avoid
any Materially Adverse effect on the Company and its Business.
2.34 Survival of Representations and Warranties; Nature of Representations
and Warranties.
Except as otherwise provided in Section 6.4, the representations and
warranties of the Stockholders shall survive the Closing Date for a period of
three (3) years. Notwithstanding the joint and several nature of the
representations and warranties of Stockholders, and Stockholders'
indemnification in respect of breaches of the same, the representations and
warranties of Section 2.4, Section 2.5, and Section 2.6 with respect to any
particular Seller, and the absence of conflicts with its or his agreements and
similar instruments, the absence of approvals and the like required of it or
him, and due authorization and execution of this Agreement by it or him, shall
be deemed made only by such Seller, only such Seller shall be deemed liable for
indemnification pursuant to Article 6 with respect to a breach of such
representation and warranty, and no other Seller shall have liability in
respect of a breach of such representation and warranty by any other Seller but
all Stockholders will be so liable for a breach of such representation or
warranty with respect to the Company.
ARTICLE 3. ACQUISITION SUBSIDIARY'S REPRESENTATIONS AND
WARRANTIES
Acquisition Subsidiary represents and warrants, and UT where indicated below
represents and warrants, to the Stockholders as follows:
3.1 Organization, Good Standing and Qualification.
Acquisition Subsidiary is a corporation duly organized and validly
existing under the laws of the State of Illinois and has all necessary
corporate power and authority to own, lease and operate the Properties and
assets it now owns, leases and operates and to carry on its business as now
being conducted. Acquisition Subsidiary is duly qualified and licensed and is
in good standing to do
30
business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except for such failures to be so duly qualified and
licensed and in good standing which will not in the aggregate have a Materially
Adverse effect on Acquisition Subsidiary.
3.2 Authorization, etc.
Acquisition Subsidiary has all requisite right, corporate power and
authority and full legal capacity to enter into, perform and comply with this
Agreement and each of the Transaction Agreements to which it is or will be a
party. All proceedings required to be taken by the Acquisition Subsidiary to
authorize the execution, delivery and performance of and compliance with this
Agreement and such Transaction Agreements have been properly taken and no other
proceedings (corporate or otherwise) on the part of Acquisition Subsidiary (or
its shareholders) or any other Person are necessary to authorize this Agreement
and the Transaction Agreements or to consummate the transactions contemplated
hereby or thereby. This Agreement and each of such Transaction Agreements has
been, or will be upon execution thereof, duly executed and constitute, or will
constitute upon execution thereof; the valid and binding obligation of the
Acquisition Subsidiary, enforceable against Acquisition Subsidiary in
accordance with their terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity
or at law).
3.3 No Violations.
Neither the execution and delivery of this Agreement or any of the
Transaction Agreements by the Acquisition Subsidiary nor the consummation of
the transactions contemplated hereby or thereby, will (i) violate any law,
statute, ordinance, rule or regulation to which Acquisition Subsidiary is
subject, or any provision of such Acquisition Subsidiary's organizational
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate modify, or cancel, or require any notice under, or the
consent of any other party to, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement for borrowed money,
instrument of indebtedness lien, or other arrangement to which Acquisition
Subsidiary is a party or by which it is bound or to which any of its assets is
subject, excluding from clauses (i) and (ii) above such violations, conflicts,
breaches and defaults that, in the aggregate, would not have a material adverse
effect on the ability of the Acquisition Subsidiary to consummate the
transactions provided for by this Agreement and the Transaction Agreements.
Assuming the accuracy of Stockholders' representations and warranties at
Section 2.30, Acquisition Subsidiary is not required by law to obtain any
approval from any Governmental Agency to consummate the transactions
contemplated by this Agreement or any Transaction Agreement.
3.4 Approvals, etc.
No consent, permit or approval of, filing with or notice to any
Governmental Agency or any other Person (whether or not governmental in
character) has been or is required to be obtained,
31
made or given by the Acquisition Subsidiary in connection with the execution
and delivery of this Agreement or the Transaction Agreements to be entered into
pursuant hereto or the performance of and compliance with this Agreement and
such Transaction Agreements, except such consents, permits, approvals, filings
or notices that have been so obtained, made or given.
3.5 Brokers.
Except as set forth on Schedule 2.32, no broker, agent, finder,
consultant or other Person has been retained by, or has acted on behalf of the
Acquisition Subsidiary (other than legal and accounting advisors) or is
entitled to be paid based upon any agreements or understandings made by the
Acquisition Subsidiary in connection with any of the transactions contemplated
by this Agreement.
3.6 Registration Rights.
UT is under no restriction from granting "piggyback" rights as
provided in the Registration Rights Agreement attached hereto.
3.7 Continuation of Ongoing Operations.
UT does not plan to sell, liquidate or otherwise transfer
substantially all of the assets of the Surviving Corporation within two years
from the Closing Date, other than to an Affiliate of Acquisition Subsidiary or
UT.
ARTICLE 4. CONDITIONS TO THE CLOSING
4.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the transactions to be effected by it at the Closing shall
be subject to the satisfaction, or waiver, at or prior to the Closing Date of
the following conditions:
(a) Consents, Approvals. The Company shall have received all
consents, approvals, authorizations, or other actions by, or filings with or
notification to, any Person or governmental Authority set forth in Schedule 2.5
and made all such filings and declarations, as may be required to consummate
the transactions contemplated by this Agreement, and the execution and delivery
of the Transaction Agreements.
(b) No Injunctions. There shall not be in effect any statute,
regulation, order, decree or judgment of any governmental authority which makes
it illegal or enjoins or prevents the consummation of the transactions
contemplated by this Agreement, or the Transaction Agreements.
4.2 Conditions to Obligations of the Acquisition Subsidiary. The
obligations of the Acquisition Subsidiary to effect the transactions to be
effected by it at the Closing shall be subject to the satisfaction of, or
waiver by, Acquisition Subsidiary, at or prior to the Closing Date, of the
following conditions:
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(a) Stockholders' and Company's Obligations Performed. The
Stockholders and the Company shall have performed, satisfied and complied in
all material respects with all covenants, agreements, conditions and
obligations under this Agreement required to be performed by it or them on or
prior to the Closing Date. The deliveries described in Section 4.6 hereof
shall have been made.
(b) Accuracy of Representations and Warranties. Each of the
representations and warranties of Stockholders and the Company contained in
this Agreement or any written schedule or certificate that shall be delivered
to the Acquisition Subsidiary pursuant to this Agreement shall be true and
correct in all material respects in each case as of the Closing Date (except
for representations and warranties expressly stated herein to be applicable
solely as to a specified date which were true and correct as of such date).
(c) Due Diligence. The completion of Acquisition Subsidiary's
due diligence review of the Business and operations of the Company to the
reasonable satisfaction of Acquisition Subsidiary.
(d) Transaction Agreements. The Stockholders and the Company
shall have executed and delivered each of the Transaction Agreements.
(e) No Materially Adverse Effect. No event or series of events
shall have occurred which has had or would reasonably be expected to have a
Materially Adverse effect on the Company.
(f) Certification by Stockholders. Acquisition Subsidiary shall
have received a certificate, dated the date of the Closing, signed by each of
the Stockholders, other than ▇▇▇▇▇▇ ▇▇▇▇▇, representing and warranting, in such
detail as Acquisition Subsidiary may reasonably request, that the conditions
specified in Section 4.1 and Sections 4.2(a) and (b) have been fulfilled.
(g) Consents: Approvals.
All consents, approvals and actions of, filings with and
notice to any Governmental Agency necessary to permit Acquisition Subsidiary,
Stockholders and Company obligations under this Agreement and the Transaction
Agreements and to the transactions contemplated hereby and thereby; and all
consents (or in lieu thereof waivers) listed on Schedule 4.2(g) and all other
consents (or in lieu thereof waivers) to the performance by Stockholders and
the Company of their obligations under this Agreement and the Transaction
Agreements or to the consummation of the transactions contemplated hereby and
thereby as are required under any Contract to which the Stockholders or the
Company is a party or by which any of their respective Properties are bound and
where the failure to obtain any such consent (or in lieu thereof waiver) could
reasonably be expected, individually or in the aggregate with other such
failures, to Materially Adversely affect the Acquisition Subsidiary or the
Business, (A) shall have been obtained, (B) shall be in form and substance
reasonably satisfactory to the Acquisition Subsidiary, (C) shall not be subject
to the
33
satisfaction of any condition that has not been satisfied or waived, (D) shall
be without condition Materially Adverse to the Acquisition Subsidiary, (E)
shall not be conditioned upon the giving of any additional consideration by the
Acquisition Subsidiary, and (F) shall be in full force and effect.
(h) Litigation. There shall be no investigation, notice,
litigation, arbitration or proceeding pending or threatened by any governmental
authority or Person for the purpose of enjoining or preventing the consummation
of this Agreement or the Transaction Agreements or otherwise claiming that the
consummation of this Agreement or the Transaction Agreements is illegal or
improper or which, if decided adversely, would Materially Adversely affect (i)
the Business, (ii) Acquisition Subsidiary rights in respect thereof, (iii) the
value of the Company Shares, or (iv) the Stockholders' and the Company's
ability to perform its obligations under this Agreement and the Transaction
Agreements, if and when the transactions contemplated hereby are consummated,
or that would cause any of the transactions contemplated by this Agreement or
the Transaction Agreements to be rescinded following consummation (and no such
judgment, order, decree, stipulation, injunction or change shall be in effect).
(i) Opinion of Stockholders' Counsel. Acquisition Subsidiary
shall have received from counsel for the Stockholders, an opinion dated the
date of the Closing in the form of Exhibit D.
(j) Management Agreements; Employment Relationships.
(i) The Company shall have entered into a three-year
employment agreement with ▇▇▇▇▇▇▇▇ as its President and Chief Scientific
Officer in the form of Exhibit E, including his acceptance of and agreement to
be bound by (i) UT's Employee Manual, and (ii) UT's Securities Trades by
Company Personnel Policy, both of which shall be attachments to his employment
agreement.
(ii) The Company shall have entered into three-year
employment agreements with ▇▇▇▇▇▇▇▇ and Guo in the form of Exhibit F, including
their acceptance of and agreement to be bound by (i) UT's Employee Manual, and
(ii) UT's Securities Trades by Company Personnel Policy, both of which shall be
attachments to their employment agreements.
(iii) In addition to those employees set forth in (i) and
(ii) above, substantially all employees of the Company indicate a willingness
to remain with the Company after Closing. The Acquisition Subsidiary shall be
satisfied that the transactions contemplated hereby and ownership of the
Company by Acquisition Subsidiary shall have no effect on the relations between
the Company and their employees that is reasonably likely to be Materially
Adverse to the Surviving Corporation or the Business.
(k) Approval and Delivery of Documentation. Stockholders and the
Company shall have delivered such other certificates, instruments, opinions and
other documents as Acquisition Subsidiary may reasonably request, and the form
and substance of all certificates, instruments, opinions and other documents
delivered to Acquisition Subsidiary under this Agreement shall be satisfactory
in all reasonable respects to Acquisition Subsidiary and its counsel. No legal
impediment to the consummation of transactions contemplated by this Agreement
and the
34
Transaction Agreements shall have arisen in the reasonable judgment of
Acquisition Subsidiary. The deliveries described in Section 4.5 hereof shall
have been made.
4.3 Conditions to Obligations of the Stockholders and the Company. The
obligations of the Stockholders and the Company to effect the transactions to
be effected by it at the Closing shall be subject to the satisfaction, or
waiver, at or prior to the Closing Date of the following conditions:
(a) Acquisition Subsidiary's Obligations Performed. The
Acquisition Subsidiary shall have performed, satisfied and complied in all
material respects with all covenants, agreements, conditions and obligations
under this Agreement required to be performed by it on or prior to the Closing
Date.
(b) Accuracy of Representations and Warranties. Each of the
representations and warranties of the Acquisition Subsidiary contained in this
Agreement or any written schedule or certificate that shall be delivered to the
Acquisition Subsidiary pursuant to this Agreement shall be true and correct in
all material respects in each case as of the Closing Date (except for
representations and warranties expressly stated herein to be applicable solely
as to a specified date which were true and correct as of such date), except
where the failure to be so true and correct would not, in the aggregate, have a
Materially Adverse effect on the Company.
(c) Deliveries upon Closing. Acquisition Subsidiary shall have
delivered such other certificates, instruments, opinions and other documents as
Stockholders and the Company may reasonably request, and the form and substance
of all certificates, instruments, opinions and other documents delivered to
Stockholders and the Company under this Agreement shall be satisfactory in all
reasonable respects to Stockholders and the Company and their counsel. No
legal impediment to the consummation of transaction contemplated by this
Agreement and the Transaction Agreements shall have arisen in the reasonable
judgment of Stockholders and the Company. The deliveries described in Section
4.4 hereof shall have been made.
(d) Litigation. There shall be no investigation, notice,
litigation, arbitration or proceeding pending or threatened for the purpose of
enjoining or preventing the consummation of this Agreement or the Transaction
Agreements or otherwise claiming that the consummation of this Agreement or the
Transaction Agreements is illegal or improper or that would cause any of the
transactions contemplated by this Agreement or the Transaction Agreements to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction or change shall be in effect).
(e) ▇▇▇▇▇▇▇▇ Guarantee. Those guarantees or other similar credit
support provided by ▇▇▇▇▇▇▇▇ personally as disclosed on Schedule 4.3(e) shall
be guaranteed by UT and ▇▇▇▇▇▇▇▇ shall have been released from each such
guarantee or obligations to the extent that the party so guaranteed consents to
such release prior to the Closing Date or as soon thereafter as may be
practicable.
4.4 Acquisition Subsidiary's Deliveries at Closing.
35
At Closing, UT and the Acquisition Subsidiary shall deliver to the
Stockholders the following:
(a) payment of the Merger Consideration as required under Section
1.3 above;
(b) a duly executed certificate, dated as of the Closing Date,
from UT and the Acquisition Subsidiary to the effect that the conditions set
forth in Article 4 above which have not otherwise been waived by the
Stockholders and the Company have been satisfied;
(c) a duly executed Registration Rights Agreement at Exhibit G
hereto;
(d) opinion of ▇▇▇▇▇ Patusky ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered,
counsel for Acquisition Subsidiary, addressing the matters relating to
Acquisition Subsidiary as set forth at Exhibit H and as are otherwise
reasonably acceptable in form and substance to Stockholders;
(e) letter from UT and the Acquisition Subsidiary to ▇▇▇▇▇▇▇▇,
indicating that UT and the Acquisition Subsidiary will cooperate with ▇▇▇▇▇▇▇▇
and use their best efforts to secure ▇▇▇▇▇▇▇▇'▇ release from the personal
guaranty of the ▇▇▇▇ ▇▇▇▇▇▇ Bank financings identified in Schedule 4.3(e) and
will indemnify ▇▇▇▇▇▇▇▇ against any liability under such personal guaranty if
he not released.
(f) such other instruments or documents necessary to complete the
transaction contemplated herein, all reasonably satisfactory in form and
substance to Stockholders.
4.5 Stockholders' Deliveries at Closing.
At Closing, the Stockholders and the Company shall deliver to UT and
the Acquisition Subsidiary the following:
(a) certificates evidencing all of the Company Shares with fully
executed stock powers endorsed by Stockholders to UT;
(b) a duly executed certificate, dated as of the Closing Date,
from the Stockholders and the Company to the effect that the conditions set
forth in Article 4 above which have not otherwise been waived by the
Acquisition Subsidiary have been satisfied;
(c) a duly executed Registration Rights Agreement at Exhibit G;
(d) certificates of the Secretary of the Company certifying the
authenticity and completeness and accompanying the charter, By-laws, existing
minutes and stock record book of the Company;
(e) duly executed Employment Agreements referenced in Sections
4.2(j)(i) and (ii);
(f) opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., counsel for Stockholders,
addressing the matters
36
relating to Stockholders and the Company set forth at Exhibit D and as are
otherwise reasonably satisfactory in form and substance to Acquisition
Subsidiary;
(g) such other instruments or documents necessary to complete the
transaction contemplated herein, all reasonably satisfactory in form and
substance to the Acquisition Subsidiary.
ARTICLE 5. POST-CLOSING OBLIGATIONS AND AGREEMENTS
The Stockholders, the Acquisition Subsidiary, the Company and UT, as
may be provided below, respectively covenant that:
5.1 Conduct of Business in Normal Course.
Stockholders have caused the Company to carry on, and the Company has
carried on, the Business diligently in the Ordinary Course of Business and in a
manner consistent with past practice.
5.2 Certain Taxes.
All transfer, documentary, sales, use, value added, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement or the transaction
contemplated hereby shall be paid by Stockholders when due, and Stockholders
will, at their own expense, file all necessary Tax returns and other
documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, Acquisition Subsidiary will join in the execution of any such Tax returns
and other documentation. Stockholders shall indemnify, defend and hold
Acquisition Subsidiary and the Surviving Corporation, together with their
respective Affiliates, officers, directors, shareholders, employees and agents,
harmless from and against any such Taxes.
5.3 Accounting Fees.
The Surviving Corporation shall pay the fees of ▇▇▇▇▇▇▇▇, Kallick and
Bartlestein, LLP (other than fees incurred by them in connection with services
rendered to the Stockholders personally in connection with the transactions
contemplated herein) in the amounts set forth in Schedule 2.9 in three equal
monthly payments with the first payment to be made on or before October 15,
1999.
5.4 Employee Stock Options.
Within fifteen Business Days after Closing, UT shall grant to
employees of the Surviving Corporation the number of stock options for UT
common stock pursuant to UT's Equity Incentive Plan, vesting 20% each year over
a five-year period that is provided adjacent to their names in Schedule
2.20(a)(i).
37
5.5 Board Seat.
The Stockholders shall have the right for a three-year period from the
Closing Date to name one qualified, competent member of the Surviving
Corporation's Board of Directors subject to the consent of the Surviving
Corporation, which consent shall not be reasonably withheld.
5.6 Post-Closing Operations.
(a) The Surviving Corporation will operate the Business pursuant
to the initial operating budget attached at Exhibit I to achieve the following
two priorities: (i) the highest priority is to support FDA approval of UT-15 in
the shortest possible time, and (ii) the second highest priority is to operate
profitably and cash-flow positive at all times.
(b) The parties acknowledge that the amount of new cash provided
by UT for new equipment, employees and consultants for the Surviving
Corporation to achieve the highest priority is detailed in Schedule 5.6. The
parties acknowledge that UT will not add new cash into the Surviving
Corporation beyond that amount identified in Schedule 3.7, but will instead
apply UT's marketing and sales resources to helping the Surviving Corporation
maintain profitability and cash-flow positive business status at all times
pursuant to the operating budget at Exhibit I.
(c) The parties acknowledge that ▇▇▇▇▇▇▇▇, as President & Chief
Scientific Officer of the Surviving Corporation, will report to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
as CEO of the Surviving Corporation.
(d) A new Director of Operations will be hired with responsibility
for ensuring that the Surviving Corporation produces UT-15 to GMP standards and
passes the upcoming FDA inspections. The Surviving Corporation's new Director
of Operations will report to the Surviving Corporation's CEO to ensure that the
Surviving Corporation produces UT-15 to GMP standards and passes the upcoming
FDA inspections.
(e) All expenditures within the operating budget provided at
Exhibit I as it may be revised from time to time shall be approved by the
Surviving Corporation's CEO and any out-of-budget expenditure must be approved
in advance of obligation by UT's CEO. Moriarty, Penmasta, Guo and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ agree not to incur any expenses or obligations outside of established
budgets without written, prior approval from UT's CEO.
5.7 ▇▇▇▇▇▇▇▇ Loans.
The pre-closing loans or advances owed by ▇▇▇▇▇▇▇▇ to the Company
described in Schedule 5.7 shall continue as a receivable of the Surviving
Corporation for a period of the earlier of (i) one month from the registration
of the UT shares issued to ▇▇▇▇▇▇▇▇, and (ii) 13 months from the Closing Date,
at which time such receivables shall be paid in full to the Surviving
Corporation.
5.8 Split-Dollar Insurance.
38
▇▇▇▇▇▇▇▇ shall have the right to request that the Surviving
Corporation continue the premium payments on the existing split-dollar
insurance policy provided, in each event, that such ▇▇▇▇▇▇▇▇'▇ compensation
under his employment agreement shall be reduced by the amount of such premium
payments as they are made.
5.9 Subchapter "S" Final Return.
As soon as practicable after Closing, Stockholders shall prepare and
file at their sole expense the final Company Subchapter "S" federal income tax
return subject to UT's prior review and approval, such approval not to be
unreasonably withheld or delayed. Stockholders shall be solely responsible for
any and all payment, fees, penalties and interest relating thereto.
5.10 Additional Agreements.
In case at any time after the date of this Agreement any further
action is necessary or desirable to carry out the purposes of this Agreement or
the Transaction Agreements, the parties to this Agreement shall take all such
actions.
ARTICLE 6. INDEMNIFICATION
6.1 Indemnification as to Representations Warranties. Covenants and Other
Matters.
(a) Stockholders, except for ▇▇▇▇▇, agree, jointly and severally
(except as otherwise provided at Section 2.34 to indemnify, defend and hold
Acquisition Subsidiary, the Surviving Corporation and their respective
Affiliates, officers, directors, shareholders, employees and agents harmless
from and against any and all losses, liabilities, damages, claims, demands,
costs, obligations, deficiencies and expenses (including without limitation
interest, penalties and reasonable attorneys' fees and expenses and, in the
case of environmental matters, reasonably necessary facility and equipment
repairs, modifications and additions) (collectively and including without
limitation Tax Losses, "LOSSES") which arise, or result, directly or
indirectly, from:
(i) Representations, Warranties and Covenants -- except
as otherwise provided herein, any material breach of or failure to perform, any
representation, warranty, covenant or obligation of any of the Stockholders or
the Company in this Agreement or in any Schedule or certificate delivered
pursuant hereto;
(ii) Identified Claims and Litigation Matters (Designated
Claims) -- defense costs and all other Losses arising out of or in connection
with the claims and litigation matters against the Company which are identified
on Schedule 6.1(a)(ii) (such claims and matters, the "DESIGNATED CLAIM"; Losses
from the Designated Claims, the "DESIGNATED CLAIM LOSSES"), provided, however,
that Stockholders' obligation to indemnify with respect to the Designated Claim
Losses shall be subject to a one time, aggregate deductible of Acquisition
Subsidiary against such Losses of twenty-five Thousand Dollars ($25,000).
39
(iii) Liabilities -- any and all liabilities, debts, or
obligations, known or unknown, fixed or contingent, liquidated or unliquidated,
secured or unsecured, direct or indirect, or of any other kind, of the Company,
which arose or accrued prior to Closing, other than (i) liabilities
specifically disclosed and identified as to amount on the Stub Balance Sheet or
in the Schedules attached hereto (but only to the extent of such amounts
specifically disclosed in such Schedules or to the extent the Contracts giving
rise to any such liabilities have been specifically identified in such
Schedules), (ii) liabilities, debts, or obligations arising since the Stub
Period Date which have been incurred in the Ordinary Course of Business and
which are consistent with the representations and warranties in Section 2.8 and
to the extent covered by such warranties and representations, and (iii)
liabilities the subject of indemnification pursuant to Section 6.1(a)(ii)
(Designated Claims). The foregoing liabilities shall include, without
limitation, any and all losses that the Surviving Corporation might incur by
reason of any claim, suit, demand or action alleging that the operation of the
Business of the Company prior to Closing conflicted with, infringed upon or
misappropriated the Proprietary Rights of any third party, only to the extent
covered by Stockholders' warranties and representations under this Agreement;
and
(iv) Taxes -- in addition to Losses resulting from any
breach of the representations and warranties in Section 2.10, but
notwithstanding disclosure in Schedule 2.10(a), any and all Losses arising from
or related or attributable to Taxes of the Surviving Corporation relating to or
arising or accruing on or before Closing, or obligations of the Surviving
Corporation to report, pay, or withhold in respect of such Taxes, to the extent
related to or arising or accruing on or before Closing, to the extent not
accrued and taken into account in the adjustment of the Share Purchase Price
(all such Losses in this clause (vi) with respect to Tax matters are referred
to herein as "TAX LOSSES").
(b) Acquisition Subsidiary agrees, jointly and severally, to
indemnify, defend and hold Stockholders harmless from and against any and all
Losses which arise or result, directly or indirectly, from any breach of or
failure to perform, any representation, warranty, covenant or obligation of the
Acquisition Subsidiary in this Agreement.
6.2 Notice of Claims.
(a) If an indemnified party reasonably believes that it may incur
any Losses hereunder, or receives notice of a third-party claim for which it
intends to seek indemnification hereunder, it shall give the indemnifying party
prompt written notice of such claim, specifying the facts and circumstances of
the indemnification claim and the estimated amount of the Losses.
(b) The indemnifying party under this Section 6.2 shall have the
right to conduct and control, through counsel of its own choosing but
reasonably acceptable to the indemnified party, any third-party claim, action
or suit or compromise or settlement thereof but only so long as prior to
assuming the conduct or control of such claims, action or suit, the
indemnifying party confirms in writing to the indemnified party that such
claim, action or suit is one in respect of which the indemnifying party is
obligated to provide indemnification under this Agreement. The indemnified
40
party may, at its election, participate in the defense of any such claim,
action or suit through counsel of its own choosing, but the fees and expenses
of such counsel shall be at the expense of the indemnified party, unless the
indemnified party shall have been advised by such counsel that there are one or
more legal defenses available to it that are inconsistent and conflicting with
those available to the indemnifying party (in which case, if the indemnified
party notifies the indemnifying party in writing that it elects separate
counsel at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party with respect to such defenses). If the indemnifying party
shall fail to defend promptly and aggressively any such third-party claim,
action or suit, then the indemnified party may defend, through counsel of its
own choosing, such claim, action or suit and may settle such claim, action or
suit and recover from the indemnifying party the amount of such settlement or
of any judgment and the costs and expenses of such defense. The obligations of
the indemnifying party hereunder shall not be reduced as a result of any action
by the party furnishing the notice of third-party claim responding to such
claim if such action is reasonably required to minimize damages or to avoid a
forfeiture or penalty or to comply with a requirement imposed by law. The
indemnifying party shall not compromise or settle any third-party claim, action
or suit that includes any term which shall require any act or forbearance by
the indemnified party and which does not unconditionally release the
indemnified party from all liability in respect of such claim, action or suit
without the prior written consent of the indemnified party. Acquisition
Subsidiary and Stockholders shall cooperate in all reasonable respects with
each other in connection with the defense, negotiation or settlement of any
legal proceeding, claim or demand referred to in this Section 6.2.
(c) Notwithstanding any of the foregoing:
(i) UT and the Surviving Corporation shall be entitled to
control any audit, contest, or proceeding involving Taxes, but shall allow,
and shall cause the Subsidiaries to allow, the Stockholders to be present with
the Surviving Corporation at all meetings with Tax authorities in respect of
audits, and to be present at all other proceedings and hearings with respect to
all Tax contests, to the extent such meetings, proceedings or hearings relate
to the Tax returns of the Company with respect to periods on or prior to the
Closing in respect of which UT or the Acquisition Subsidiary seek
indemnification from Stockholders. Stockholders shall also be entitled to make
any reasonable written submissions in respect of such Tax audits, proceedings
and hearings, provided that all positions taken in such submissions are based
upon substantial authority, are made in good faith, and are prepared by counsel
of recognized national standing, and further provided that prior to making such
submissions, Stockholders shall afford Acquisition Subsidiary reasonable
opportunity to review and comment on such submissions. UT and the Surviving
Corporation will not settle any such Tax audit, proceeding or contest in a
manner that would adversely affect any of the Stockholders without the prior
written consent of such Stockholders, which consent shall not be unreasonably
withheld, conditioned or delayed. Stockholders' consent shall be deemed to
have been given in the event Stockholders fail to respond to and disapprove of
the Surviving Corporation's request for consent within 5 Business Days of
notice given pursuant to the provisions of Section 7.5.
(ii) Notwithstanding the procedure detailed in Section
6.2(c)(i) above, in the
41
event that UT or the Surviving Corporation has no exposure to potential Taxes
and the impact of any Taxes would fall solely on the Stockholders then, in such
event, the Stockholders may control any audits, contests or proceedings but
shall allow UT and the Surviving Corporation to be present at all meetings with
Tax authorities in respect of audits, and to be present at all other
proceedings and hearings with respect to all Tax contests, and to receive
copies of all correspondence to and from tax authorities, to the extent such
meetings, proceedings, hearings or correspondence relate to the Tax returns of
the Company. In the event that during the course of Stockholders' control of
any audits, contests or proceedings, the Surviving Corporation or UT becomes
exposed to potential Taxes and the impact of any Taxes would fall on the
Surviving Corporation or UT then, in such event, the Surviving Corporation and
UT shall be entitled to immediately control any audit, contest, or proceeding
as provided in Section 6.2(c)(i) above.
(iii) Acquisition Subsidiary shall have the right to
conduct and control the claims and litigation the subject of indemnification
pursuant to Section 6.1(a)(ii) (Designated Claims), subject to the following:
(A) To the extent that the total cumulative
Designated Claim Losses are in excess of $250,000, prior to settling such
Designated Claims, the Surviving Corporation shall secure the approval of
Stockholders of such settlement, which approval shall not be unreasonably
withheld or delayed. Stockholders' approval shall be deemed to have been given
in the event Stockholders fail to respond to and disapprove of the Surviving
Corporation request for approval within 5 Business Days of notice given
pursuant to the provisions of Section 7.5; and
(B) The Surviving Corporation shall continue to use
counsel handling the Designated Matters reasonably acceptable to the
Stockholders.
6.3 Offset.
(a) Subject to Section 6.4, Acquisition Subsidiary shall have the
right to offset from the UT Stock Holdback pursuant to Section 1.4 any amounts
representing Losses (including Tax Losses) resulting to either of the Surviving
Corporation or UT as a result of any indemnification claim contained in this
Agreement. Subject to the limitations of Section 6.4, exercise of the offset
rights under this Section 6.3(a) and Section 6.3(b) by the Surviving
Corporation or UT shall not limit the rights of the Surviving Corporation or UT
to recover any amounts owed to any of them that exceed the amount obtained by
exercise of those rights and such exercise shall not be in substitution of or
in any way limit the exercise by either of the Surviving Corporation or UT, of
their other rights and remedies. Stockholders acknowledge and agree that the
exercise of its rights pursuant to this Section 6.3(a) and pursuant to Section
6.3(b) by the Surviving Corporation or UT shall not limit the rights of the
Surviving Corporation or UT to recover any amounts owed to any of them that
exceed the amount obtained by exercise of those rights and such exercise shall
not limit the exercise by either of the Surviving Corporation or UT of their
other rights and remedies under this Agreement.
(b) In the event that on the date payment of the net UT Stock
Holdback retained pursuant to Section 1.7 there are then pending third-party
claims which give rise to rights to indemnification in favor of the Surviving
Corporation or UT, and their respective Affiliates,
42
officers, directors, shareholders, employees and agents under this Article 6
which have not been fully resolved or settled, the Surviving Corporation or UT
shall be entitled to exercise the set-off rights provided above with respect to
such claims by withholding from the UT Stock Holdback an amount equal to the
reasonable assessment of the amount of Losses that are likely to be incurred by
the Surviving Corporation or UT in respect of such claims. In connection with
such exercise of set-off rights, the Surviving Corporation or UT shall give
written notice to Stockholders of the amount of its assessment of the Losses in
question. If Stockholders disagree with assessment of the Losses by the
Surviving Corporation or UT, they shall give written notice to the Surviving
Corporation or UT of their objection no later than 30 days after receipt of the
first notice from the Surviving Corporation or UT. If the parties are unable
to resolve their differences within 30 days of Stockholders' notice to the
Surviving Corporation or UT, the matter shall be submitted to KPMG, Washington,
D.C., for the Surviving Corporation or UT, and ▇▇▇▇▇▇▇▇, Kallick and
Bartelstein for Seller, to arrive at a proposed resolution on Losses
assessment. In the event that KPMG and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇
arrive at a mutual recommendation, it shall be adopted by the parties. In the
event that KPMG and ▇▇▇▇▇▇▇▇, Kallick and Bartelstein are unable to arrive at a
mutual recommendation, then KPMG and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ shall
agree upon a third CPA firm to act as an arbitrator (the "ACCOUNTING
ARBITRATOR") for a final determination of the reasonable assessment of the
amount of Losses that are likely to be incurred in respect of such claim. If
the Accounting Arbitrator determines that the amount withheld by the Surviving
Corporation or UT is in excess of the amount of Losses that are likely to be
incurred by the Surviving Corporation or UT, then the Surviving Corporation or
UT shall release the excess amount, to the Stockholders. The fees and expenses
of the Accounting Arbitrator shall be borne equally by the Surviving
Corporation or UT, on the one hand, and by the Stockholders, on the other.
Each of the parties shall bear its own attorneys' and accountants' fees and
expenses incurred in connection with resolution of the matter by the Accounting
Arbitrator.
6.4 Limitations.
(a) No Losses shall be payable by Stockholders pursuant to Section
6.l(a)(i) (Representations, Warranties and Covenants), Section 6.l(a)(iv)
(Liabilities) or (Section 6.l(a)(v) (Taxes) (except as specified below) until
and unless the aggregate amount of all such Losses asserted and claimed by the
Surviving Corporation or UT against Stockholders exceeds Twenty-Five Thousand
Dollars $25,000 (the "DEDUCTIBLE AMOUNT"), provided that at such time as the
amount of such Losses exceeds the Deductible Amount, the Surviving Corporation
or UT shall be entitled to be indemnified for the amount of such Losses in
excess of the Deductible Amount. The foregoing provisions shall not apply to
Losses the subject of Section 6.l(a)(ii) (Designated Claims) and such Losses
shall be subject only to such deductible or threshold as set expressly set
forth in such provisions.
(b) Except for indemnification in respect of (i) any and all Tax
Losses, pursuant to Section 6.1(a)(v) (Taxes), or for breach of the
Stockholders' representations and warranties at Section 2.10 (Tax Returns and
Payments), which rights to indemnification shall survive for the applicable
statute of limitation periods for the underlying claims plus sixty (60) days,
(ii) matters the subject of Section 6.l(a)(ii) (Designated Claims), which
rights to indemnification shall survive indefinitely, and (iii) any and all
Losses of either of the Surviving Corporation or UT arising as a
43
result of any breach of the representations and warranties of Stockholders at
Sections 2.3 (Corporate Capitalization; Title to Company Shares), or Section
2.6 (Authorization, Validity), arising as a result of fraud on the part of the
Stockholders or any of them, or arising in respect of breaches by the
Stockholders or any of them under Article 5 or Section 7.12, which rights to
indemnification shall survive indefinitely, the respective rights of the
Surviving Corporation, UT or the Stockholders to indemnification under this
Article 6 shall terminate, as to all claims for which the party claiming
indemnification has not given to the indemnifying party written notice of a
claim, by the third anniversary of the Closing Date. Rights to indemnification
which survive pursuant to the foregoing for a definite period in excess of
three (3) years from the Closing Date shall terminate as the end of the period
specified above, except with respect to claims for which the party claiming
indemnification has given to the indemnifying party written notice of such
claim prior to the end of such period.
(c) Stockholders shall not be obligated to indemnify the Surviving
Corporation or UT in respect of any claim under this Article 6 until the amount
of such claim or (i) such claim and substantially related claims or (ii) such
claim and claims involving substantially the same practice or facts or
circumstances, equals or exceeds $5,000, at which point, the Surviving
Corporation or UT shall be entitled to indemnification for the full amount of
the claim, subject to the Deductible Amounts of this Article 6.
(d) Nothing herein is intended to limit or cap remedies for actual
fraud.
6.5 Limitation of Liability.
Notwithstanding anything to the contrary set forth above, the
liability of each Seller shall not exceed the portion of the Purchase Price,
less any reductions or adjustments to the Purchase Price under this Agreement,
to be paid to each Seller for each Seller's Shares being sold hereunder, with
the exception of actual fraud for which there shall be no limitation of
liability.
6.6 Exchange Rate.
In determining whether a deductible, level of liability, or cap on
liability under this Article 6 has been met, all obligations and liabilities to
be taken into account with respect to such deductible, level of liability or
cap denominated in a currency other than Dollars shall be converted into
Dollars at the rate for the purchase of such currency with Dollars at the
Designated Exchange Rate on the date that the Surviving Corporation or UT pays
on such obligation or liability.
ARTICLE 7. MISCELLANEOUS
7.1 Transactional Expenses.
Whether or not the transactions contemplated by this Agreement are
consummated, Stockholders, Company and Acquisition Subsidiary shall each pay
his or its own legal and
44
accounting fees and expenses incident to the negotiation, preparation,
execution, delivery and performance hereof, including, without limitation, the
fees and expenses of its counsel, accountants and other experts. To the extent
any of such fees and expenses have been charged to or are payable by the
Company, Stockholders shall cause such amounts to be discharged and paid for
prior to Closing. Notwithstanding anything to the contrary set forth above,
accounting fees of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ and legal fees of the Law
Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ will be paid as provided in Section 5.3 and legal
and other fees of the Law Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, including portions of
such fees relating to this transaction, will be paid pursuant to Section 5.3 as
a result of the purchase of ▇▇▇▇▇' Company Shares under this Agreement and
various payments from the $200,000 cash payment to Stockholders at Closing.
7.2 Other Agreements Superseded; Waiver and Modification, etc.
This Agreement and the Transaction Agreements supersede all prior
agreements, representations or understandings, written or oral, of
Stockholders, UT, Acquisition Subsidiary and the Company relating to any form
of acquisition of the Company, and incorporates the entire understanding of the
parties with respect thereto. This Agreement may be amended or supplemented
only by a written instrument signed by the party against whom the amendment or
supplement is sought to be enforced. Except as otherwise provided in Article
4, the party benefited by any condition or obligation may waive the same, but
such waiver shall not be enforceable by another party unless made by written
instrument signed by the waiving party.
7.3 Survival.
Except as otherwise specified in this Agreement, the indemnifications,
covenants, representations and warranties made in this Agreement or made in
writing pursuant hereto shall survive the Closing, any investigation of the
matters covered thereby by or on behalf of any party to whom they are made or
any discovery or knowledge prior to Closing or execution of this Agreement of
misstatement or misrepresentation by the party to whom they are made. Each of
the parties acknowledges that the others are entering into this Agreement and
will consummate the transactions contemplated hereby, in reliance upon the
express representations and warranties of the other parties made in this
Agreement or made in a writing delivered pursuant hereto.
7.4 Recovery of Litigation Costs.
If any legal action or any arbitration or other proceeding is brought
for the enforcement of this Agreement or because of an alleged dispute, breach,
default or misrepresentation in connection with any provision of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
7.5 Notices.
Any notice under or relating to this Agreement shall be given in
writing and shall be deemed sufficiently given and served for all purposes when
personally delivered or given by telex or
45
machine-confirmed facsimile or seven (7) Business Days after a writing is
deposited in the mails, airmail postage and other charges prepaid and
registered, return receipt requested, in each case sent or addressed as
follows:
(a) If to UT or Acquisition Subsidiary:
United Therapeutics Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: CEO
with a copy to:
▇▇▇▇▇ Patusky ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇. ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to Stockholders:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D.
▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax:
----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, Ph.D.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone:
----------------------
Fax:
----------------------
▇▇▇▇▇ ▇▇▇, Ph.D.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
46
Phone:
----------------------
Fax:
----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone:
----------------------
Fax:
----------------------
with a copy to:
Law Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
7.6 Law Governing: Arbitration.
(a) This Agreement shall be construed in accordance with of the
State of New York.
(b) Any controversy or claim arising out of or relating to this
Agreement, or to any breach thereof, shall be finally resolved by arbitration
pursuant to this Section 7.8. To institute the provisions of this paragraph,
the party desiring to institute the procedure shall first notify the other
party and then both parties shall attempt to resolve the claim within fifteen
(15) Business Days. In the event the parties cannot resolve the claim within
such time period, the matter shall be submitted to the American Arbitration
Association ("AAA") in accordance with the Commercial Arbitration Rules of the
American Arbitration Association as they exist on the date of this Agreement.
The parties agree that the exclusive proper place of venue for any arbitration
hearing shall be New York, NY. The parties agree that the arbitrator(s) may
grant any relief that could have been granted if the case were determined by
the civil courts of general jurisdiction. If, however, the arbitrator(s)
determine(s) that he or she is or they are not empowered to exercise the
equitable powers of the courts, the party being denied the equitable relief may
have the matter tried by the civil courts.
47
Each of the parties consents to the jurisdiction of the state and federal
courts sitting in New York, NY (and of the appropriate appellate courts), in
any such action or proceeding and waives any objection to venue laid therein.
In addition, nothing contained herein shall prevent Acquisition Subsidiary or
their Affiliates from pursuing any remedies, including but not limited to any
of the remedies afforded hereunder, in any courts or other tribunals in which
any labor dispute or action involving any employment contract may be pending
with any of the Stockholders. Process in respect of litigation or arbitration
may be served on any party by mail, in addition to every other method permitted
by law.
7.7 Assignability; Successors.
The Stockholders may not assign any of their rights or obligations
hereunder without the consent of the Surviving Corporation or UT. The
Surviving Corporation may assign its rights and obligations hereunder without
consent of the Stockholders, or any of them, to any Affiliate of United
Therapeutics or to any successor or assign of United Therapeutics, provided
that notice thereof is given to the Stockholders and provided that such
assignment shall not release the Surviving Corporation from its obligations
hereunder. Any assignment made or purported to be made contrary to the
provisions of this Section 7.7 shall be void and of no force or effect.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of each of the parties and their respective successors and assigns.
7.8 Time of Essence.
Time is of the essence of this Agreement and all of the terms,
conditions and provisions hereof.
7.9 Counterparts.
This Agreement may be executed in any number of counterparts and each
such executed counterpart shall be deemed to be an original instrument, but all
such executed counterparts together shall constitute one and the same
instrument. One party may execute one or more counterparts other than that or
those executed by another party, without thereby affecting the effectiveness of
any such signatures.
7.10 Parties in Interest.
Nothing in this Agreement, express or implied, is intended to confer
any rights or remedies under or by reason of this Agreement on any Person other
than the parties to it and their respective permitted successors and assigns,
nor is anything in this Agreement intended to relieve or discharge any
obligation of any third Person to any party hereto or give any third Person any
right of subrogation or action over against any party hereto.
7.11 Severability.
48
If any provision of this Agreement is held to be unenforceable for any
reason, it shall be modified rather than voided, if possible, in order to
achieve the intent of the parties to this Agreement to the extent possible. In
any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
7.12 Confidentiality.
(a) The terms and conditions of this Agreement, including, without
limitation, the pricing, shall be treated as confidential and shall not be
disclosed by any party hereto other than to (i) its or his officers, directors,
employees, accountants, lawyers, and other advisors, on a need to know basis,
(ii) successors and assigns of; and Persons considering investing in or
acquiring such party or any Affiliate thereof; or providing financing for the
same, and (iii) as may be reasonably necessary to permit consummation of the
transaction contemplated by this Agreement or for subsequent operation of the
Survivor Corporation. The foregoing shall also not prevent disclosure as
required by applicable law, including securities laws. In connection with any
disclosure permitted by this Section, the disclosee shall be instructed to
comply with the obligations of this paragraph.
(b) In the event that the Closing does not occur, each of
the Acquisition Subsidiary, on the one hand, and the Stockholders and the
Company, on the other hand, shall treat as confidential and shall not disclose
other than to its or his officers, directors, employees, accountants, lawyers,
and other advisors, on a need to know basis, any confidential information (as
defined in Section 7.12(d) below) of any of the other parties hereto. In
connection with any disclosure permitted by this Section 7.12, the disclosee
shall be instructed to comply with the obligations of this Section 7.12.
(c) At all times after Closing, each of the Stockholders will hold
in strictest confidence, and will not use or disclose to any third party other
than its or his officers, directors, employees, accountants, lawyers, and other
advisors, on a need to know basis, any confidential information (as defined in
Section 7.12(d) below) of the Company or other Affiliates or of the Acquisition
Subsidiary or any of their Affiliates obtained by any of such Stockholders at
any time prior to Closing. In connection with any disclosure permitted by this
Section, the disclosee shall be instructed to comply with the obligations of
this Section.
(d) The term "confidential information" as used in this Section
7.12 shall mean all non-public information relating to a party and its
Affiliates. "Confidential information" of a party includes, without
limitation, information relating to services and products of such party and its
Affiliates, marketing or promotion of such services and products, business
policies or practices, customers, suppliers, or such other information received
from others that the party or its Affiliates is obligated to treat as
confidential. "Confidential information" shall not include, however,
information that: (i) is or becomes generally known or available to the public
through no fault of any of the parties to whom disclosure is made, (ii) was
given to third parties by the disclosing party without restriction on use or
disclosure, (iii) was known by the parties to whom disclosure is made prior to
receiving such information from the disclosing party, or (iv) is required to be
disclosed pursuant to any court order, law or regulation, after providing
notice to the disclosing party;
49
provided, however, that in the event of a disputed disclosure, the party to
whom disclosure was made shall bear the burden of proof of demonstrating that
the confidential information falls within one of the above exceptions.
ARTICLE 8. INTERPRETATION OF THIS AGREEMENT
8.1 Terms Defined.
As used in this Agreement, the following terms have the respective
meanings set forth below or in the location indicated:
Accounting Arbitrator - See Section 6.3(b).
Affiliate - a Person (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, another Person, or (ii) which beneficially owns or holds 20% or more of
any class of the voting stock of another Person, or (iii) 20% or more of the
voting stock (or in the case of a Person which is not a corporation, 20% or
more of the equity interest) of which is beneficially owned or held by another
Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by Contract or
otherwise.
Agreement - this Stock Purchase Agreement, including the Exhibits and
Schedules thereto.
Business - See introductory paragraphs.
Business Day - any day which is not a Saturday, Sunday or a bank
holiday in New York or Maryland.
Acquisition Subsidiary - See introductory paragraphs.
Certificates - See Section 1.4.
Certificate of Merger - See Section 1.1.
Closing - See Section 1.2.
Closing Date - See Section 1.2.
Code - See Recitals
Company - See introductory paragraphs.
Company Indebtedness - all current liabilities and long-term debt of
the Company, including
50
without limitation, (i) all accounts payable, long-term debt due within
one-year, short-term borrowings, accrued expenses including officer's
compensation, salaries and payroll taxes, and other liabilities, (ii) all debt
for borrowed money or for the deferred purchase price of property or services,
and other interest-bearing obligations, of the Company, (iii) all obligations
under leases that are or should be, under generally accepted accounting
principles related to the preparation of consolidated financial statements, as
consistently applied by the Company in past years, treated as capital leases of
the Company, (iv) all debt for borrowed money or for the deferred purchase
price of property or services, or capital leases, in respect of which the
Company has provided its Guarantee (other than the Guarantee of the Real
Property Lease by the Company), (iv) all principal, interest and other amounts
outstanding (and any penalties or other amounts attributable to the repayment
thereof at the Closing) by the Company to ▇▇▇▇ ▇▇▇▇▇▇ Bank or any other lender,
bank or financial institution, whether by loan, line of credit, or bank
overdraft, (v) all overdue or deferred social security contributions or pension
fund payments or other payments in respect of Taxes (including interest and
penalties thereon accrued Closing), (vi) any deferred payment in respect of any
court orders or judgments or settlements arising prior to the Closing Date, and
(vii) any deferred severance payments in connection with dismissal of any
employees prior to the Closing Date to the extent treated as indebtedness under
generally accepted accounting principles of the United States.
Company Shares - See Section 1.3(a).
Company Common Stock - See Section 1.3(a).
Contract - except as specifically provided in this Agreement, any
written agreement, contract, lease, license, promissory note, conditional sales
contract, indenture, mortgage, deed of trust, commitment, undertaking,
instrument or arrangement of any kind. Without limiting the generality of the
foregoing, any agreement, commitment, undertaking or arrangement of any kind
with a Governmental Agency shall constitute a "Contract" whether it was entered
into voluntarily or pursuant to applicable law or in settlement of a claim or
possible claim by such Governmental Agency, or otherwise.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - See introductory paragraphs.
▇▇▇▇▇ - See introductory paragraphs.
Deductible Amount - See Section 6.4(a).
Designated Claim - See Section 6.l(a)(iii).
Designated Claim Loss - See Section 6.1(a)(iii).
Designated Contracts - See Section 2.23.
Dollar or $ - Means United States dollars.
Effective Time - See Section 1.2.
51
Environmental Requirements - any currently existing United States or
foreign country central, provincial, regional, federal, state or local laws,
statutes and common law, ordinances, regulations, permits, orders, licenses,
approvals, authorizations or similar requirements of any Government Authority
and all judicial and administrative agency decrees, judgments and orders, in
each case relating to safety, health or the environment, including without
limitation, those pertaining to soils, subsurface, air, surface water and
ground water, land use, Hazardous Materials, waste, disposal, noise, odor and
other human health or environmental matters, including, without limitation, in
the case of the United States, the Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Federal
Clean Air Act, the Safe Drinking Water Act, and their state and local
counterparts.
Equipment - any machinery, tools, appliances, vehicles, furniture,
fixtures, equipment, computers (and related software systems), parts or similar
tangible personal Property.
ERISA - See Section 2.21.
Escrow - See Section 1.5(c).
Escrow Agent - See Section 1.5(c).
Exchange Ratio - See Section 1.3(a).
Exploitation - the use, display, reproduction, manufacturing,
distribution, licensing, sublicensing, sale, representation or any other
exercise of any Proprietary Rights, or any rights relating thereto, in any
product, work, technology, process or other form or manner, including without
limitation to any online use or transmission via internet or other electronic
medium, whether now known or hereafter devised. "Exploit" means to so use,
display, reproduce, manufacture, distribute, license, sublicense, sell,
represent or otherwise exercise any Proprietary Rights, or any rights relating
thereto.
Excess Parachute Payment - See Section 2.10(e).
Financial Statements - See Section 2.7.
Governmental Agency - any United States or foreign country central,
provincial, regional, federal, state, local or government or any political
subdivision thereof or any department, commission, board, bureau, agency,
court, panel or other instrumentality of any kind of any of the foregoing or
any quasi-governmental entity of any kind or type.
Guo - See introductory paragraphs.
Hazardous Materials - any substance:
52
(i) which is (upon the Closing) defined as a hazardous substance,
hazardous material, hazardous waste, extremely hazardous substance, extremely
hazardous material, extremely hazardous waste, pollutant, contaminant, toxic
substance, toxic material, toxic waste or any similar term in any Environmental
Requirement;
(ii) which is hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous,
(iii) which is regulated under any Environmental Requirement;
(iv) the presence of which on the Real Property causes or threatens
to cause a nuisance upon the Real Property or to adjacent properties or poses
or threatens to pose a hazard to the Real Property or to the health or safety
of Persons on or about the Real Property;
(v) which is petroleum or a petroleum substance or a petroleum
product, including without limitation gasoline, diesel fuel or other petroleum
hydrocarbons;
(vi) which is asbestos or an asbestos compound or which contains
asbestos; or
(vii) which is a PCB (polychlorinated biphenyl) or a PCB compound or
contains PCBs.
Illinois Code - See Section 1.1.
Immigration Laws - See Section 2.20(a)(vi).
Knowledge - means the actual knowledge of the Person to whom the
reference is made.
Licensed Proprietary Rights - See Section 2.17(a).
Lien - any mortgage, deed of trust, security interest, retention of
title or lease for security purposes, pledge, charge, encumbrance, equity,
claim, easement, right of way, covenant, limitation, condition or restriction,
leasehold interest or any right of any kind of any other Person in or with
respect to any Property.
Losses - See Section 6.1(a).
Market Price - the closing share price as reported for UT Stock on the
NASDAQ Stock Market on October 4, 1999 which was $29.625 per share.
Materially Adverse - materially adverse to any one or more of the
following of the Company, taken as a consolidated whole, or the Business: its
financial condition, results of operations, liabilities, assets, Properties,
sales, operations, or prospects.
Merger - See Recitals.
53
Merger Consideration - See Section 1.3(a).
▇▇▇▇▇▇▇▇ - See introductory paragraphs.
Ordinary Course of Business - the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency) of the Company and the Subsidiaries.
Owned Proprietary Rights - See Section 2.17(a).
Permitted Lien - (a) Liens for taxes or other governmental charges not
yet due and payable or the amount or validity of which is being contested in
good faith by appropriate proceedings and as to which adequate reserves have
been reserved on the Stub Balance Sheet, (b) Liens existing on the Closing Date
and judgments and other similar Liens fully reflected on the Stub Balance
Sheet, (c) easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment of the property or assets encumbered thereby in
the normal course of business or materially impair the value of the property
subject thereto, and (d) any ___ or UCC filings relating to the ▇▇▇▇ ▇▇▇▇▇▇
Bank financings.
▇▇▇▇▇▇▇▇ - See introductory paragraphs.
Person - an individual, partnership, corporation, limited liability
company, trust or unincorporated organization, or a Governmental Agency.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible, and wherever located,
including without limitation money; and including without limitation, in the
case of the Company and its Subsidiaries, their respective business, goodwill
and value as a going concern.
Proprietary Rights - All trademarks, service marks, trade dress,
copyrights and trade names, and all applications for or registrations of any of
the foregoing, marketing or promotional designs, rights against other Persons
in respect of the any of the foregoing and any other promotional Properties
used or useful or developed or acquired for use in business. All privacy,
publicity, property, moral or other such similar rights ("droit moral"). All
patents, patent rights, patent applications, letters patent, trade secrets,
inventions, models, processes, designs, licenses, business rights, rights to
exclude others, information as to the identities or requirements of customers
or potential customers, market information, market analyses, marketing plans,
operating or management policies, procedures and forms, and all other
proprietary rights used or useful or developed or acquired for use in business.
Real Property - See Section 2.11.
Real Property Leases - See Section 2.11.
Release - any spilling, leaking, pumping, pouring, emitting, emptying,
discharging,
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injecting, escaping, leaching or disposing into the environment of any
Hazardous Material.
Stockholders - See introductory paragraphs.
Stub Balance Sheet - See Section 2.7.
Stub Period Date - See Section 2.7.
Surviving Corporation - See Section 1.1.
Tax or Taxes - any United States or foreign country central,
provincial, regional, federal, state, local or other jurisdictional tax, import
or export fees, duties or tariffs, assessments, fees (including without
limitation, documentation, license, filing and registration fees), customs'
fees, social security payments or contributions, social contribution payments,
or other charges of any other nature or kind whatsoever, levied by a
Governmental Authority, including without limitation (a) taxes imposed or based
on or with respect to or measured by any net or gross income or receipts, (b)
value added, transfer, excise, sales, use, gross receipts or other similar
taxes, (c) any franchise taxes, taxes on doing business, license taxes,
occupational taxes, gross receipts taxes or capital stock taxes (including any
minimum taxes and taxes measured by any item of tax preference), (d) taxes
based upon or imposed with reference to real or personal property ownership,
(e) compulsory social welfare and social security funds, (f) employment taxes
that are required to be paid or collected, including without limitation,
amounts payable pursuant to the federal insurance contributions act (FICA), the
federal unemployment tax act (FUTA), the self employment contributions act
(SECA) or any other employment related tax imposed by any other federal, state
or other jurisdiction, (g) any withholding for Taxes, and (h)any taxes similar
to or in the nature of those taxes described in (a), (b), (c), (d), (e), (f) or
(g) above, together with any penalties, fines, interest, or other additions to
any such taxes or other charges however imposed, withheld, levied or assessed.
Tax Losses - See Section 6.l(a)(v).
Transaction Agreements - those agreements to be executed by the
parties in connection with and as contemplated by this Agreement, which
agreements include the Escrow Agreement, Registration Rights Agreement and the
Employment Agreements of Moriarty, Penmasta, and Guo with attachments thereto.
Transfer Agent - See Section 1.5(a).
UT - See introductory paragraphs.
UT Stock Holdback - See Section 1.5(c).
8.2 References.
All terms such as "herein," "hereby" or "hereunder" refer to this
Agreement as a whole. The use of the terms "including", "include" and
"includes" followed by one or more examples is
55
intended to be illustrative and shall not be deemed or construed to limit the
scope of the classification or category to the examples listed.
8.3 Headings, Schedules.
The headings used in this Agreement are provided for convenience only
and this Agreement shall be interpreted as though they did not appear herein.
The Schedules and Attachments to this Agreement form an integral part of this
Agreement.
8.4 Fair Construction.
This Agreement shall be given a fair and reasonable construction in
accordance with the intention of the parties and without regard to the drafter
thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
UNITED THERAPEUTICS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, CEO
SQ ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
SYNQUEST, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D., President
56
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, PH.D.
SSN: ###-##-####
/s/ Raju Pensmasta
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, PH.D.
SSN: ###-##-####
/s/ ▇▇▇▇▇ ▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇, PH.D.
SSN: ###-##-####
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ESQ.
SSN: ###-##-####
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
SSN: ###-##-####