Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HYSEQ, INC.,
VERTICAL MERGER CORP.
AND
VARIAGENICS, INC.
DATED AS OF NOVEMBER 9, 2002
TABLE OF CONTENTS
ARTICLE 1. The Merger 1
Section 1.1 The Merger.
Section 1.2 Closing. 1
Section 1.3 Effect of the Merger. 1
Section 1.4 Certificate of Incorporation; Bylaws. 2
Section 1.5 Directors and Officers of the Surviving Corporation. 2
Section 1.6 Directors of Parent; Name. 2
ARTICLE 2. Conversion of Securities; Exchange of Certificates 3
Section 2.1 Conversion of Securities. 3
Section 2.2 Exchange of Certificates. 4
Section 2.3 Stock Transfer Books. 7
Section 2.4 Stock Options. 7
ARTICLE 3. Representations and Warranties of the Company 8
Section 3.1 Organization and Qualification; Subsidiaries. 8
Section 3.2 Capitalization. 9
Section 3.3 Authority. 10
Section 3.4 No Conflict; Required Filings and Consents. 10
Section 3.5 Permits; Compliance With Law. 11
Section 3.6 SEC Filings; Financial Statements. 11
Section 3.7 Absence of Certain Changes or Events. 12
Section 3.8 Employee Benefit Plans. 12
Section 3.9 Contracts. 15
Section 3.10 Litigation. 15
Section 3.11 Environmental Matters. 16
Section 3.12 Intellectual Property. 17
Section 3.13 Taxes. 17
Section 3.14 Insurance. 19
Section 3.15 Properties. 19
Section 3.16 Brokers. 19
Section 3.17 Interested Stockholder. 19
ARTICLE 4. Representations and Warranties of Parent and Merger Sub 19
Section 4.1 Organization and Qualification; Subsidiaries. 19
Section 4.2 Capitalization. 20
Section 4.3 Authority. 21
Section 4.4 No Conflict; Required Filings and Consents. 22
Section 4.5 Permits; Compliance With Law. 22
Section 4.6 SEC Filings; Financial Statements. 23
Section 4.7 Absence of Certain Changes or Events. 23
Section 4.8 Employee Benefit Plans. 24
Section 4.9 Contracts. 26
Section 4.10 Litigation. 27
Section 4.11 Environmental Matters. 27
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Section 4.12 Intellectual Property. 28
Section 4.13 Taxes. 28
Section 4.14 Insurance. 30
Section 4.15 Properties. 30
Section 4.16 Rights Agreement. 30
Section 4.17 Brokers. 30
Section 4.18 Ownership of Merger Sub; No Prior Activities. 30
Section 4.19 Interested Stockholder. 31
Section 4.20 Certain Regulatory Matters. 31
ARTICLE 5. Covenants 32
Section 5.1 Conduct of Business by the Company Pending the Closing. 32
Section 5.2 Conduct of Business by Parent Pending the Closing. 35
Section 5.3 Tax-Free Reorganization Treatment. 39
Section 5.4 Control of Other Party's Business. 39
ARTICLE 6. Additional Agreements 39
Section 6.1 Registration Statement; Proxy Statement. 39
Section 6.2 Stockholders' Meetings. 40
Section 6.3 Access to Information; Confidentiality. 41
Section 6.4 No Solicitation of Transactions. 42
Section 6.5 Reasonable Best Efforts. 44
Section 6.6 Certain Notices. 45
Section 6.7 Public Announcements. 45
Section 6.8 Nasdaq Listing. 46
Section 6.9 Employee Benefit Matters. 46
Section 6.10 Indemnification of Directors and Officers. 46
Section 6.11 Tax Treatment. 47
Section 6.12 Affiliate Letters. 47
Section 6.13 Section 16 Matters. 47
Section 6.14 Registration of Parent Common Stock. 48
Section 6.15 Blue Sky Laws. 50
ARTICLE 7. Closing Conditions 50
Section 7.1 Conditions to Obligations of Each Party Under
This Agreement. 50
Section 7.2 Additional Conditions to Obligations of Parent
and Merger Sub. 51
Section 7.3 Additional Conditions to Obligations of the Company. 51
ARTICLE 8. Termination, Amendment and Waiver 52
Section 8.1 Termination. 52
Section 8.2 Effect of Termination. 54
Section 8.3 Amendment. 56
Section 8.4 Waiver. 56
Section 8.5 Fees and Expenses. 56
ARTICLE 9. General Provisions 56
Section 9.1 Non-Survival of Representations and Warranties. 56
Section 9.2 Notices. 57
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Section 9.3 Certain Definitions. 57
Section 9.4 Interpretation. 63
Section 9.5 Severability. 63
Section 9.6 Entire Agreement. 64
Section 9.7 Assignment. 64
Section 9.8 Parties in Interest. 64
Section 9.9 Mutual Drafting. 64
Section 9.10 Governing Law; Consent to Jurisdiction. 64
Section 9.11 Specific Performance. 65
Section 9.12 Disclosure. 65
Section 9.13 Counterparts. 65
Exhibit 6.12 Form of Affiliate Letter
Exhibit 7.2(c)(i) Parent Tax Matters Certificate
Exhibit 7.2(c)(ii) Company Tax Matters Certificate
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AGREEMENT AND PLAN OF MERGER, dated as of November 9, 2002 (this
"Agreement"), by and among Hyseq, Inc., a Nevada corporation ("Parent"),
Vertical Merger Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Variagenics, Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of the Company and
Parent deem it advisable and in the best interests of each corporation and its
respective stockholders that the Company and Parent engage in a business
combination as peer firms in a merger of equals in order to, among other
reasons, advance the long-term strategic business interests of the Company and
Parent;
WHEREAS, the respective Boards of Directors of the Company and
Parent have approved the merger of Merger Sub with and into the Company (the
"Merger") upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL");
WHEREAS, immediately following the Merger, the Company shall be
merged with and into Parent (the "Short Form Merger");
WHEREAS, as a condition and inducement to the willingness of the
Company and Parent to enter into this Agreement, simultaneously with the
execution of this Agreement, certain stockholders of the respective companies
are entering into Stockholder Voting Agreements (the "Voting Agreements") which
Voting Agreements provide for certain actions relating to the transactions
contemplated by this Agreement, including the agreement of such stockholders to
vote shares of capital stock of the respective companies held by them in favor
of the Merger;
WHEREAS, for U.S. federal income tax purposes, Parent, Merger Sub
and the Company intend that the Merger and the Short Form Merger shall be
treated as an integrated transaction (together, the "Transaction") and shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1.
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to satisfaction
or waiver of the conditions set forth in this Agreement, and in accordance with
the DGCL, at the Effective Time, Merger Sub shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
Section 1.2 Closing. The closing of the Merger (the "Closing") shall
take place on the first Business Day after the satisfaction or waiver of the
conditions (excluding conditions that, by their nature, cannot be satisfied
until the Closing Date) set forth in Article 7,
unless this Agreement has been theretofore terminated pursuant to its terms or
unless another time or date is agreed to in writing by the parties hereto (the
actual date of the Closing being referred to herein as the "Closing Date"). The
Closing shall be held at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another place is agreed to in
writing by the parties hereto. As soon as practicable after the Closing Date,
the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger relating to the Merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, the DGCL (the date
and time of such filing, or if another date and time is specified in such
filing, such specified date and time, being the "Effective Time").
Section 1.3 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; Bylaws. (a) At the
Effective Time, the Restated Certificate of Incorporation of the Company, as in
effect on the date hereof (the "Company Certificate"), shall be the certificate
of incorporation of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable Law.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable Law.
Section 1.5 Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
Section 1.6 Directors of Parent; Name. (a) Prior to the Effective
Time the parties will take all action necessary such that as of the Effective
Time (i) the Board of Directors of Parent shall consist of the seven (7) members
as set forth on Schedule 1.6 hereto which schedule shall also designate the
class of director to which each such member belongs, of whom (A) 4 directors
have been designated by Parent (it being understood that Parent shall have the
right to change such designation as set forth on Schedule 1.6) ("Parent
Directors"), including ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, who shall be Chairman of the
Board of Directors (and neither party has any intention of seeking to shorten
the service of ▇▇. ▇▇▇▇▇▇▇▇ as Chairman of the Board of Directors of Parent to a
term of less than 3 years), and (B) 3 directors have been designated by the
Company (it being understood that the Company shall have the right to change
such designation as set forth on Schedule 1.6) and (ii) ▇▇. ▇▇▇ ▇. Love shall
remain as Chief Executive Officer of Parent (and neither party has any intention
of seeking to shorten the service of Dr. Love as Chief Executive Officer of
Parent to a term of less than 3 years). For a period of not less than three (3)
years from and after the Effective Time (i) at least a majority of the
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members of the Board of Directors shall consist of Parent Directors and
directors nominated by the Nominating Committee of the Board of Directors of
Parent ("Parent Continuing Directors"), and (ii) at least a majority of the
members of the Nominating Committee shall consist of Parent Continuing
Directors.
(b) Parent shall change its name as of the Effective Time to a new
name to be mutually agreed upon by the Company and Parent prior to the Effective
Time.
ARTICLE 2.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion Generally. Each share of common stock, par value
$0.01 per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock to be canceled pursuant to Section 2.1(b)) shall be converted, subject to
Section 2.2(e), into the right to receive (i) 1.6451 (the "Exchange Ratio") of a
share of common stock, par value $0.001 per share ("Parent Common Stock"), of
Parent (the "Merger Consideration"). All such shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the right to receive the Merger Consideration
payable in respect of such shares of Company Common Stock.
(b) Parent-Owned Shares. All shares of Company Common Stock owned by
Parent or any of its Subsidiaries shall be cancelled and retired and shall cease
to exist and no Merger Consideration or other consideration shall be delivered
in exchange therefor.
(c) Merger Sub. Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
be exchanged for one newly and validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
(d) Change in Shares. If, between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock or Company Common
Stock shall have been changed into, or exchanged for, a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, reorganization, recapitalization, split, combination,
contribution or exchange of shares, the Exchange Ratio shall be correspondingly
adjusted to provide the holders of Company Common Stock and Company Options the
same economic effect as contemplated by this Agreement prior to such event.
(e) Cancellation of Treasury Shares. Each share of Company Common
Stock held in the Company treasury and each share of Company Common Stock, if
any, owned by any wholly-owned subsidiary of the Company immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof.
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(f) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a stockholder who has not voted in favor of the
Merger or consented thereto in writing and who has properly demanded appraisal
for such shares in accordance with the DGCL, shall not be converted into a right
to receive the Merger Consideration, unless such stockholder fails to perfect or
withdraws or otherwise loses such stockholder's right to appraisal. If after the
Effective Time such stockholder fails to perfect or withdraws or loses such
stockholder's right to appraisal, such shares of Company Common Stock shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration. The Company shall give Parent prompt notice of
any demands received by the Company for appraisal of shares of Company Common
Stock, and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not settle, make any
payments with respect to, or offer to settle, any claim with respect to
Dissenting Shares without the written consent of Parent.
Section 2.2 Exchange of Certificates
(a) Exchange Agent. As of the Effective Time, Parent shall deposit,
or shall cause to be deposited, with U.S. Stock Transfer Corporation or another
bank or trust company designated by Parent and reasonably satisfactory to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock, for exchange, in accordance with this Article 2, through
the Exchange Agent, sufficient cash and certificates representing shares of
Parent Common Stock to make all deliveries pursuant to this Article 2. Parent
agrees to make available to the Exchange Agent, from time to time as needed,
cash sufficient to pay any dividends and other distributions pursuant to Section
2.2(c). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Merger Consideration contemplated to be paid for shares of Company Common
Stock pursuant to this Agreement out of the Exchange Fund. Except as
contemplated by Sections 2.2(c) and 2.2(e) hereof, the Exchange Fund shall not
be used for any other purpose. Any cash and certificates representing Parent
Common Stock deposited with the Exchange Agent (including the proceeds from
sales of Excess Shares in accordance with Section 2.2(e)) shall be referred to
as the "Exchange Fund."
(b) Exchange Procedures. Promptly (and in any event no more than
five (5) business days) after the Effective Time, Parent shall instruct the
Exchange Agent to mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in customary form) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration payable in respect of the shares of Company Common Stock
represented by such Certificates. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
properly completed and duly executed, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration payable in
respect of the shares of Company Common Stock represented by such Certificate,
cash in lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.2(c), and the Certificate so
surrendered shall forthwith be
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canceled. No interest shall be paid or accrued on any cash in lieu of fractional
shares or on any unpaid dividends and distributions payable to holders of
Certificates. In the event of a transfer of ownership of shares of Company
Common Stock which is not registered in the transfer records of the Company, the
Merger Consideration payable in respect of such shares of Company Common Stock
may be paid to a transferee if the Certificate representing such shares of
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer Taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration payable in respect of the shares of Company
Common Stock represented by such Certificate, cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(c).
(c) Distributions with Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions declared or made with respect
to shares of Parent Common Stock, with a record date after the Effective Time,
shall be paid to the holder of any unsurrendered Certificate, and no cash
payment in lieu of fractional shares of Parent Common Stock shall be paid to any
such holder pursuant to Section 2.2(e), unless and until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of escheat,
Tax or other applicable Laws, following surrender of any such Certificate, there
shall be paid to such holder of the certificates representing whole shares of
Parent Common Stock issuable in exchange therefor, without interest, (i)
promptly, the amount of any cash payable in lieu of fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(e) and the
amount of dividends or other distributions with a record date at or after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions, with a record date at or after the Effective Time but
prior to such surrender and a payment date subsequent to such surrender, payable
with respect to such whole shares of Parent Common Stock.
(d) Further Rights in Company Common Stock. The Merger Consideration
issued upon conversion of a share of Company Common Stock in accordance with the
terms hereof (including any dividends or distributions pursuant to Section
2.2(c) or Section 2.2(e)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such share of Company Common Stock.
(e) Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock will be issued upon the surrender for
exchange of Certificates, but in lieu thereof each holder of Company Common
Stock who would otherwise be entitled to a fraction of a share upon surrender
for exchange of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from Parent an
amount of cash (rounded down to the nearest whole cent), without interest, equal
to the product of such fraction multiplied by the Market Value (as defined
below) of the Parent Common Stock. The "Market Value" of the Parent Common Stock
means the average closing price per share of Parent Common Stock (rounded to the
nearest cent) on the NASDAQ National Market for the twenty (20) consecutive
trading days ending on the second trading day immediately prior to the Effective
Time (as reported in the New York City edition of The Wall Street Journal for
each such trading day, or, if not reported therein, any other authoritative
source
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reasonably selected by Parent). Such payment shall occur as soon as practicable
after the determination of the amount of cash, if any, to be paid to each holder
of Company Common Stock with respect to any fractional shares and following
compliance by such holder with the exchange procedures set forth in Section
2.2(b) hereof and in the letter of transmittal. No dividend or distribution with
respect to parent Common Stock shall be payable on or with respect to any
fractional share and such fractional share interests shall not entitle the owner
thereof to any rights of a stockholder of Parent.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and,
from and after such delivery to Parent, any holders of Company Common Stock who
have not theretofore complied with this Article 2 shall thereafter look only to
Parent for the Merger Consideration payable in respect of such shares of Company
Common Stock, any cash in lieu of fractional shares of Parent Common Stock to
which they are entitled pursuant to Section 2.2(e) and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.2(c), in each case, without any interest thereon.
(g) No Liability. None of Parent, the Surviving Corporation or the
Company shall be liable to any holder of shares of Company Common Stock for any
such shares of Parent Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any abandoned property, escheat or similar Law.
(h) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond, in such reasonable amount as
Parent may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent shall pay in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration payable in
respect of the shares of Company Common Stock represented by such Certificate,
any cash in lieu of fractional shares of Parent Common Stock to which the
holders thereof are entitled pursuant to Section 2.2(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.2(c), in each case, without any interest thereon.
(i) Withholding. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as Parent or the
Exchange Agent are required to deduct and withhold under the Code, or any Tax
Law, with respect to the making of such payment. To the extent that amounts are
so withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
Company Common Stock in respect of whom such deduction and withholding was made
by Parent or the Exchange Agent.
Section 2.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and thereafter, there shall be no
further registration of transfers of shares of Company Common Stock theretofore
outstanding on the records of the Company. From and after the Effective Time,
the holders of certificates representing shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to
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have any rights with respect to such shares of Company Common Stock except as
otherwise provided herein or by Law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Parent for any reason shall be
converted into the Merger Consideration payable in respect of the shares of
Company Common Stock represented by such Certificates, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 2.2(e) and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 2.2(c), without any
interest thereon.
Section 2.4 Stock Options
(a) Conversion Generally. At the Effective Time, each Company Option
(other than Company Warrants) then outstanding under the Company Stock Option
Plan or otherwise, whether or not then exercisable, shall be converted, without
any action on the part of the holder thereof into an option to purchase Parent
Common Stock in accordance with this Section 2.4(a) and the terms of the Company
Option and, if applicable, Company Stock Option Plan. Each Company Option so
converted shall continue to have, and be subject to, the same terms and
conditions (including vesting schedule) as set forth in the Company Option and,
if applicable, Company Stock Option Plan and any agreements thereunder
immediately prior to the Effective Time, except that, as of the Effective Time,
(i) each Company Option shall be exercisable (or shall become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares that were issuable upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Common Stock, and (ii) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such Company Option so
converted shall be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
(b) Reservation of Share; Registration. Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery upon exercise of Company Options assumed
pursuant to Section 2.4(a). Promptly after the Effective Time, but in no event
later than five (5) business days thereafter, Parent shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), or another appropriate form, with respect to the shares of
Parent Common Stock subject to such options to the fullest extent permitted by
law and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
(c) Company ESPP. Each outstanding purchase right under the
Company's 2000 Employee Stock Purchase Plan (the "Company ESPP") shall be
exercised for the purchase of shares of Company Common Stock at the price per
share determined pursuant to the Company ESPP on the date immediately prior to
the Closing Date, pursuant to Section 18 of the Company ESPP (the "Final
Offering Period"). Immediately following the Final Offering Period and upon or
prior to the Effective Time, the Company shall take all action necessary to
provide that the Company ESPP shall be terminated immediately prior to the
Effective Time and that no Person will have any further right to purchase
Company Common Stock under the Company ESPP.
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(d) Warrants. At the Effective Time, each warrant to purchase shares
of Company Common Stock (a "Company Warrant") which is outstanding immediately
prior thereto shall, in accordance with the terms thereof, cease to represent a
right to acquire shares of Company Common Stock and automatically shall be
converted, at the Effective Time, without any action on the part of the holder
thereof, into a warrant to purchase Parent Common Stock (as so converted, a
"Company Converted Warrant"). Each Company Converted Warrant shall continue to
have, and be subject to, the same terms and conditions as set forth in any
agreements thereunder immediately prior to the Effective Time, except that, as
of the Effective Time, (i) each Company Converted Warrant shall be exercisable
(or shall become exercisable in accordance with its terms) for that number of
whole shares of Parent Common Stock equal to the product of the number of shares
that were issuable upon exercise of such Company Warrant immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
Company Converted Warrant shall be equal to the quotient determined by dividing
the exercise price per share of Company Common Stock at which such Company
Warrant was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding section of the Disclosure
Letter delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Letter") (and subject to Section 9.12
hereof), the Company hereby represents and warrants to Parent as follows:
Section 3.1 Organization and Qualification; Subsidiaries. Each of
the Company and its Subsidiaries (the "Company Subsidiaries") is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as it is now being conducted, and is qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its assets or properties or conduct of its business
requires such qualification, except where the failure to be so organized,
qualified or in good standing, or to have such power or authority, would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company has made available to Parent a complete and correct copy of the
certificates of incorporation and by-laws of the Company and the Company
Subsidiaries, each as amended to date. Except with respect to securities of
non-affiliates held for investment purposes which do not constitute more than a
5% interest in any such non-affiliate, neither the Company nor any Company
Subsidiary holds an Equity Interest in any other person. The certificates of
incorporation and by-laws of the Company and the Company Subsidiaries so
delivered are in full force and effect. Section 3.1 of the Company Disclosure
Letter contains a correct and complete list of each jurisdiction where the
Company and each of its Subsidiaries is organized and qualified to do business.
Section 3.2 Capitalization. (a) As of the date hereof, the
authorized capital stock of the Company consists of 70,000,000 shares of Company
Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share
(the "Company Preferred Stock"). As of
8
November 5, 2002, (i) 24,105,198 shares of Company Common Stock were issued and
outstanding, all of which were validly issued and fully paid, nonassessable and
free of preemptive rights, and (ii) 4,214,232 shares of Company Common Stock
were issuable (and such number was reserved for issuance) upon exercise of
Company Options outstanding as of such date. As of the date hereof, no shares of
Company Preferred Stock are issued or outstanding.
(b) Except for outstanding Company Options and outstanding purchase
rights under the Company ESPP, as of the date hereof, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character to which the Company or any Company Subsidiary is a party or by which
the Company or any Company Subsidiary is bound relating to the issued or
unissued capital stock or other Equity Interests of the Company or any Company
Subsidiary, or obligating the Company or any Company Subsidiary to issue or sell
any shares of its capital stock or other Equity Interests. From November 5, 2002
to the date of this Agreement, the Company has not issued any Equity Interests
with respect to Company Common Stock, other than Company Common Stock issued
upon exercise of Company Stock Options. The Company has previously provided
Parent with a true and complete list, as of November 5, 2002, of the prices at
which outstanding Company Options may be exercised under the Company Stock
Option Plan, the number of Company Options outstanding at each such price and
the vesting schedule of the Company Options. All shares of Company Common Stock
subject to issuance under the Company Stock Option Plans, upon issuance prior to
the Effective Time on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights.
(c) There are no outstanding contractual obligations of the Company
or any Company Subsidiary (i) restricting the transfer of, (ii) affecting the
voting rights of, (iii) requiring the repurchase, redemption or disposition of,
or containing any right of first refusal with respect to, (iv) requiring the
registration for sale of, or (v) granting any preemptive or antidilutive right
with respect to, any Company Common Stock or any capital stock of, or other
Equity Interests in, any Company Subsidiary. Each outstanding share of capital
stock of each Company Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and is owned, beneficially and of
record, by the Company free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Company's voting rights, charges and other encumbrances of any nature
whatsoever. There are no outstanding contractual obligations of the Company or
any Company Subsidiary to make any loan to, or any equity or other investment
(in the form of a capital contribution or otherwise) in, any Company Subsidiary
or any other person, other than guarantees by the Company of any indebtedness or
other obligations of any wholly-owned Company Subsidiary and other than loans
made in the ordinary course consistent with past practice to employees of the
Company and its Subsidiaries. The Company has not adopted a stockholder rights
plan.
(d) The Company does not have outstanding any bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter.
Section 3.3 Authority. (a) Assuming the accuracy of Section 4.19,
the Company has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated by this Agreement, subject in the case of the
consummation of the Merger to the approval of this
9
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock (the "Company Stockholder Approval"). The execution and delivery of
this Agreement by the Company and the consummation by the Company of such
transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company and no
stockholder votes are necessary to authorize this Agreement or to consummate
such transactions, subject only to obtaining the Company Stockholder Approval.
This Agreement is the valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(b) The Board of Directors of the Company, by resolutions duly
adopted by unanimous vote at a meeting duly called and held and not subsequently
rescinded or modified in any way (the "Company Board Approval"), has duly (i)
determined that this Agreement and the Merger are advisable and fair to and in
the best interests of the Company and its stockholders, (ii) approved this
Agreement and the Merger and (iii) recommended that the stockholders of the
Company adopt this Agreement and approve the Merger and directed that this
Agreement and the transactions contemplated hereby be submitted for
consideration by the Company's stockholders in accordance with this Agreement.
Assuming the accuracy of Section 4.19, the Company Board Approval constitutes
approval of this Agreement and the Merger as required under any applicable state
takeover Law and no such state takeover Law is applicable to the Merger or the
other transactions contemplated hereby.
(c) The Board of Directors of the Company has received the opinion
of its financial advisors, ▇▇ ▇▇▇▇▇ Securities Corporation (the "Company
Financial Advisor"), dated the date, or shortly prior to the date, of this
Agreement, to the effect that, as of the date of such opinion, the Exchange
Ratio is fair, from a from a financial point of view, to the stockholders of the
Company, copies of which opinion will be made available to Parent.
Section 3.4 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate any provision of the Company Certificate, the Bylaws of the Company as
in effect on the date hereof (the "Company Bylaws"), or any equivalent
organizational documents of any Company Subsidiary, or (ii) require any consent
or approval under, result in any breach of, any loss of any benefit under or
constitute a change of control or default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any right
of termination, vesting, amendment, acceleration or cancellation of, or result
in the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any Contract, Company Permit or
other instrument or obligation, except, with respect to clause (ii), for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any domestic or foreign Governmental Entity, except (i) under the Exchange
Act, the Securities Act, any applicable Blue Sky Law, the rules and regulations
of Nasdaq and pursuant to Section 1.2 hereof, the filing of a
10
Certificate of Merger with the Delaware Secretary of State and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 3.5 Permits; Compliance With Law. Each of the Company and
the Company Subsidiaries is in possession of all authorizations, licenses,
permits, certificates, approvals and clearances, and has submitted notices to,
all Governmental Entities necessary for the Company or any Company Subsidiary to
own, lease and operate its properties or other assets and to carry on their
respective businesses in the manner described in the Company SEC Filings filed
prior to the date hereof and as it is being conducted as of the date hereof (the
"Company Permits"), and all such Company Permits are valid, and in full force
and effect, except where the failure to have, or the suspension or cancellation
of, or failure to be valid or in full force and effect of, any of the Company
Permits would not, individually or in the aggregate, have a Company Material
Adverse Effect. Neither the Company nor any Company Subsidiary is in conflict
with, or in default or violation of, (a) any Law applicable to the Company or
any Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected or (b) any Company Permits, except, with
respect to clauses (a) and (b), for any such conflicts, defaults or violations
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. No investigation or review by any Governmental Entity with
respect to the Company or any of the Company Subsidiaries is pending or, to the
Knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct the same.
Section 3.6 SEC Filings; Financial Statements. (a) The Company has
timely filed all registration statements, prospectuses, forms, reports,
definitive proxy statements, schedules and documents required to be filed by it
under the Securities Act or the Exchange Act, as the case may be, since January
1, 2000 (collectively, the "Company SEC Filings"). Each Company SEC Filing (i)
as of its date, complied or, if filed subsequent to the date hereof, will
comply, in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and (ii) did not, or, if filed subsequent
to the date hereof, will not, at the time of filing, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Company SEC Filings was, or will
be, prepared in all material respects in accordance with GAAP applied (except as
may be indicated in the notes thereto and, in the case of unaudited quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act) on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto), and each presented, or will present, fairly the consolidated
financial position, results of operations and cash flows of the Company and the
consolidated Company Subsidiaries as of the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which did not and would
not, individually or in the aggregate, have a Company Material Adverse Effect).
The books and records of the Company and the Company Subsidiaries have been, and
are being, maintained in all material respects in accordance with GAAP and all
other applicable legal and accounting requirements.
11
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Company Subsidiaries as of
December 31, 2001 included in the Company's Form 10-K for the year ended
December 31, 2001, including the notes thereto (the "Company Form 10-K"),
neither the Company nor any consolidated Company Subsidiary has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet or in notes
thereto prepared in accordance with GAAP, except for (i) liabilities or
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2001 and (ii) liabilities and obligations incurred
in connection with this Agreement and the transactions contemplated hereby that
would not, individually or in the aggregate have a Company Material Adverse
Effect.
(d) The Company had as of October 31, 2002, a balance of cash, cash
equivalents, short-term and long-term investments, calculated in accordance with
GAAP, totaling not less than $58,531,535.
Section 3.7 Absence of Certain Changes or Events. Since December 31,
2001, except as disclosed in the Company Form 10-K or in Company SEC Filings
since December 31, 2001 through to the date of this Agreement, including the
notes thereto, and except as specifically contemplated by, or as disclosed in,
this Agreement, the Company and the Company Subsidiaries have conducted their
businesses in the ordinary course consistent with past practice and, since such
date, there has not been (a) any change, circumstance or event that has had a
Company Material Adverse Effect; (b) any material change by the Company or the
Company Subsidiaries in its accounting methods not required pursuant to
generally accepted accounting principles or practices; (c) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the Company's or any Company Subsidiary's capital stock; (d) any split,
combination or reclassification of the Company's or any Company Subsidiary's
capital stock or any issuance of or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock or (e) any revaluation by the Company or any Company Subsidiary of
any of their assets having a Company Material Adverse Effect.
Section 3.8 Employee Benefit Plans. (a) Section 3.8(a) of the
Company Disclosure Letter sets forth a true and complete list of each "employee
benefit plan" as defined in Section 3(3) of ERISA and any other material plan,
policy, program, practice, agreement, understanding or arrangement providing
compensation or other benefits to any current or former director, officer,
employee or consultant (or to any dependent or beneficiary thereof) of the
Company or any ERISA Affiliate, which are now, or with respect to any plan
intended to be qualified under 401(a) of the Code, were within the past 6 years,
maintained, sponsored or contributed to by the Company or any ERISA Affiliate,
or under which the Company or any ERISA Affiliate has any obligation or
liability, whether actual or contingent, including, without limitation, all
material incentive, bonus, deferred compensation, vacation, holiday, cafeteria,
medical, disability, stock purchase, stock option, stock appreciation, phantom
stock, restricted stock or other stock-based compensation plans, policies,
programs, practices or arrangements. Each "employee benefit plan" as defined in
Section 3(3) of ERISA and each other material plan, policy, program, practice,
agreement, understanding or arrangement providing compensation or other benefits
to any current or former director, officer, employee or consultant (or to any
dependent or beneficiary thereof) of the Company or any ERISA Affiliate, which
are now, or were within the past 6 years, maintained, sponsored or contributed
to by the Company or any ERISA Affiliate, or under which the Company or any
ERISA Affiliate has any obligation or
12
liability, whether actual or contingent, including, without limitation, all
material incentive, bonus, deferred compensation, vacation, holiday, cafeteria,
medical, disability, stock purchase, stock option, stock appreciation, phantom
stock, restricted stock or other stock-based compensation plans, policies,
programs, practices or arrangements is hereinafter referred to as a "Company
Benefit Plan". Neither the Company, nor to the Knowledge of the Company, any
other person, has any express or implied commitment, whether legally enforceable
or not, to modify, change or terminate any Company Benefit Plan, other than with
respect to a modification, change or termination required by ERISA, the Code,
the Health Insurance Portability and Accountability Act or any other applicable
law The Company has delivered or made available to Parent true, correct and
complete copies of all Company Benefit Plans (or, if not so delivered, has
delivered or made available to Parent a written summary of their material
terms), and, with respect thereto, all amendments, trust agreements, insurance
Contracts, other funding vehicles, determination letters issued by the United
States Internal Revenue Service (the "IRS"), the most recent annual reports
(Form 5500 series) filed with the IRS, and the most recent actuarial report or
other financial statement relating to such Company Benefit Plan.
(b) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable Laws, including ERISA
and the Code, and contributions required to be made under the terms of any of
the Company Benefit Plans as of the date of this Agreement have been timely
made. Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, (i) with respect to the Company Benefit Plans, no event
has occurred and, to the Knowledge of the Company, there exists no condition or
set of circumstances in connection with which the Company could reasonably be
expected to be subject to any material liability (other than for routine benefit
liabilities) under the terms of, or with respect to, such Company Benefit Plans,
ERISA, the Code or any other applicable Law, and (ii) neither the Company nor
any ERISA Affiliate has any liability under ERISA Section 502.
(c) Each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has obtained or is the subject of a favorable
determination letter from the IRS that the Company Benefit Plan is so qualified
and all related trusts are exempt from U.S. federal income taxation under
Section 501(a) of the Code, and, to the Knowledge of the Company, nothing has
occurred, whether by action or by failure to act, which could be reasonably
expected to cause the loss of such qualification or exemption. Except as would
not reasonably be expected to result in material liability to the Company or a
Company ERISA Affiliate, (i) to the Knowledge of the Company there has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code and other than a transaction that is exempt under a statutory
or administrative exemption) with respect to any Company Benefit Plan, (ii) no
suit, administrative proceeding, action or other litigation has been brought, or
to the Knowledge of the Company is threatened, against or with respect to any
such Company Benefit Plan, including any audit or inquiry by the IRS or United
States Department of Labor (other than routine benefits claims), (iii) none of
the assets of the Company or any Company ERISA Affiliate is, or may reasonably
be expected to become, the subject of any lien arising under ERISA or Section
412(n) of the Code, (iv) all Tax, annual reporting and other governmental
filings required by ERISA and the Code have been timely filed with the
appropriate Governmental Entity and all notices and disclosures have been timely
provided to participants, (v) all contributions and payments to each Company
Benefit Plan are deductible under applicable Code sections including, as
applicable, sections 162 or 404, and (vi) no excise Tax could be imposed upon
the Company under Chapter 43 of the Code.
13
(d) Neither the Company nor any of its ERISA Affiliates sponsors,
maintains, contributes to or has an obligation to contribute to, or has
sponsored, maintained, contributed to or had an obligation to contribute to, any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) that is
subject to Title IV of ERISA or Section 412 of the Code, or any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(e) No amount that could be received (whether in cash or property or
the vesting of property), in connection with the consummation of the
transactions contemplated by this Agreement, by any employee, officer or
director of the Company or any of its Subsidiaries who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any Company Benefit Plan or otherwise may be characterized as an
"excess parachute payment" (as defined in Section 280G(b)(1) of the Code).
(f) Except as required by Law, no Company Benefit Plan provides any
of the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. The Company and each ERISA Affiliate are
in compliance with (i) the requirements of the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations (including proposed
regulations) thereunder and any similar state Law and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996,
as amended, and the regulations (including the proposed regulations) thereunder,
except as would not be reasonably expected to result in material liability to
the Company or a Company ERISA Affiliate.
(g) Neither the Company nor any of its Subsidiaries, sponsors,
contributes to or has any liability with respect to any employee benefit plan,
program or arrangement that provides benefits to non-resident aliens with no
United States source income outside of the United States.
(h) The Company has delivered to Parent accurate W-2 information for
the executive officers of the Company for the 2000 and 2001 calendar years.
(i) Neither the Company nor any Company Subsidiary is a party to or
otherwise bound by any collective bargaining Contract with a labor union or
labor organization, nor is any such Contract presently being negotiated.
(j) The Company has identified in Section 3.8(j) of the Company
Disclosure Letter and has made available to Parent true and complete copies of
(i) all severance and employment agreements with directors, officers or
employees of or consultants to the Company or any Company Subsidiary, (ii) all
severance programs and policies of each of the Company and each Company
Subsidiary with or relating to its employees, and (iii) all plans, programs,
agreements and other arrangements of each of the Company and each Company
Subsidiary with or relating to its directors, officers, employees or consultants
which contain change in control provisions. Neither the execution and delivery
of this Agreement or other related agreements, nor the consummation of the
transactions contemplated hereby or thereby will (either alone or in conjunction
with any other event, such as termination of employment) (i) result in any
payment (including, without limitation, severance, unemployment compensation,
parachute or otherwise) becoming due to any director or any employee of the
Company or any Company Subsidiary or Affiliate from the Company or any Company
Subsidiary or Affiliate under any Company Benefit
14
Plan or otherwise, (ii) significantly increase any benefits otherwise payable
under any Company Benefit Plan or (iii) result in any acceleration of the time
of payment or vesting of any benefits, except as may be required by applicable
law.
Section 3.9 Contracts. Except as filed as exhibits to the Company
SEC Filings filed prior to the date of this Agreement, or as disclosed in
Section 3.9 of the Company Disclosure Letter, neither the Company nor any
Company Subsidiary is a party to or bound by any Contract (each a "Company
Material Contract") that (i) is a "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC), (ii) is with any Affiliate of
the Company, other than any Contract (A) which is or has been fully performed
and under which the Company has no continuing right, liability or obligation, or
(B) that is otherwise disclosed on the Company Disclosure Letter and marked with
a footnote indicating that it is a Contract with an Affiliate of the Company, or
(iii) limits or otherwise restricts the Company or any Company Subsidiary or
that would, after the Effective Time, limit or restrict Parent or any of its
Subsidiaries (including the Surviving Corporation and its Subsidiaries) or any
successor thereto, from engaging or competing in any line of business or in any
geographic area, which Contracts would be material to Parent and its
Subsidiaries (determined after giving effect to the Merger). To the Company's
Knowledge, none of the contracts or agreements referred to in the foregoing
clause (iii) would preclude the Company, the Surviving Corporation or Parent
after Closing from engaging in any of its current activities or any of the
Company's or Parent's planned activities. Copies of all the Contracts set forth
in the Company Disclosure Letter have heretofore been made available to Parent
and such copies are accurate and complete.
Section 3.10 Litigation. Except as and to the extent disclosed in
the Company SEC Filings, including the notes thereto, filed prior to the date of
this Agreement or as would not, individually or in the aggregate, have a Company
Material Adverse Effect, (a) there is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of the Company, threatened in writing
against the Company or any Company Subsidiary or for which the Company or any
Company Subsidiary is obligated to indemnify a third party that would have a
Company Material Adverse Effect, and (b) neither the Company nor any Company
Subsidiary is subject to any outstanding and unsatisfied order, writ,
injunction, decree or arbitration ruling, award or other finding. There is no
suit, claim, action, proceeding or investigation pending or, to the Knowledge of
the Company, threatened in writing against the Company or any Company Subsidiary
that, as of the date hereof, challenges the validity or propriety, or seeks to
prevent consummation of, the Merger or any other transaction contemplated by
this Agreement.
Section 3.11 Environmental Matters. Except as disclosed in the
Company Form 10-K or in Company SEC Filings, including the notes thereto, since
December 31, 2001 through to the date of this Agreement or as would not,
individually or in the aggregate, have a Company Material Adverse Effect:
(a) The Company and the Company Subsidiaries (i) are in compliance
with all applicable Environmental Laws, (ii) hold or have applied for all
Environmental Permits necessary to conduct their current operations, and (iii)
are in compliance with their respective Environmental Permits.
(b) Neither the Company nor any Company Subsidiary has received
within the past five (5) years any written notice, demand, letter, claim or
request for information
15
alleging that the Company or any Company Subsidiary may be in violation of, or
liable under, any Environmental Law.
(c) Neither the Company nor any Company Subsidiary (i) has entered
into or agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials and, to the Knowledge of
the Company, no investigation, litigation or other proceeding is pending or
threatened with respect thereto nor is there any reasonable basis for such
investigation, litigation or other proceeding or (ii) is an indemnitor in
connection with any claim threatened or asserted in writing by any third-party
indemnitee for any liability under any Environmental Law or relating to any
Hazardous Materials.
(d) To the Knowledge of the Company without independent
investigation, no event has occurred or condition exists on property owned or
leased by the Company and no operating practice is or has been employed by the
Company, that reasonably may be expected to give rise to liability on the part
of the Company for any losses, liabilities, damages, settlements, penalties,
expenses or response costs arising under or on account of any Environmental Law.
(e) None of the real property owned or leased by the Company or any
Company Subsidiary is listed or, to the Knowledge of the Company without
independent investigation, proposed for listing on the "National Priorities
List" under CERCLA, as updated through the date hereof, or any similar state or
foreign list of sites requiring investigation or cleanup.
(f) To the Knowledge of the Company, the Company has never sent or
transported or arranged to be sent or transported Hazardous Materials, or
generated Hazardous Materials that were ultimately sent or transported, to a
site that, pursuant to any applicable Environmental Law: (i) has been placed on
the "National Priorities list under CERCLA or any similar state or foreign list;
or (ii) is otherwise designated or identified as a potential site for cleanup,
remediation, closure or other environmental remedial activity.
Section 3.12 Intellectual Property. Except as would not,
individually or in the aggregate, have a Company Material Adverse Effect, (a)
the Company (or one of its Subsidiaries) has the full right, power and authority
to grant all of the rights, title and interests in the Company Intellectual
Property granted in this Agreement, (b) to the Company's knowledge, the Company
Patents are valid and enforceable, in whole or in part, and no allegation of
invalidity or conflicting ownership or inventorship rights with respect to any
Company Patent has been received by the Company or any Company Subsidiary from a
third party, (c) no Company Intellectual Property that is owned by the Company
or any Company Subsidiary is the subject of any pending or, to the Company's
Knowledge, threatened action, suit, claim, investigation, arbitration, validity
or enforceability challenge or other proceeding, (d) to the Company's Knowledge,
no Company Intellectual Property that is licensed by the Company is the subject
of any pending or threatened action, suit, claim, investigation, arbitration,
validity or enforceability challenge or other proceeding, (e) no person has
given written notice to the Company or any Company Subsidiary that the Company
or any Company Subsidiary is infringing or has infringed any patent, trademark,
service ▇▇▇▇, trade name, or copyright or design right or other intellectual
property right of any third party, or that the Company or any
16
Company Subsidiary has misappropriated or improperly used or disclosed any trade
secret, confidential information or know-how, (f) to the Company's Knowledge,
the making, having made, using, selling, offering for sale, importing,
exporting, manufacturing, marketing, licensing, reproduction, distribution or
publishing by the Company of any process, machine, manufacture or product as
embodied in the Company's currently existing business does not infringe any
valid claim of any patent, trademark, service ▇▇▇▇, trade name, copyright,
design right, or other intellectual property right of any third party in the
jurisdictions in which such making, using, selling, offering for sale,
importing, exporting, manufacturing, marketing, licensing, reproduction,
distribution, or publishing occurs, and does not involve the misappropriation or
improper use or disclosure of any trade secrets, confidential information or
know-how of any third party, (g) there exists no prior act or omission or
current conduct or use by the Company, any Company Subsidiary or, to the
Knowledge of the Company, any third party that would invalidate, reduce or
eliminate the enforceability or scope of any Company Intellectual Property and
(h) no Company Intellectual Property is subject to any outstanding injunction,
judgment, order or settlement and Company has fully complied with, paid and
otherwise satisfied all such obligations.
Section 3.13 Taxes. (a) Each of the Company and the Company
Subsidiaries has duly and timely filed with the appropriate Tax authorities or
other Governmental Entities all material Tax Returns that it was required to
file through the date hereof. All such Tax Returns are complete and accurate in
all material respects. All Taxes shown as due on such Tax Returns have been
paid. None of the Company nor any Company Subsidiary currently is the
beneficiary of any extension of time within which to file any material Tax
Return. No claim has ever been made by an authority in a jurisdiction where any
of the Company and the Company Subsidiaries does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction.
(b) The unpaid Taxes of the Company and the Company Subsidiaries (i)
did not, as of the dates of the most recent financial statements contained in
the Company SEC Filings, exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheets contained in
such financial statements, and (ii) will not exceed that reserve as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Company and the Company Subsidiaries in filing their
Tax Returns. Since the date of the most recent financial statements, none of the
Company and the Company Subsidiaries has (x) engaged in any transactions or
incurred any liability for Taxes other than in the ordinary course of business
or (y) paid Taxes other than Taxes paid on a timely basis and in a manner
consistent with past custom and practice.
(c) No deficiencies for Taxes with respect to any of the Company and
the Company Subsidiaries have been claimed, proposed or assessed by a Tax
authority or other Governmental Entity. No audit or other proceeding for or
relating to any liability in respect of Taxes of any of the Company or any
Company Subsidiary is being conducted by any Tax authority or Governmental
Entity, and the Company and the Company Subsidiaries have not received
notification in writing that any such audit or other proceeding is pending. The
Company has delivered or made available to Parent complete and accurate copies
of federal, state and local income Tax Returns of each of the Company and the
Company Subsidiaries and their predecessors for the years ended December 31,
1998, 1999, 2000 and 2001, and complete and accurate copies of all examination
reports and statements of deficiencies assessed against or
17
agreed to by any of the Company and the Company Subsidiaries or any predecessors
since December 31, 1998, with respect to Taxes of any type. Neither the Company
nor any of the Company Subsidiaries nor any predecessor has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. The are no liens for Taxes upon the
assets of any of the Company and the Company Subsidiaries (other than with
respect to Permitted Liens for Taxes).
(d) All material Taxes required to be withheld, collected or
deposited by or with respect to each of the Company and the Company Subsidiaries
have been timely withheld, collected or deposited as the case may be, and to the
extent required, have been paid to the relevant Tax authority or other
Governmental Entity.
(e) Neither the Company nor any Company Subsidiary is responsible
for the Taxes of any person other than members of the affiliated group of which
the Company is the common parent (i) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign Law), (ii) as a transferee
or successor, (iii) by Contract, or (iv) otherwise.
(f) Neither the Company nor any Company Subsidiary is a party to, is
bound by or has any obligation under any Tax sharing or Tax indemnity agreement
or similar Contract or arrangement.
(g) Neither the Company nor any Company Subsidiary has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(h) Neither the Company nor any Company Subsidiary has been a party
to any distribution occurring during the two years preceding the date of this
Agreement in which the parties to such distribution treated the distribution as
one to which Section 355 of the Code is applicable. None of the outstanding
indebtedness of any of the Company and the Company Subsidiaries constitutes
indebtedness with respect to which any interest deductions may be disallowed
under Section 163(i) or 163(l) or 279 of the Code or under any other provision
of applicable law.
(i) Neither the Company nor any Company Subsidiary knows of any fact
or circumstance or has taken, or failed to take, any action that could
reasonably be expected to prevent the Transaction from qualifying as a
reorganization within the meaning of Section 368 of the Code.
Section 3.14 Insurance. Summaries of all material insurance policies
maintained by the Company, including fire and casualty, general liability,
product liability, business interruption and professional liability policies,
have been made available to Parent.
Section 3.15 Properties. Each of the Company and the Company
Subsidiaries has good and valid title to or a valid leasehold interest in all
its properties and assets reflected on the most recent balance sheet contained
in the Company's quarterly report on Form 10-Q that is part of the Company SEC
Filings or acquired after the date thereof, except for (a) properties and assets
sold or otherwise disposed of in the ordinary course of business since the date
of such
18
balance sheet, and (b) properties and assets the loss of which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.16 Brokers. No broker, finder or investment banker (other
than the Company Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of the Company or any Company Subsidiary. Prior to the date
hereof, the Company has accurately described to Parent the Company's
arrangements with, and the fees that may be paid by the Company to, the Company
Financial Advisor relating to the Merger.
Section 3.17 Interested Stockholder. As of the date hereof (without
giving effect to the execution and delivery of any Voting Agreement(s) executed
and delivered in connection herewith), neither the Company nor any Company
Subsidiary is an interested stockholder of Parent within the meaning of Section
78.423 of the Nevada Revised Statutes.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the corresponding section of the Disclosure
Letter delivered by Parent to the Company prior to the execution of this
Agreement (the "Parent Disclosure Letter") (and subject to Section 9.12 hereof),
Parent hereby represents and warrant to the Company as follows:
Section 4.1 Organization and Qualification; Subsidiaries. Each of
Parent and its Subsidiaries (the "Parent Subsidiaries") is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as it is now being conducted, and is qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its assets or properties or conduct of its business
requires such qualification, except where the failure to be so organized,
qualified or in good standing, or to have such power or authority, would not,
individually or in the aggregate, have a Parent Material Adverse Effect. Parent
has made available to the Company a complete and correct copy of the
certificates of incorporation and by-laws of Parent and the Parent Subsidiaries,
each as amended to date. Except with respect to securities of non-affiliates
held for investment purposes which do not constitute more than a 5% interest in
any such non-affiliate, neither Parent nor any Parent Subsidiary holds an Equity
Interest in any other person. The certificates of incorporation and by-laws of
Parent and the Parent Subsidiaries so delivered are in full force and effect.
Section 4.1 of the Parent Disclosure Letter contains a correct and complete list
of each jurisdiction where Parent and each of its Subsidiaries is organized and
qualified to do business.
Section 4.2 Capitalization. (a) As of the date hereof, the
authorized capital stock of Parent consists of 100,000,000 shares of Parent
Common Stock and 8,000,000 shares of preferred stock, par value $0.001 per share
(the "Parent Preferred Stock"), of which 3,000,000 shares have been designated
Series A Preferred Stock and 20,000 shares have been designated Series B Junior
Participating Preferred Stock. As of November 5, 2002, (i) 23,035,854 shares of
Parent Common Stock were issued and outstanding, all of which were validly
issued and fully paid, nonassessable and free of preemptive rights, and (ii)
7,035,825 shares of Parent Common
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Stock were issuable (and such number was reserved for issuance) upon exercise of
Parent Options outstanding as of such date. As of the date hereof, (i) 20,000
shares of Series B Junior Participating Preferred Stock have been reserved for
issuance in connection with the Rights, and (ii) no shares of Parent Preferred
Stock are issued or outstanding.
(b) Except for outstanding Parent Options, outstanding purchase
rights under Parent's Employee Stock Purchase Plan and outstanding Rights under
the Rights Agreement, as of the date hereof, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
Parent or any Parent Subsidiary is a party or by which Parent or any Parent
Subsidiary is bound relating to the issued or unissued capital stock or other
Equity Interests of Parent or any Parent Subsidiary, or obligating Parent or any
Parent Subsidiary to issue or sell any shares of its capital stock or other
Equity Interests. From November 5, 2002 to the date of this Agreement, Parent
has not issued any Equity Interests with respect to Parent Common Stock, other
than Parent Common Stock issued upon exercise of Parent Stock Options. Parent
has previously provided the Company with a true and complete list, as of
November 5, 2002, of the prices at which outstanding Parent Options may be
exercised under the applicable Parent Stock Option Plan, the number of Parent
Options outstanding at each such price and the vesting schedule of the Parent
Options. All shares of Parent Common Stock subject to issuance under the Parent
Stock Option Plans, upon issuance prior to the Effective Time on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights.
(c) There are no outstanding contractual obligations of Parent or
any Parent Subsidiary (i) restricting the transfer of, (ii) affecting the voting
rights of, (iii) requiring the repurchase, redemption or disposition of, or
containing any right of first refusal with respect to, (iv) requiring the
registration for sale of, or (v) granting any preemptive or antidilutive right
with respect to, any Parent Common Stock or any capital stock of, or other
Equity Interests in, any Parent Subsidiary. Each outstanding share of capital
stock of each Parent Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and is owned, beneficially and of
record, by Parent free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on Parent's
voting rights, charges and other encumbrances of any nature whatsoever. There
are no outstanding contractual obligations of Parent or any Parent Subsidiary to
make any loan to, or any equity or other investment (in the form of a capital
contribution or otherwise) in, any Parent Subsidiary or any other person, other
than guarantees by Parent of any indebtedness or other obligations of any
wholly-owned Parent Subsidiary and other than loans made in the ordinary course
consistent with past practice to employees of Parent and its Subsidiaries.
(d) Parent does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or convertible
into or exercisable for securities having the right to vote) with the
stockholders of Parent on any matter.
Section 4.3 Authority. (a) Assuming the accuracy of section 3.17,
Parent has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement, subject to (i) the approval by the
stockholders of Parent, by the holders of a majority of the outstanding shares
of Parent Common Stock, of an amendment to the Parent Articles to change the
name of Parent at the Effective Time to a new name to be mutually agreed by
Parent and the
20
Company prior to mailing the Joint Proxy /Prospectus (the "Charter Amendment"),
and (ii) the approval by the stockholders of Parent, by a majority of the votes
cast at the Parent Stockholders Meeting (as defined in Section 6.2(b)), of the
Share Issuance (collectively, the "Parent Stockholder Approval"), and the filing
of a related Certificate of Amendment with the Secretary of State of the State
of Nevada. The execution and delivery of this Agreement by Parent and the
consummation by Parent of such transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent and no stockholder votes are necessary to authorize this
Agreement or to consummate such transactions, subject only to obtaining the
Parent Stockholder Approval. This Agreement is the valid and binding agreement
of Parent enforceable against Parent in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) The Board of Directors of Parent, by resolutions duly adopted by
unanimous vote at a meeting duly called and held and not subsequently rescinded
or modified in any way (the "Parent Board Approval"), has duly (i) determined
that this Agreement and the Merger are advisable and fair to and in the best
interests of Parent and its stockholders, (ii) approved this Agreement, the
Merger, the Charter Amendment and the Share Issuance, and (iii) recommended that
the stockholders of Parent approve the Share Issuance and the Charter Amendment
and directed that the Share Issuance and the Charter Amendment be submitted for
consideration by Parent's stockholders in accordance with this Agreement.
Assuming the accuracy of section 3.17, the Parent Board Approval constitutes
approval of this Agreement and the Merger as required under any applicable state
takeover Law and no such state takeover Law is applicable to the Merger or the
other transactions contemplated hereby.
(c) The Board of Directors of Parent has received the opinion of its
financial advisors, Banc of America Securities LLC (the "Parent Financial
Advisor"), dated the date, or shortly prior to the date, of this Agreement, to
the effect that, as of the date of such opinion, the Exchange Ratio is fair,
from a from a financial point of view, to Parent, copies of which opinion will
be made available to the Company.
Section 4.4 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent do not, and the performance
of this Agreement by Parent will not, (i) conflict with or violate any provision
of the Parent Articles, the Bylaws of Parent as in effect on the date hereof, or
any equivalent organizational documents of any Parent Subsidiary, or (ii)
require any consent or approval under, result in any breach of, any loss of any
benefit under or constitute a change of control or default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any right of termination, vesting, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or any Parent Subsidiary pursuant to, any Contract,
Parent Permit or other instrument or obligation, except, with respect to clause
(ii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent do not,
and the performance of this Agreement by Parent will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
domestic or foreign Governmental Entity, except (i) under the Exchange Act, the
Securities Act, any applicable Blue Sky Law, the rules
21
and regulations of Nasdaq and pursuant to Section 1.2 hereof, the filing of a
Certificate of Merger with the Delaware Secretary of State and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
Section 4.5 Permits; Compliance With Law. Each of Parent and the
Parent Subsidiaries is in possession of all authorizations, licenses, permits,
certificates, approvals and clearances, and has submitted notices to, all
Governmental Entities necessary for Parent or any Parent Subsidiary to own,
lease and operate its properties or other assets and to carry on their
respective businesses in the manner described in the Parent SEC Filings filed
prior to the date hereof and as it is being conducted as of the date hereof (the
"Parent Permits"), and all such Parent Permits are valid, and in full force and
effect, except where the failure to have, or the suspension or cancellation of,
or failure to be valid or in full force and effect of, any of the Parent Permits
would not, individually or in the aggregate, have a Parent Material Adverse
Effect. Neither Parent nor any Parent Subsidiary is in conflict with, or in
default or violation of, (a) any Law applicable to Parent or any Parent
Subsidiary or by which any property or asset of Parent or any Parent Subsidiary
is bound or affected or (b) any Parent Permits, except, with respect to clauses
(a) and (b), for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Parent Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to Parent or any
of the Parent Subsidiaries is pending or, to the Knowledge of Parent,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same.
Section 4.6 SEC Filings; Financial Statements. (a) Parent has timely
filed all registration statements, prospectuses, forms, reports, definitive
proxy statements, schedules and documents required to be filed by it under the
Securities Act or the Exchange Act, as the case may be, since January 1, 2000
(collectively, the "Parent SEC Filings"). Each Parent SEC Filing (i) as of its
date, complied or, if filed subsequent to the date hereof, will comply, in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and (ii) did not, or, if filed subsequent to the date
hereof, will not, at the time of filing, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Parent SEC Filings was, or will
be, prepared in all material respects in accordance with GAAP applied (except as
may be indicated in the notes thereto and, in the case of unaudited quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act) on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto), and each presented, or will present, fairly the consolidated
financial position, results of operations and cash flows of Parent and the
consolidated Parent Subsidiaries as of the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which did not and would
not, individually or in the aggregate, have a Parent Material Adverse Effect).
The books and records of Parent and the Parent Subsidiaries have been, and are
being, maintained in all material respects in accordance with GAAP and all other
applicable legal and accounting requirements.
22
(c) Except as and to the extent set forth on the consolidated
balance sheet of Parent and the consolidated Parent Subsidiaries as of December
31, 2001 included in Parent's Form 10-K for the year ended December 31, 2001,
including the notes thereto (the "Parent Form 10-K"), neither Parent nor any
consolidated Parent Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for (i) liabilities or obligations incurred in the ordinary course
of business consistent with past practice since December 31, 2001, and (ii)
liabilities and obligations incurred in connection with this Agreement and the
transactions contemplated hereby that would not, individually or in the
aggregate have a Parent Material Adverse Effect.
Section 4.7 Absence of Certain Changes or Events. Since December 31,
2001, except as disclosed in the Parent Form 10-K or in Parent SEC Filings since
December 31, 2001 through to the date of this Agreement, including the notes
thereto, and except as specifically contemplated by, or as disclosed in, this
Agreement, Parent and the Parent Subsidiaries have conducted their businesses in
the ordinary course consistent with past practice and, since such date, there
has not been (a) any change, circumstance or event that has had a Parent
Material Adverse Effect; (b) any material change by Parent or the Parent
Subsidiaries in accounting methods not required pursuant to generally accepted
accounting principles or practices; (c) any declaration, setting aside or
payment of any dividend or other distribution with respect to Parent's or any
Parent Subsidiary's capital stock; (d) any split, combination or
reclassification of Parent's or any Parent Subsidiary's capital stock or any
issuance of or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock or
(e) any revaluation by the Parent or any Parent Subsidiary of any of their
assets having a Parent Material Adverse Effect.
Section 4.8 Employee Benefit Plans. (a) Section 4.8(a) of the Parent
Disclosure Letter sets forth a true and complete list of each "employee benefit
plan" as defined in Section 3(3) of ERISA and any other material plan, policy,
program, practice, agreement, understanding or arrangement providing
compensation or other benefits to any current or former director, officer,
employee or consultant (or to any dependent or beneficiary thereof) of Parent or
any ERISA Affiliate, which are now, or with respect to any plan intended to be
qualified under 401(a) of the Code, were within the past 6 years, maintained,
sponsored or contributed to by Parent or any ERISA Affiliate, or under which
Parent or any ERISA Affiliate has any obligation or liability, whether actual or
contingent, including, without limitation, all material incentive, bonus,
deferred compensation, vacation, holiday, cafeteria, medical, disability, stock
purchase, stock option, stock appreciation, phantom stock, restricted stock or
other stock-based compensation plans, policies, programs, practices or
arrangements. Each "employee benefit plan" as defined in Section 3(3) of ERISA
and each other material plan, policy, program, practice, agreement,
understanding or arrangement providing compensation or other benefits to any
current or former director, officer, employee or consultant (or to any dependent
or beneficiary thereof) of Parent or any ERISA Affiliate, which are now, or were
within the past 6 years, maintained, sponsored or contributed to by Parent or
any ERISA Affiliate, or under which Parent or any ERISA Affiliate has any
obligation or liability, whether actual or contingent, including, without
limitation, all material incentive, bonus, deferred compensation, vacation,
holiday, cafeteria, medical, disability, stock purchase, stock option, stock
appreciation, phantom stock, restricted stock or other stock-based compensation
plans, policies, programs, practices or arrangements is hereinafter referred to
as a "Parent Benefit Plan". Neither Parent, nor to the
23
Knowledge of Parent, any other person, has any express or implied commitment,
whether legally enforceable or not, to modify, change or terminate any Parent
Benefit Plan, other than with respect to a modification, change or termination
required by ERISA, the Code, the Health Insurance Portability and Accountability
Act or any other applicable law. Parent has delivered or made available to the
Company true, correct and complete copies of all Parent Benefit Plans (or, if
not so delivered, has delivered or made available to the Company a written
summary of their material terms), and, with respect thereto, all amendments,
trust agreements, insurance Contracts, other funding vehicles, determination
letters issued by the United States Internal Revenue Service (the "IRS"), the
most recent annual reports (Form 5500 series) filed with the IRS, and the most
recent actuarial report or other financial statement relating to such Parent
Benefit Plan.
(b) Each Parent Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable Laws, including ERISA
and the Code, and contributions required to be made under the terms of any of
the Parent Benefit Plans as of the date of this Agreement have been timely made.
Except as would not, individually or in the aggregate, have a Parent Material
Adverse Effect, (i) with respect to the Parent Benefit Plans, no event has
occurred and, to the Knowledge of Parent, there exists no condition or set of
circumstances in connection with which Parent could reasonably be expected to be
subject to any material liability (other than for routine benefit liabilities)
under the terms of, or with respect to, such Parent Benefit Plans, ERISA, the
Code or any other applicable Law, and (ii) neither Parent nor any ERISA
Affiliate has any liability under ERISA Section 502.
(c) Each Parent Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has obtained or is the subject of a favorable
determination letter from the IRS that the Parent Benefit Plan is so qualified
and all related trusts are exempt from U.S. federal income taxation under
Section 501(a) of the Code, and, to the Knowledge of Parent, nothing has
occurred, whether by action or by failure to act, which could be reasonably
expected to cause the loss of such qualification or exemption. Except as would
not reasonably be expected to result in material liability to Parent or a Parent
ERISA Affiliate, (i) to the Knowledge of Parent there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code and other than a transaction that is exempt under a statutory or
administrative exemption) with respect to any Parent Benefit Plan, (ii) no suit,
administrative proceeding, action or other litigation has been brought, or to
the Knowledge of Parent is threatened, against or with respect to any such
Parent Benefit Plan, including any audit or inquiry by the IRS or United States
Department of Labor (other than routine benefits claims), (iii) none of the
assets of Parent or any Parent ERISA Affiliate is, or may reasonably be expected
to become, the subject of any lien arising under ERISA or Section 412(n) of the
Code, (iv) all Tax, annual reporting and other governmental filings required by
ERISA and the Code have been timely filed with the appropriate Governmental
Entity and all notices and disclosures have been timely provided to
participants, (v) all contributions and payments to each Parent Benefit Plan are
deductible under applicable Code sections including, as applicable, sections 162
or 404, and (vi) no excise Tax could be imposed upon Parent under Chapter 43 of
the Code.
(d) Neither Parent nor any of its ERISA Affiliates sponsors,
maintains, contributes to or has an obligation to contribute to, or has
sponsored, maintained, contributed to or had an obligation to contribute to, any
"employee pension benefit plan" (as defined in Section
24
3(2) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code,
or any "multiemployer plan" as defined in Section 3(37) of ERISA.
(e) No amount that could be received (whether in cash or property or
the vesting of property), in connection with the consummation of the
transactions contemplated by this Agreement, by any employee, officer or
director of Parent or any of its Subsidiaries who is a "disqualified individual"
(as such term is defined in proposed Treasury Regulation Section 1.280G-1) under
any Parent Benefit Plan or otherwise may be characterized as an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code).
(f) Except as required by Law, no Parent Benefit Plan provides any
of the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. Parent and each ERISA Affiliate are in
compliance with (i) the requirements of the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the regulations (including proposed regulations)
thereunder and any similar state Law, and (ii) the applicable requirements of
the Health Insurance Portability and Accountability Act of 1996, as amended, and
the regulations (including the proposed regulations) thereunder, except as would
not be reasonably expected to result in material liability to Parent or a Parent
ERISA Affiliate.
(g) Neither Parent nor any of its Subsidiaries, sponsors,
contributes to or has any liability with respect to any employee benefit plan,
program or arrangement that provides benefits to non-resident aliens with no
United States source income outside of the United States.
(h) Parent has delivered to the Company accurate W-2 information for
the executive officers of Parent for the 2000 and 2001 calendar years.
(i) Neither Parent nor any Parent Subsidiary is a party to or
otherwise bound by any collective bargaining Contract with a labor union or
labor organization, nor is any such Contract presently being negotiated.
(j) Parent has identified in Section 4.8(j) of the Parent Disclosure
Letter and has made available to the Company true and complete copies of (i) all
severance and employment agreements with directors, officers or employees of or
consultants to Parent or any Parent Subsidiary, (ii) all severance programs and
policies of each of Parent and each Parent Subsidiary with or relating to its
employees, and (iii) all plans, programs, agreements and other arrangements of
each of Parent and each Parent Subsidiary with or relating to its directors,
officers, employees or consultants which contain change in control provisions.
Neither the execution and delivery of this Agreement or other related
agreements, nor the consummation of the transactions contemplated hereby or
thereby will (either alone or in conjunction with any other event, such as
termination of employment) (i) result in any payment (including, without
limitation, severance, unemployment compensation, parachute or otherwise)
becoming due to any director or any employee of Parent or any Parent Subsidiary
or Affiliate from Parent or any Parent Subsidiary or Affiliate under any Parent
Benefit Plan or otherwise, (ii) significantly increase any benefits otherwise
payable under any Parent Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any benefits, except as may be required by
applicable law.
25
Section 4.9 Contracts. Except as filed as exhibits to the Parent SEC
Filings filed prior to the date of this Agreement, or as disclosed in Section
4.9 of the Parent Disclosure Letter, neither Parent nor any Parent Subsidiary is
a party to or bound by any Contract (each a "Parent Material Contract") that (i)
is a "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC), (ii) is with any Affiliate of Parent, other than any
Contract (A) which is or has been fully performed and under which Parent has no
continuing right, liability or obligation, or (B) that is otherwise disclosed on
the Parent Disclosure Letter and marked with a footnote indicating that it is a
Contract with an Affiliate of Parent, or (iii) limits or otherwise restricts
Parent or any Parent Subsidiary or that would, after the Effective Time, limit
or restrict Parent or any of its Subsidiaries (including the Surviving
Corporation and its Subsidiaries) or any successor thereto, from engaging or
competing in any line of business or in any geographic area, which Contracts
would be material to Parent and its Subsidiaries (determined after giving effect
to the Merger). To Parent's Knowledge, none of the contracts or agreements
referred to in the foregoing clause (iii) would preclude the Company, the
Surviving Corporation or Parent after Closing from engaging in any of its
current activities or any of the Company's or Parent's planned activities.
Copies of all the Contracts set forth in the Parent Disclosure Letter have
heretofore been made available to Company and such copies are accurate and
complete.
Section 4.10 Litigation. Except as and to the extent disclosed in
the Parent SEC Filings, including the notes thereto, filed prior to the date of
this Agreement or as would not, individually or in the aggregate, have a Parent
Material Adverse Effect, (a) there is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of Parent, threatened in writing
against Parent or any Parent Subsidiary or for which Parent or any Parent
Subsidiary is obligated to indemnify a third party that would have a Material
Adverse Effect, and (b) neither Parent nor any Parent Subsidiary is subject to
any outstanding and unsatisfied order, writ, injunction, decree or arbitration
ruling, award or other finding. There is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of Parent, threatened in writing
against Parent or any Parent Subsidiary that, as of the date hereof, challenges
the validity or propriety, or seeks to prevent consummation of, the Merger or
any other transaction contemplated by this Agreement.
Section 4.11 Environmental Matters. Except as disclosed in the
Parent Form 10-K or in Parent SEC Filings, including the notes thereto, since
December 31, 2001 through to the date of this Agreement or as would not,
individually or in the aggregate, have a Parent Material Adverse Effect:
(a) Parent and the Parent Subsidiaries (i) are in compliance with
all applicable Environmental Laws, (ii) hold or have applied for all
Environmental Permits necessary to conduct their current operations, and (iii)
are in compliance with their respective Environmental Permits.
(b) Neither Parent nor any Parent Subsidiary has received within the
past five (5) years any written notice, demand, letter, claim or request for
information alleging that Parent or any Parent Subsidiary may be in violation
of, or liable under, any Environmental Law.
(c) Neither Parent nor any Parent Subsidiary (i) has entered into or
agreed to any consent decree or order or is subject to any judgment, decree or
judicial order relating to
26
compliance with Environmental Laws, Environmental Permits or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous
Materials and, to the Knowledge of Parent, no investigation, litigation or other
proceeding is pending or threatened with respect thereto nor is there any
reasonable basis for such investigation, litigation or other proceeding, or (ii)
is an indemnitor in connection with any claim threatened or asserted in writing
by any third-party indemnitee for any liability under any Environmental Law or
relating to any Hazardous Materials.
(d) To the Knowledge of Parent and Merger Sub without independent
investigation, no event has occurred or condition exists on property owned or
leased by Parent or Merger Sub and no operating practice is or has been employed
by Parent or Merger Sub, that reasonably may be expected to give rise to
liability on the part of Parent or Merger Sub for any losses, liabilities,
damages, settlements, penalties, expenses or response costs arising under or on
account of any Environmental Law.
(e) None of the real property owned or leased by Parent or any
Parent Subsidiary is listed or, to the Knowledge of Parent without independent
investigation, proposed for listing on the "National Priorities List" under
CERCLA, as updated through the date hereof, or any similar state or foreign list
of sites requiring investigation or cleanup.
(f) To the Knowledge of Parent and Merger Sub, neither Parent nor
Merger Sub has ever sent or transported or arranged to be sent or transported
Hazardous Materials, or generated Hazardous Materials that were ultimately sent
or transported, to a site that, pursuant to any applicable Environmental Law:
(i) has been placed on the "National Priorities list under CERCLA or any similar
state or foreign list; or (ii) is otherwise designated or identified as a
potential site for cleanup, remediation, closure or other environmental remedial
activity.
Section 4.12 Intellectual Property. Except as would not,
individually or in the aggregate, have a Parent Material Adverse Effect, (a)
Parent (or one of its Subsidiaries) has the full right, power and authority to
grant all of the rights, title and interests in Parent Intellectual Property
granted in this Agreement, (b) to Parent's knowledge, the Parent Patents are
valid and enforceable, in whole or in part, and no allegation of invalidity or
conflicting ownership or inventorship rights with respect to any Parent Patent
has been received by Parent or any Parent Subsidiary from a third party, (c) no
Parent Intellectual Property that is owned by Parent or any Parent Subsidiary is
the subject of any pending or, to Parent's Knowledge, threatened action, suit,
claim, investigation, arbitration, validity or enforceability challenge or other
proceeding, (d) to Parent's Knowledge, no Parent Intellectual Property that is
licensed by Parent is the subject of any pending or threatened action, suit,
claim, investigation, arbitration, validity or enforceability challenge or other
proceeding, (e) no person has given written notice to Parent or any Parent
Subsidiary that Parent or any Parent Subsidiary is infringing or has infringed
any patent, trademark, service ▇▇▇▇, trade name, or copyright or design right or
other intellectual property right of any third party, or that Parent or any
Parent Subsidiary has misappropriated or improperly used or disclosed any trade
secret, confidential information or know-how, (f) to Parent's Knowledge, the
making, having made, using, selling, offering for sale, importing, exporting,
manufacturing, marketing, licensing, reproduction, distribution or publishing by
Parent of any process, machine, manufacture or product as embodied in Parent's
currently existing business does not infringe any valid claim of any patent,
trademark, service ▇▇▇▇, trade name, copyright, design right, or other
intellectual property right of any third party in the
27
jurisdictions in which such making, using, selling, offering for sale,
importing, exporting, manufacturing, marketing, licensing, reproduction,
distribution, or publishing occurs, and does not involve the misappropriation or
improper use or disclosure of any trade secrets, confidential information or
know-how of any third party, (g) there exists no prior act or omission or
current conduct or use by Parent, any Parent Subsidiary or, to the Knowledge of
Parent, any third party that would invalidate, reduce or eliminate the
enforceability or scope of any Parent Intellectual Property and (h) no Parent
Intellectual Property is subject to any outstanding injunction, judgment, order
or settlement and Parent has fully complied with, paid and otherwise satisfied
all such obligations.
Section 4.13 Taxes. (a) Each of Parent and the Parent Subsidiaries
has duly and timely filed with the appropriate Tax authorities or other
Governmental Entities all material Tax Returns that it was required to file
through the date hereof. All such Tax Returns are complete and accurate in all
material respects. All Taxes shown as due on such Tax Returns have been paid.
None of Parent nor any Parent Subsidiary currently is the beneficiary of any
extension of time within which to file any material Tax Return. No claim has
ever been made by an authority in a jurisdiction where any of Parent and the
Parent Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(b) The unpaid Taxes of Parent and the Parent Subsidiaries (i) did
not, as of the dates of the most recent financial statements contained in the
Parent SEC Filings, exceed the reserve for Tax liability (excluding any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the balance sheets contained in such
financial statements, and (ii) will not exceed that reserve as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of Parent and the Parent Subsidiaries in filing their Tax
Returns. Since the date of the most recent financial statements, none of Parent
and the Parent Subsidiaries has (x) engaged in any transactions or incurred any
liability for Taxes other than in the ordinary course of business or (y) paid
Taxes other than Taxes paid on a timely basis and in a manner consistent with
past custom and practice.
(c) No deficiencies for Taxes with respect to any of Parent and the
Parent Subsidiaries have been claimed, proposed or assessed by a Tax authority
or other Governmental Entity. No audit or other proceeding for or relating to
any liability in respect of Taxes of any of Parent or any Parent Subsidiary is
being conducted by any Tax authority or Governmental Entity, and Parent and the
Parent Subsidiaries have not received notification in writing that any such
audit or other proceeding is pending. Parent has delivered or made available to
the Company complete and accurate copies of federal, state and local income Tax
Returns of each of Parent and the Parent Subsidiaries and their predecessors for
the years ended December 31, 1999, 2000 and 2001, and complete and accurate
copies of all examination reports and statements of deficiencies assessed
against or agreed to by any of Parent and the Parent Subsidiaries or any
predecessors since December 31, 1998, with respect to Taxes of any type. Neither
Parent nor any of the Parent Subsidiaries nor any predecessor has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency. The are no liens for Taxes upon
the assets of any of Parent and the Parent Subsidiaries (other than with respect
to Permitted Liens for Taxes).
28
(d) All material Taxes required to be withheld, collected or
deposited by or with respect to each of Parent and the Parent Subsidiaries have
been timely withheld, collected or deposited as the case may be, and to the
extent required, have been paid to the relevant Tax authority or other
Governmental Entity.
(e) Neither Parent nor any Parent Subsidiary is responsible for the
Taxes of any person other than members of the affiliated group of which Parent
is the common parent (i) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local, or foreign Law), (ii) as a transferee or
successor, (iii) by Contract, or (iv) otherwise.
(f) Neither Parent nor any Parent Subsidiary is a party to, is bound
by or has any obligation under any Tax sharing or Tax indemnity agreement or
similar Contract or arrangement.
(g) Neither Parent nor any Parent Subsidiary has been a party to any
distribution occurring during the two years preceding the date of this Agreement
in which the parties to such distribution treated the distribution as one to
which Section 355 of the Code is applicable. None of the outstanding
indebtedness of any of Parent and the Parent Subsidiaries constitutes
indebtedness with respect to which any interest deductions may be disallowed
under Section 163(i) or 163(l) or 279 of the Code or under any other provision
of applicable law.
(h) Neither Parent nor any Parent Subsidiary knows of any fact or
circumstance or has taken, or failed to take, any action that could reasonably
be expected to prevent the Transaction from qualifying as a reorganization
within the meaning of Section 368 of the Code.
Section 4.14 Insurance. Summaries of all material insurance policies
maintained by Parent, including fire and casualty, general liability, product
liability, business interruption and professional liability policies, have been
made available to the Company.
Section 4.15 Properties. Each of Parent and the Parent Subsidiaries
has good and valid title to or a valid leasehold interest in all its properties
and assets reflected on the most recent balance sheet contained in Parent's
quarterly report on Form 10-Q that is part of the Parent SEC Filings or acquired
after the date thereof, except for (a) properties and assets sold or otherwise
disposed of in the ordinary course of business since the date of such balance
sheet, and (b) properties and assets the loss of which would not, individually
or in the aggregate, have a Parent Material Adverse Effect.
Section 4.16 Rights Agreement. Parent has taken all action necessary
to cause the Rights Agreement to be amended so that neither the Company nor any
of its affiliates or any stockholder of the Company executing a Voting Agreement
shall become an "Acquiring Person", and no "Share Acquisition Date" or
"Distribution Date" (as such terms are defined in the Rights Agreement) will
occur, by reason of the approval, execution or delivery of this Agreement or the
consummation of the transactions contemplated thereby.
Section 4.17 Brokers. No broker, finder or investment banker (other
than the Parent Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of Parent or any
29
Parent Subsidiary. Prior to the date hereof, Parent has accurately described to
the Company Parent's arrangements with, and the fees that may be paid by Parent
to, the Parent Financial Advisor relating to the Merger.
Section 4.18 Ownership of Merger Sub; No Prior Activities. (a)
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Merger Sub is a direct wholly-owned
subsidiary of Parent.
(b) Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Merger Sub and the consummation by Merger Sub of
such transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
and no stockholder votes are necessary to authorize this Agreement or to
consummate such transactions. This Agreement is the valid and binding agreement
of Merger Sub enforceable against Merger sub in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(c) The execution and delivery of this Agreement by Merger Sub do
not, and the performance of this Agreement by Merger Sub Parent will not,
conflict with or violate any provision of the certificate of incorporation or
by-laws of Merger Sub.
(d) Merger Sub has not conducted any activities other than in
connection with the organization of Merger Sub, the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby.
Merger Sub has no Subsidiaries.
(e) Merger Sub does not (i) own of record or beneficially, directly
or indirectly, (A) any shares of capital stock or securities convertible into
capital stock of any other corporation or (B) any participating interest in any
partnership, limited liability company, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
Section 4.19 Interested Stockholder. As of the date hereof (without
giving effect to the execution and delivery of any Voting Agreement(s) executed
and delivered in connection herewith), neither Parent nor any Parent Subsidiary
is an interested stockholder of the Company within the meaning of Section 203 of
the DGCL.
Section 4.20 Certain Regulatory Matters. (a) Parent has made
available to the Company (i) all written communications and all memoranda
regarding any oral communications relating to Alfimeprase between Parent and the
Food and Drug Administration ("FDA") or any other Governmental Entity, and (ii)
to Parent's Knowledge, all written communications and all memoranda regarding
any oral communications relating to Alfimeprase between Amgen and the FDA or any
other Governmental Entity, in each case that describe matters that would have a
Parent Material Adverse Effect attributable to any contemplated compound,
product or product line of Parent.
30
(b) Parent has filed with the FDA and all applicable state and local
regulatory bodies for and received approval of all registrations, applications,
licenses, requests for exemptions, permits and other regulatory authorizations
necessary to conduct the business of Parent as currently conducted, the absence
of which would, individually or in the aggregate, have a Parent Material Adverse
Effect. Parent is, and at all relevant times has been, in compliance with all
such registrations, applications, licenses, requests for exemptions, permits and
other regulatory authorizations, except where the failure to be in compliance
would not, individually or in the aggregate, have a Parent Material Adverse
Effect. To Parent's Knowledge, any third party which is a manufacturer for
Parent or Amgen with respect to Alfimeprase is, and at all relevant times has
been, in compliance in all material respects with all FDA and Public Health
Services ("PHS") registrations, applications, licenses, requests for exemptions,
permits and other regulatory authorizations insofar as the same pertain to the
manufacture of Alfimeprase. Parent is, and at all relevant times has been, with
respect to the development of Alfimeprase, in compliance in all material
respects with all material FDA, PHS, state and local rules, regulations,
guidelines and policies, including, but not limited to, material FDA, state and
local rules, regulations and policies relating to good manufacturing practice,
good laboratory practice and good clinical practice; and Parent has no reason to
believe that any party granting any such registration, application, license,
request for exemption, permit or other authorization is considering limiting,
suspending or revoking the same and knows of no basis for any such limitation,
suspension or revocation.
(c) The human clinical trials, animal studies and other preclinical
tests relating to Alfimeprase conducted by Parent or in which Parent has
participated, and such studies and tests conducted on behalf of Parent, were
and, if still pending, are being conducted in all material respects in
accordance with experimental protocols, informed consents, procedures and
controls generally used by qualified experts in the preclinical or clinical
study of products comparable to Alfimeprase and other biologics subject to
regulation by the FDA. Neither Parent, nor any agent or representative of Parent
nor, to the Knowledge of Parent, any of its licensees and assignees of Parent
Intellectual Property, has received any notices or correspondence from the FDA
or any other Governmental Entity requiring the termination, suspension or
modification (other than such modifications as are customary in the regulatory
process) of any animal studies, preclinical tests or clinical trials relating to
Alfimeprase conducted by or on behalf of Parent or, to the Knowledge of Parent,
such licensees and assignees of Parent Intellectual Property, or in which Parent
or, to the Knowledge of Parent, such licensees and assignees of Parent
Intellectual Property, have participated. To Parent's Knowledge, no clinical
investigator acting for Parent with respect to Alfimeprase has been or is now,
or is threatened to become, the subject of any disbarment or disqualification
proceedings by any regulatory agency.
(d) To Parent's Knowledge, the human clinical trials, animal studies
and other preclinical tests relating to Alfimeprase conducted by Amgen or in
which Amgen has participated, and such studies and tests conducted on behalf of
Amgen, were and, if still pending, are being conducted in all material respects
in accordance with experimental protocols, informed consents, procedures and
controls generally used by qualified experts in the preclinical or clinical
study of products comparable to Alfimeprase and other biologics subject to
regulation by the FDA. To Parent's Knowledge neither Amgen, nor any agent or
representative of Amgen, has received any notices or correspondence from the FDA
or any other Governmental Entity requiring the termination, suspension or
modification (other than such modifications as are customary in the regulatory
process) of any animal studies, preclinical tests or clinical trials
31
relating to Alfimeprase conducted by or on behalf of Amgen or in which Amgen has
participated. To Parent's Knowledge, no clinical investigator acting for Amgen
with respect to Alfimeprase has been or is now, or is threatened to become, the
subject of any disbarment or disqualification proceedings by any regulatory
agency.
ARTICLE 5.
COVENANTS
Section 5.1 Conduct of Business by the Company Pending the Closing.
The Company agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 5.1 of the Company Disclosure Letter or as
specifically permitted by any other provision of this Agreement, or unless the
President and Chief Executive Officer of Parent shall otherwise consent in
writing, the Company shall, and shall cause each Company Subsidiary to, (x)
maintain its existence in good standing under applicable Law, (y) subject to the
restrictions set forth in this Section 5.1, conduct its operations only in the
ordinary and usual course of business consistent with past practice and (z) use
its reasonable best efforts to keep available the services of the current
officers, key employees and consultants of the Company and each Company
Subsidiary and, to preserve the current relationships of the Company and the
Company Subsidiaries with their customers, suppliers and other persons with
which the Company or any Company Subsidiary has significant business relations
as is reasonably necessary in order to preserve substantially intact its
business organization. In addition, without limiting the foregoing, except as
set forth in Section 5.1 of the Company Disclosure Letter or as specifically
permitted by any other provision of this Agreement, the Company shall not and
shall not permit any of its Subsidiaries to (unless required by applicable Law
or the regulations or requirements of any stock exchange or regulatory
organization applicable to the Company and its Subsidiaries), between the date
of this Agreement and the Effective Time, directly or indirectly, do, or agree
to do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change its articles or certificate of
incorporation or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer or encumber any
shares of capital stock of, or other Equity Interests in, the Company or any
Company Subsidiary of any class, or other rights of any kind to acquire any
shares of such capital stock or other Equity Interests of the Company or any
Company Subsidiary, except that the Company may issue shares of Company Common
Stock pursuant to the Company ESPP or upon exercise of Company Options
outstanding on the date hereof;
(c) (i) sell, pledge, dispose of, transfer, lease, license, or
encumber any material property or assets (other than Company Intellectual
Property) of the Company or any Company Subsidiary, except (A) sales, pledges,
dispositions, transfers, leases, licenses or encumbrances pursuant to and in
accordance with the terms of existing Contracts, or (B) sales, pledges,
dispositions, transfers, leases, licenses or encumbrances of property or assets
by the Company or a Company Subsidiary in the ordinary course of business but
not to exceed an aggregate value for all such sales, pledges, dispositions,
transfers, leases, licenses and encumbrances of $500,000; (ii) sell, pledge,
dispose of, transfer, lease, license, abandon, fail to maintain or encumber any
Company Intellectual Property, except sales, pledges, dispositions, transfers,
leases, licenses, abandonments, failures to maintain or encumbrances in the
ordinary
32
course of business which will not materially impair the conduct of the Company's
business; (iii) enter into any Contract or series of related Contracts, or any
amendment or series of related amendments of one or more Contracts, involving
aggregate receipts, payments or expenses (direct, contingent or otherwise) in
excess of $500,000; or (iv) enter into any material commitment or transaction
outside the ordinary course of business consistent with past practice;
(d) declare, set aside, make or pay any dividend or other
distribution (whether payable in cash, stock, property or a combination thereof)
with respect to any of the capital stock of the Company or enter into any
agreement with respect to the voting of the capital stock of the Company;
(e) (i) reclassify, combine, split or subdivide any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of, or in substitution for, shares of its capital stock, or (ii) redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock,
other Equity Interests or other securities;
(f) (i) incur any indebtedness for borrowed money (other than short
term debt incurred in the ordinary course of business consistent with past
practice) or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
person (other than a wholly-owned Company Subsidiary) for borrowed money, (ii)
terminate, cancel, or agree to any material and adverse change in, any Company
Material Contract, (iii) make or authorize any capital expenditure materially in
excess of the Company's budget as disclosed to Parent prior to the date hereof,
(iv) make or authorize any material loan to any person (other than a Company
Subsidiary) outside the ordinary course of business and consistent with past
practice, or (v) enter into any agreement or arrangement that limits or
otherwise restricts the Company or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that could, after the
Effective Time, limit or restrict Parent or any of its affiliates (including the
Surviving Corporation) or any successor thereto, from engaging or competing in
any line of business or in any geographic area;
(g) except as may be required by contractual commitments with
respect to severance or termination pay in existence on the date of this
Agreement as disclosed in Section 3.8 of the Company Disclosure Letter, (i)
increase the compensation or benefits payable or to become payable to its
directors, officers or employees (except for increases in accordance with past
practices and methodologies in salaries or wages of officers and/or employees of
the Company or any Company Subsidiary), (ii) grant any rights to severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of the Company or any Company Subsidiary
(other than with respect to newly appointed directors and newly hired employees
in accordance with past practices of the Company or any Company Subsidiary,
provided that any such agreements shall not provide for the payment of any
severance or termination pay as a result of the execution of this Agreement or
the consummation of the transactions contemplated hereby), (iii) establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director,
officer, consultant or employee, except to the extent required by applicable
Law, or (iv) take any affirmative action to amend or waive any performance or
vesting criteria or accelerate vesting, exercisability or funding under any
Company Benefit Plan or Company Option;
33
(h) make any material change in accounting policies or procedures,
other than in the ordinary course of business consistent with past practice or
except as required by GAAP or by a Governmental Entity;
(i) except in the ordinary course of business consistent with past
practice, make any material Tax election or settle or compromise any material
liability for Taxes, change any annual Tax accounting period, change any method
of Tax accounting, file any amended material Tax Return, enter into any closing
agreement relating to any material Tax, surrender any right to claim a material
Tax refund, or consent to any extension or waiver of the statute of limitations
period applicable to any material Tax claim or assessment;
(j) subject to Section 6.4(g), modify, amend or terminate, or waive,
release or assign any material rights or claims with respect to any
confidentiality or standstill agreement to which the Company is a party and
which relates to a business combination involving the Company;
(k) write up, write down or write off the book value of any assets,
individually or in the aggregate, for the Company and the Company Subsidiaries
taken as a whole, other than in the ordinary course of business or except as
required by GAAP;
(l) subject to Section 6.4(g), take any action to render
inapplicable, or to exempt any third party from any state takeover Law or state
Law that purports to limit or restrict business combinations or the ability to
acquire or vote shares;
(m) acquire, or agree to acquire, from any Person any assets (not
including Intellectual Property), operations, business or securities or engage
in, or agree to engage in, any merger, consolidation or other business
combination with any Person, except in connection with capital expenditures
permitted hereunder and except for acquisitions of inventory and other assets
(not including Intellectual Property) in the ordinary course of business or,
which, individually or in the aggregate, would not be reasonably expected to
result in any of the conditions to the Merger set forth in Article 7 not being
satisfied;
(n) take any action that is intended or would reasonably be expected
to result in any of the conditions to the Merger set forth in Article 7 not
being satisfied;
(o) adopt a stockholder rights agreement, or "poison pill";
(p) acquire, or agree to acquire, from any Person, any Intellectual
Property, except in the ordinary course of business consistent with past
practice (including in size and nature); or
(q) authorize or enter into any agreement or otherwise make any
commitment to do any of the foregoing.
Section 5.2 Conduct of Business by Parent Pending the Closing.
Parent agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.1 of the Parent Disclosure Letter or as
specifically permitted by any other provision of this Agreement, or unless the
Chief Business Officer of the Company shall otherwise consent in writing, Parent
shall, and shall cause each Parent Subsidiary to, (x) maintain its existence in
good
34
standing under applicable Law, (y) subject to the restrictions set forth in this
Section 5.2, conduct its operations only in the ordinary and usual course of
business consistent with past practice and (z) use its reasonable best efforts
to keep available the services of the current officers, key employees and
consultants of Parent and each Parent Subsidiary and to preserve the current
relationships of Parent and the Parent Subsidiaries with their customers,
suppliers and other persons with which Parent or any Parent Subsidiary has
significant business relations as is reasonably necessary in order to preserve
substantially intact its business organization. In addition, without limiting
the foregoing, except as set forth in Section 5.1 of the Parent Disclosure
Letter or as specifically permitted by any other provision of this Agreement,
Parent shall not and shall not permit any of its Subsidiaries to (unless
required by applicable Law or the regulations or requirements of any stock
exchange or regulatory organization applicable to Parent and its Subsidiaries),
between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of the Company:
(a) amend or otherwise change its articles or certificate of
incorporation (other than the Charter Amendment) or bylaws or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer or encumber any
shares of capital stock of, or other Equity Interests in, Parent or any Parent
Subsidiary of any class, or other rights of any kind to acquire any shares of
such capital stock or other Equity Interests of Parent or any Company
Subsidiary, except that Parent may issue shares of Parent Common Stock pursuant
to Parent's Employee Stock Purchase Plan or upon exercise of Parent Options
outstanding on the date hereof;
(c) (i) sell, pledge, dispose of, transfer, lease, license, or
encumber any material property or assets (other than Parent Intellectual
Property) of Parent or any Parent Subsidiary, except (A) sales, pledges,
dispositions, transfers, leases, licenses or encumbrances pursuant to and in
accordance with the terms of existing Contracts, or (B) sales, pledges,
dispositions, transfers, leases, licenses or encumbrances of property or assets
by Parent or a Parent Subsidiary in the ordinary course of business but not to
exceed an aggregate value for all such sales, pledges, dispositions, transfers,
leases, licenses and encumbrances of $500,000; (ii) sell, pledge, dispose of,
transfer, lease, license, abandon, fail to maintain or encumber any Parent
Intellectual Property, except sales, pledges, dispositions, transfers, leases,
licenses, abandonments, failures to maintain or encumbrances in the ordinary
course of business which will not materially impair the conduct of Parent's
business; (iii) enter into any Contract or series of related Contracts, or any
amendment or series of related amendments of one or more Contracts, involving
aggregate receipts, payments or expenses (direct, contingent or otherwise) in
excess of $500,000; or (iv) enter into any material commitment or transaction
outside the ordinary course of business consistent with past practice;
(d) declare, set aside, make or pay any dividend or other
distribution (whether payable in cash, stock, property or a combination thereof)
with respect to any of the capital stock of Parent or enter into any agreement
with respect to the voting of the capital stock of Parent;
(e) (i) reclassify, combine, split or subdivide any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of, or in substitution for,
35
shares of its capital stock, or (ii) redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock, other Equity Interests or
other securities;
(f) (i) incur any indebtedness for borrowed money (other than short
term debt incurred in the ordinary course of business consistent with past
practice) or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
person (other than a wholly-owned Parent Subsidiary) for borrowed money, except
for indebtedness for borrowed money under Parent's existing credit facilities or
replacement credit facilities in an aggregate amount not materially larger than
Parent's existing credit facilities, (ii) terminate, cancel, or agree to any
material and adverse change in, any Parent Material Contract, (iii) make or
authorize any capital expenditure materially in excess of Parent's budget as
disclosed to the Company prior to the date hereof, (iv) make or authorize any
material loan to any person (other than a Parent Subsidiary) outside the
ordinary course of business and consistent with past practice, or (v) enter into
any agreement or arrangement that limits or otherwise restricts Parent or any of
its Subsidiaries or any of their respective affiliates or any successor thereto,
or that could, after the Effective Time, limit or restrict the Surviving
Corporation or any of its affiliates or any successor thereto, from engaging or
competing in any line of business or in any geographic area;
(g) except as may be required by contractual commitments with
respect to severance or termination pay in existence on the date of this
Agreement as disclosed in Section 4.8 of the Parent Disclosure Letter, (i)
increase the compensation or benefits payable or to become payable to its
directors, officers or employees (except for increases in accordance with past
practices and methodologies in salaries or wages of officers and/or employees of
Parent or any Parent Subsidiary), (ii) grant any rights to severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of Parent or any Parent Subsidiary
(other than with respect to newly appointed directors and newly hired employees
in accordance with past practices of Parent or any Parent Subsidiary, provided
that any such agreements shall not provide for the payment of any severance or
termination pay as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby), (iii) establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer,
consultant or employee, except to the extent required by applicable Law, or (iv)
take any affirmative action to amend or waive any performance or vesting
criteria or accelerate vesting, exercisability or funding under any Parent
Benefit Plan or Parent Option;
(h) make any material change in accounting policies or procedures,
other than in the ordinary course of business consistent with past practice or
except as required by GAAP or by a Governmental Entity;
(i) except in the ordinary course of business consistent with past
practice, make any material Tax election or settle or compromise any material
liability for Taxes, change any annual Tax accounting period, change any method
of Tax accounting, file any amended material Tax Return, enter into any closing
agreement relating to any material Tax, surrender any right to claim a material
Tax refund, or consent to any extension or waiver of the statute of limitations
period applicable to any material Tax claim or assessment;
36
(j) subject to Section 6.4(g), modify, amend or terminate, or
waive, release or assign any material rights or claims with respect to any
confidentiality or standstill agreement to which Parent is a party and which
relates to a business combination involving Parent;
(k) write up, write down or write off the book value of any
assets, individually or in the aggregate, for Parent and the Parent Subsidiaries
taken as a whole, other than in the ordinary course of business or except as
required by GAAP;
(l) subject to Section 6.4(g), take any action to render
inapplicable, or to exempt any third party from any state takeover Law or state
Law that purports to limit or restrict business combinations or the ability to
acquire or vote shares;
(m) acquire, or agree to acquire, from any Person any assets
(not including Intellectual Property), operations, business or securities or
engage in, or agree to engage in, any merger, consolidation or other business
combination with any Person, except in connection with capital expenditures
permitted hereunder and except for acquisitions of inventory and other assets
(not including Intellectual Property) in the ordinary course of business or,
which, individually or in the aggregate, would not be reasonably expected to
result in any of the conditions to the Merger set forth in Article 7 not being
satisfied;
(n) take any action that is intended or would reasonably be
expected to result in any of the conditions to the Merger set forth in Article 7
not being satisfied;
(o) acquire, or agree to acquire, from any Person, any
Intellectual Property, except in the ordinary course of business consistent with
past practice (including in size and nature);
(p) except in connection with a Superior Proposal pursuant to
Section 6.4, amend or otherwise change the Rights Agreement; or
(q) authorize or enter into any agreement or otherwise make
any commitment to do any of the foregoing.
Notwithstanding anything in this Section 5.2 or elsewhere in this Agreement to
the contrary, nothing in this Agreement shall be deemed to prevent Parent from
issuing Parent Common Stock and/or warrants for the purchase of Parent Common
Stock in one or more financings where the aggregate number of shares of Parent
Common Stock so issued is less than 4,607,171 (each an "Approved Financing");
provided, that the terms and conditions of any Approved Financing shall not in
any way (i) require Parent to obtain the consent of any purchaser thereof in
order to consummate the Merger and the other transactions contemplated hereby,
other than with respect to the amendment of contracts required by such Approved
Financing; provided, however, that no such amendment shall incorporate any terms
or conditions requiring the consent of a purchaser thereof in order to
consummate the Merger and the other transactions contemplated hereby, and (ii)
restrict Parent's actions with respect to its business, operations or financial
dealings, each as presently conducted or as proposed to be conducted; provided,
further, that Parent will not, directly or indirectly, consummate any Approved
Financing unless (i) prior thereto Parent shall have delivered to the Company a
written notice of its intention to effect such Approved Financing, describing in
reasonable detail the proposed terms of such Approved Financing, and
37
(ii) either (A) the Company shall not have notified Parent in writing by 2.00
p.m. (New York City time) on the fifth business day after its receipt of such
notice of the Company's bona fide election, which election shall represent a
commitment of the Company to provide, subject to negotiation in good faith of
mutually acceptable documentation, financing to Parent on substantially similar
terms set forth in such notice, or (B) following Parent's receipt of the
Company's election, the Company shall have failed to negotiate such
documentation in good faith and to consummate such financing as soon as
commercially practicable.
Section 5.3 Tax-Free Reorganization Treatment. (a) Neither
Company nor Parent shall, nor shall they permit any of their respective
Subsidiaries to, take or cause to be taken any action that would disqualify the
Transaction as a reorganization within the meaning of Section 368(a) of the
Code. Parent and the Company shall use their reasonable best efforts, and shall
cause their respective Subsidiaries to use their reasonable best efforts, to
take or cause to be taken any action that would cause the Transaction to qualify
as a reorganization within the meaning of Section 368(a) of the Code.
(b) Each of the Company and Parent shall report the
Transaction as a reorganization within the meaning of Section 368 of the Code,
unless otherwise required pursuant to a "determination" within the meaning of
Section 1313(a) of the Code.
Section 5.4 Control of Other Party's Business. Nothing
contained in this Agreement shall give Parent, directly or indirectly, the right
to control or direct the operations of the Company prior to the consummation of
the Merger. Nothing contained in this Agreement shall give the Company, directly
or indirectly, the right to control or direct the operations of the Parent prior
to the consummation of the Merger. Prior to the consummation of the Merger, each
of Parent and the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE 6.
ADDITIONAL AGREEMENTS
Section 6.1 Registration Statement; Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, Parent and the
Company shall prepare and file with the SEC a joint proxy statement relating to
the Company Stockholders' Meeting and Parent Stockholders' Meeting (together
with any amendments thereof or supplements thereto, the "Proxy Statement") and
Parent shall prepare and file with the SEC a registration statement on Form S-4
(together with all amendments thereto, the "Registration Statement"; the
prospectus contained in the Registration Statement together with the Proxy
Statement, the "Joint Proxy/Prospectus"), in which the Proxy Statement shall be
included, in connection with the registration under the Securities Act of the
shares of Parent Common Stock to be issued to the stockholders of the Company as
Merger Consideration. Each of Parent and the Company shall use reasonable best
efforts to cause the Registration Statement to become effective as promptly as
practicable, and, prior to the effective date of the Registration Statement,
Parent shall take all or any action reasonably required under any applicable
federal or state securities Laws in connection with the issuance of shares of
Parent Common Stock in the Merger. Each of Parent and the Company shall furnish
all information concerning it and the holders of its capital stock as the other
may reasonably request in connection with such actions and the preparation of
the Registration Statement and Proxy Statement. As promptly as reasonably
practicable after the
38
Registration Statement shall have become effective and the Proxy Statement shall
have been cleared by the SEC, the Company and Parent shall mail the Joint
Proxy/Prospectus to their respective stockholders; provided, however, that the
parties shall consult and cooperate with each other in determining the
appropriate time for mailing the Joint Proxy/Prospectus in light of the date set
for the Company Stockholders' Meeting and the Parent Stockholders' Meeting. No
filing of, or amendment or supplement to, the Proxy Statement shall be made by
the Company or Parent, and no filing of, or amendment or supplement to, the
Registration Statement shall be made by Parent, in each case, without the prior
written consent of the Company, such consent not to be unreasonably withheld.
Parent and the Company each shall advise the other, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, the suspension of the qualification of the Parent Common Stock issuable
in connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information.
(b) The information supplied by the Company and Parent for
inclusion in the Registration Statement and the Proxy Statement shall not, at
(i) the time the Registration Statement is declared effective, (ii) the time the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to the stockholders of the Company, (iii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders of
Parent, (iv) the time of the Company Stockholders' Meeting and (v) the time of
the Parent Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. If at any time
prior to the Effective Time any event or circumstance relating to the Company or
Parent, or any of their respective Subsidiaries, or their respective officers or
directors, is discovered by such party which should be set forth in an amendment
or a supplement to the Registration Statement or Proxy Statement, such party
shall promptly inform the other party. All documents that either the Company or
Parent is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
Section 6.2 Stockholders' Meetings. (a) The Company shall duly
call and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") as promptly as reasonably practicable in accordance with applicable
Law, its Certificate of Incorporation and By-laws following the date the
Registration Statement becomes effective and the Proxy Statement is cleared by
the SEC and after coordination with Parent, (provided that the Company shall not
be required to hold the Company Stockholders' Meeting prior to the date of the
Parent Stockholders' Meeting), for the purpose of voting upon the adoption and
approval of this Agreement. In connection with the Company Stockholders' Meeting
and the transactions contemplated hereby, the Company will (i) subject to
applicable Law, use its reasonable best efforts (including postponing or
adjourning the Company Stockholders' Meeting to obtain a quorum or to solicit
additional proxies, but for no other reason without the prior consent of Parent,
such consent not to be unreasonably withheld) to obtain the necessary approvals
by its stockholders of this Agreement, the Merger and the other transactions
contemplated hereby, and (ii) otherwise comply with all legal requirements
applicable to the Company Stockholders' Meeting. Except where to do so would, in
the good faith determination of the Board of Directors
39
of the Company, result in a breach of its fiduciary duties to stockholders, the
Board of Directors of the Company shall recommend approval of this Agreement and
the Merger by the stockholders of the Company (the "Company Recommendation") and
shall not withdraw or adversely modify (or propose to withdraw or adversely
modify) such recommendation, and the Joint Proxy /Prospectus shall contain such
recommendation; provided, that in no event shall the Company fail to submit this
Agreement and the Merger to its stockholders, regardless of whether or not the
Board of Directors of the Company takes any action permitted by Section 6.4
hereof.
(b) Parent shall duly call and hold a meeting of its
stockholders (the "Parent Stockholders' Meeting") as promptly as reasonably
practicable in accordance with applicable Law, its Certificate of Incorporation
and By-laws following the date the Registration Statement becomes effective and
the Proxy Statement is cleared by the SEC and after coordination with the
Company (provided that the Parent shall not be required to hold the Parent
Stockholders' Meeting prior to the date of the Company Stockholders' Meeting),
for the purpose of voting upon the approval of the Share Issuance and the
Charter Amendment. In connection with the Parent Stockholders' Meeting and the
transactions contemplated hereby, Parent will (i) subject to applicable Law, use
its reasonable best efforts (including postponing or adjourning the Parent
Stockholders' Meeting to obtain a quorum or to solicit additional proxies, but
for no other reason without the prior consent of Parent, such consent not to be
unreasonably withheld) to obtain the necessary approvals by its stockholders of
the Share Issuance and the Charter Amendment and (ii) otherwise comply with all
legal requirements applicable to the Parent Stockholders' Meeting. Except where
to do so would, in the good faith determination of the Board of Directors of
Parent, result in a breach of its fiduciary duties to stockholders, the Board of
Directors of Parent shall recommend the approval of the Share Issuance and the
Charter Amendment by the stockholders of Parent (the "Parent Recommendation")
and shall not withdraw or adversely modify (or propose to withdraw or adversely
modify) such recommendation, and the Joint Proxy/Prospectus shall contain such
recommendation; provided, that in no event shall Parent fail to submit the
Charter Amendment to its stockholders, regardless of whether or not the Board of
Directors of Parent takes any action permitted by Section 6.4 hereof; provided,
further, that nothing herein shall be deemed to limit the fiduciary duty of
disclosure of the Board of Directors of Parent.
Section 6.3 Access to Information; Confidentiality. Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which the Company or Parent or any of their respective
Subsidiaries is a party (which such person shall use reasonable best efforts to
cause the counterparty to waive) from the date of this Agreement to the
Effective Time, the Company and Parent shall, and shall cause each of its
Subsidiaries and each of their respective directors, officers, employees,
accountants, consultants, legal counsel, investment bankers, advisors, and
agents and other representatives (collectively, "Representatives") to (a)
provide to the other party and its respective Representatives access at
reasonable times upon reasonable prior notice to the officers, employees,
agents, properties, offices and other facilities of such party and its
Subsidiaries and to the books and records thereof and (b) subject to applicable
Laws relating to the exchange of information, furnish promptly such information
concerning the business, properties, Contracts, assets, liabilities, personnel
and other aspects of itself and its Subsidiaries as the other party and its
Representatives may reasonably request. No investigation conducted pursuant to
this Section 6.3 shall affect or be deemed to modify or limit any representation
or warranty made in this Agreement or the conditions to the obligations to
consummate the Merger. With respect to the information disclosed pursuant to
this Section 6.3, the parties shall comply with, and shall cause their
respective Representatives to
40
comply with, all of their respective obligations under the confidentiality
agreement, dated May 24, 2002, previously executed by the Company and Parent
(the "Confidentiality Agreement").
Section 6.4 No Solicitation of Transactions. (a) Each of the
Company and Parent agrees that neither it nor any of its Subsidiaries shall, and
that it shall use its reasonable best efforts to cause its and its Subsidiaries'
Representatives not to, directly or indirectly: (i) solicit, initiate,
encourage, knowingly facilitate or induce any inquiry with respect to, or the
making, submission or announcement of, any Acquisition Proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any nonpublic information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal (except to the
extent specifically permitted pursuant to this Section 6.4), (iii) engage in
discussions with any person with respect to any Acquisition Proposal, except to
notify such person as to the existence of these provisions (except to the extent
specifically permitted pursuant to this Section 6.4), (iv) approve, endorse or
recommend any Acquisition Proposal with respect to it (except to the extent
specifically permitted pursuant to this Section 6.4), or (v) enter into any
letter of intent or similar document or any agreement, commitment or
understanding contemplating or otherwise relating to any Acquisition Proposal or
a transaction contemplated thereby (except for confidentiality agreements
specifically permitted pursuant to Section 6.4(c)). Except as permitted by
Section 6.4(c) hereof and subject to compliance with its terms, each of the
Company and Parent shall immediately terminate, and shall cause its Subsidiaries
and its and its Subsidiaries' Representatives to immediately terminate, all
discussions or negotiations, if any, with any third party with respect to, or
any that could reasonably be expected to lead to or contemplate the possibility
of, an Acquisition Proposal. Each of the Company and Parent shall immediately
demand that each person which has heretofore executed a confidentiality
agreement with it or any of its Affiliates or Subsidiaries or any of its or its
Affiliates' or Subsidiaries' Representatives with respect to such person's
consideration of a possible Acquisition Proposal to immediately return or
destroy (which destruction shall be certified in writing by such person to such
party hereunder) all confidential information heretofore furnished by such party
or any of its Affiliates or Subsidiaries or any of its or its Affiliates' or
Subsidiaries' Representatives to such person or any of such person's Affiliates
or Subsidiaries or any of such person's or such person's Affiliates' or
Subsidiaries' Representatives.
(b) Promptly, but in any event within twenty-four (24) hours,
after receipt of any Acquisition Proposal by the Company or Parent, or any
request for nonpublic information or inquiry which it reasonably believes could
lead to an Acquisition Proposal, such party shall provide the other party with
written notice of the material terms and conditions of such Acquisition
Proposal, request or inquiry, and the identity of the person or group making any
such Acquisition Proposal, request or inquiry, and a copy of all written
materials provided in connection with such Acquisition Proposal, request or
inquiry. After receipt of the Acquisition Proposal, request or inquiry by the
Company or Parent, it shall promptly keep the other party hereunder informed in
all material respects of the status and details (including material amendments
or proposed material amendments) of any such Acquisition Proposal, request or
inquiry and shall promptly provide to it a copy of all written materials
subsequently provided in connection with such Acquisition Proposal, request or
inquiry.
(c) If, prior to the Company Stockholders Meeting in the case
of the Company or Parent Stockholders Meeting in the case of Parent, either the
Company or Parent receives an
41
Acquisition Proposal (for purposes of the procedures set forth in this Section
6.4(c), any Acquisition Proposal received prior to the date hereof and which is
still outstanding as of the date hereof shall be deemed to have been received
immediately after execution and delivery hereof) which (i) constitutes a
Superior Proposal or (ii) which its Board of Directors in good faith concludes
proposes consideration that is more favorable to its stockholders than the
transactions contemplated by this Agreement and which could reasonably be
expected to result in a Superior Proposal in all other respects, it shall
promptly, but in any event in less than 3 days, provide to the other party
hereunder written notice that shall state expressly (A) that it has received an
Acquisition Proposal which constitutes a Superior Proposal or which could
reasonably be expected to result in a Superior Proposal, and (B) the identity of
the party making such Acquisition Proposal and the material terms and conditions
of the Acquisition Proposal (the "Superior Proposal Notice") and may then take
the following actions:
(1) furnish nonpublic information to the third party making
such Acquisition Proposal, provided, that (x) prior to so furnishing, the
furnishing party receives from the third party an executed confidentiality
agreement containing terms no more favorable to the third party than the terms
under the Confidentiality Agreement and customary standstill provisions, and (y)
contemporaneously with furnishing any such nonpublic information to such third
party, the furnishing party furnishes a copy of such nonpublic information to
the other party hereunder (to the extent such nonpublic information has not been
previously so furnished); and
(2) engage in negotiations with the third party with respect
to the Acquisition Proposal.
(d) For a period of not less than five Business Days after
receipt by a party from the other party of each Superior Proposal Notice, the
other party shall, if requested by the receiving party, negotiate in good faith
with the receiving party to revise this Agreement so that the Acquisition
Proposal that constituted a Superior Proposal no longer constitutes a Superior
Proposal.
(e) In response to the receipt of a Superior Proposal that has
not been withdrawn and continues to constitute a Superior Proposal after
compliance by the party receiving the Superior Proposal with Section 6.4(d), the
Board of Directors of such party may withhold or withdraw the Company
Recommendation or the Parent Recommendation, as the case may be, and, in the
case of a Superior Proposal that is a tender or exchange offer made directly to
its stockholders, may recommend that its stockholders accept the tender or
exchange offer (any of the foregoing actions, whether by the Board of Directors
or a committee thereof, a "Change of Recommendation"), if both of the following
conditions in Sections 6.4(e)(i) and 6.4(e)(ii) are met:
(i) the Company Stockholders' Meeting or the Parent
Stockholders' Meeting, as the case may be, has not occurred; and
(ii) the Board of Directors of such party has concluded in
good faith, following consultation with its outside legal counsel, that, in
light of such Superior Proposal, the failure of the Board of Directors to effect
a Change of Recommendation would result in a breach of its fiduciary obligations
to its stockholders under applicable Law.
42
(f) Each of the Company and Parent agrees that it shall not
submit to the vote of its stockholders any Acquisition Proposal (whether or not
a Superior Proposal) or propose to do so. Nothing contained in this Agreement
shall be deemed to restrict the Company or Parent from complying with Rules
14d-9 or 14e-2 under the Exchange Act or be deemed to restrict the Company or
Parent from making such other disclosures as may be required by federal
securities laws or applicable fiduciary duties.
(g) Notwithstanding anything to the contrary contained in this
Agreement, the prohibitions contained in Sections 5.l(j), 5.1(l), 5.2(j) and
5.2(l) shall not be applicable with respect to a Person who has submitted a
Superior Proposal to the Company or Parent, as the case may be.
Section 6.5 Reasonable Best Efforts. (a) The Company and
Parent shall use their reasonable best efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required (A) to
be obtained or made by Parent or the Company or any of their Subsidiaries, (B)
to avoid any action or proceeding by any Governmental Entity in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated herein, including, without limitation, the
Merger, and (C) to prevent a Company Material Adverse Effect or a Parent
Material Adverse Effect from occurring prior to or after the Effective Time, and
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under the
Securities Act and the Exchange Act, any other applicable federal or state
securities Laws, and any other applicable Law. Parent and the Company shall
cooperate with each other in connection with the making of all filings
referenced in the preceding sentence, including providing copies of all such
documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith. The Company and Parent shall have the right to review and
approve in advance, such approval not to be unreasonably withheld, all the
information relating to the other party and its Subsidiaries that appears in any
filing made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement. The Company and Parent may, as each deems
reasonably advisable and necessary, designate any competitively sensitive
information provided to the other under this Section 6.5 as "outside counsel
only." Such information shall be given only to outside counsel of the recipient.
In addition, the Company and Parent may redact any information from such
documents shared with the other party or its counsel that is not pertinent to
the subject matter of the filing or submission.
(b) Subject to the proviso contained in the following sentence
of this Section 6.5(b), the Company and Parent shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, reasonable best efforts to obtain
any non-governmental third party consents, (i) necessary, proper or advisable to
consummate the transactions contemplated in this Agreement, (ii) required to be
disclosed in the Company Disclosure Letter or the Parent Disclosure Letter, as
applicable, or (iii) required to prevent a Company Material Adverse Effect or a
Parent Material Adverse Effect from occurring prior to or after the Effective
Time. In the event that either party shall fail to
43
obtain any third party consent described in the first sentence of this Section
6.5(b), such party shall use reasonable best efforts, and shall take any such
actions reasonably requested by the other party hereto, to minimize any adverse
effect upon the Company and Parent, their respective Subsidiaries, and their
respective businesses resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such consent; provided that
no obligation to make a material payment or grant a material right not
conditioned upon the consummation of the Merger shall be imposed by this Section
6.5(b).
(c) Parent shall use commercially reasonable efforts to (i)
obtain from those persons listed on Section 6.5(c)(i) of the Parent Disclosure
Letter, each of whom acquired those warrants to purchase Parent Common Stock
("PIPE Warrants") set forth opposite such person's name on Section 6.5(c)(i) of
the Parent Disclosure Schedule, a written amendment or waiver to each PIPE
Warrant held by such person providing that neither the Merger nor the
Transaction constitutes a Change of Control as defined in Section 9(c) of such
PIPE Warrant, and (ii) obtain from Affymetrix, Inc., a Delaware corporation
("Affymetrix"), a written amendment or waiver to the promissory note, dated
November 13, 2001, in the aggregate principal amount of $4 million (the "Note"),
made by Parent and held by Affymetrix, providing that neither the Merger nor the
Transaction constitutes a Change in Control as defined in the Note.
Section 6.6 Certain Notices. From and after the date of this
Agreement until the Effective Time, each of the Company and Parent shall
promptly notify the other party of (a) the occurrence, or non-occurrence, of any
event that would be likely to cause any condition to the obligations of any
party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied, or (b) the failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it pursuant to this Agreement which would
reasonably be expected to result in any condition to the obligations of any
party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied; provided, however, that the delivery of any
notice pursuant to this Section 6.6 shall not cure any breach of any
representation or warranty, the failure to comply with any covenant, the failure
to meet any condition or otherwise limit or affect the remedies available
hereunder to the party receiving such notice.
Section 6.7 Public Announcements. Parent and the Company shall
consult with and obtain the approval of the other party before issuing any press
release or other public announcement with respect to the Merger or this
Agreement and shall not issue any such press release prior to such consultation
and approval, except as may be required by applicable law or any listing
agreement related to the trading of the shares of either party on any national
securities exchange or national automated quotation system, in which case the
party proposing to issue such press release or make such public announcement
shall use reasonable efforts to consult in good faith with the other party
before issuing any such press release or making any such public announcement;
provided, however, that each of Parent and the Company may make any public
statement in response to specific questions by the press, analysts, investors or
those attending industry conferences or financial analyst conference calls, so
long as any such statements are not inconsistent with previous press releases,
public disclosures or public statements made jointly by Parent and the Company
and do not reveal non-public information regarding the other party.
Section 6.8 Nasdaq Listing. Parent shall use reasonable best
efforts to cause the Parent Common Stock to be issued in the Merger and to be
reserved for issuance upon the
44
exercise of converted Company Options to be approved for listing on Nasdaq,
subject to official notice of issuance, prior to the Effective Date.
Section 6.9 Employee Benefit Matters. (a) With respect to each
benefit plan of Parent ("Parent Benefit Plan") in which employees of the Company
and its Subsidiaries ("New Parent Employees") subsequently participate, for
purposes of determining vesting and entitlement to benefits, including for
severance benefits and vacation entitlement (but not for accrual of pension
benefits), service with the Company (or predecessor employers to the extent the
Company provides past service credit) shall be treated as service with Parent;
provided, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits or to the extent that such
service was not recognized under the applicable Company Benefit Plan. Such
service also shall apply for purposes of satisfying any waiting periods,
evidence of insurability requirements, or the application of any pre-existing
condition limitations. Each Parent Benefit Plan shall waive pre-existing
condition limitations to the same extent waived under the applicable Company
Benefit Plan. New Parent Employees shall be given credit for amounts paid under
a corresponding benefit plan during the same period for purposes of applying
deductibles, co-payments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the Parent Benefit Plan
for the plan year in which the Effective Time occurs.
(b) At the request of Parent, the Company shall terminate any
and all 401(k) plans of the Company, effective not later than the day
immediately preceding the Closing Date. In the event that Parent requests that
such 401(k) plan(s) be terminated, the Company shall provide Parent with
evidence that such 401(k) plan(s) have been terminated pursuant to resolution of
Company's Board of Directors (the form and substance of which shall be subject
to review and approval by Parent) not later than the day immediately preceding
the Closing Date.
Section 6.10 Indemnification of Directors and Officers. (a)
Parent shall, and shall cause the Surviving Corporation to, indemnify and hold
harmless, and provide advancement of expenses to, all past and present
directors, officers and employees of the Company or any of its Subsidiaries to
the fullest extent permitted by applicable Law for acts or omissions occurring
at or prior to the Effective Time (including for acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby) in their capacities as such whether pursuant
to a Company's Certificate of Incorporation, By-laws, individual indemnity
agreements or otherwise, and such obligations shall survive the Merger and shall
continue in full force and effect in accordance with the terms of the Company's
Certificate of Incorporation, By-laws and such individual indemnity agreements
from the Effective Time until the later of (i) the expiration of the applicable
statute of limitations with respect to any claims against such directors or
officers arising out of such acts or omissions or (ii) in the case of any claims
made prior to the expiration of the applicable statute of limitations, the final
disposition of such claims.
(b) For six years from the Effective Time, Parent shall, or
shall cause the Surviving Corporation to, cause to be maintained in effect for
the benefit of the Company's directors and officers an insurance and
indemnification policy that provides coverage for acts or omissions occurring
prior to the Effective Time (the "D&O Insurance") covering each such person
currently covered by the officers' and directors' liability insurance policies
of the Company on terms with respect to coverage and in amounts no less
favorable than those of the
45
Company's policies in effect on the date hereof; provided, however, that the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of $1,250,000; provided, further, that if the annual
premiums of such insurance coverage exceed $1,250,000, Parent shall obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
(c) Parent shall, and shall cause the Surviving Corporation
to, cause to be maintained in effect in the Surviving Corporation's (or any
successor's) Certificate of Incorporation and Bylaws provisions with respect to
indemnification and advancement of expenses that are at least as favorable to
the intended beneficiaries as those contained in the Company Certificate and the
Company Bylaws as in effect on the date hereof. The obligations of Parent and
the Surviving Corporation under this Section 6.10 shall not be terminated or
modified in such a manner as to adversely affect any indemnitee to whom this
Section 6.10 applies without the express written consent of such affected
indemnitee (it being expressly agreed that the indemnitees to whom this Section
6.10 applies shall be third party beneficiaries of this Section 6.10).
(d) The provisions of this Section 6.10 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
Section 6.11 Tax Treatment. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Treasury Regulation
Section 1.368-2(g).
Section 6.12 Affiliate Letters. (a) The Company shall,
promptly after the date hereof and prior to the mailing of the Joint
Proxy/Prospectus, deliver to Parent a list setting forth the names of all
persons the Company expects to be, at the time of the Company Stockholders'
Meeting, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall furnish such information and documents as
Parent may reasonably request for the purpose of reviewing the list. The Company
shall use reasonable best efforts to cause each person who is identified as an
affiliate in the list furnished or supplemented pursuant to this Section 6.12 to
execute a written agreement, promptly following the date hereof, in
substantially the form of Exhibit 6.12 hereto.
(b) Parent shall, at all times during the two (2) year period
beginning on the Closing Date, whether or not it is subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, comply with the
current public information requirements of Rule 144(c)(1) promulgated under the
Securities Act.
Section 6.13 Section 16 Matters. Prior to the Effective Time:
(a) the Board of Directors of Parent, or an appropriate committee of
non-employee directors thereof, shall adopt a resolution consistent with the
interpretive guidance of the SEC so that the acquisition by any officer or
director of the Company who may become a covered person of Parent for purposes
of Section 16 of the Exchange Act (together with the rules and regulations
thereunder, "Section 16"), of shares of Parent Common Stock or options to
purchase shares of Parent Common Stock pursuant to this Agreement and the Merger
shall be an exempt transaction for purposes of Section 16; and (b) the Board of
Directors of the Company or an appropriate committee of non-
46
employee directors thereof, shall adopt a resolution consistent with the
interpretive guidance of the SEC so that the disposition by any officer or
director of the Company who is a covered person of the Company for purposes of
Section 16 of shares of Company Common Stock or Company Options pursuant to this
Agreement and the Merger shall be an exempt transaction for purposes of Section
16.
Section 6.14 Registration of Parent Common Stock. (a)
Registrable Shares. For purposes of this Section, "Registrable Shares" shall
mean the shares of Parent Common Stock issued to the Company Stockholders in
accordance with Section 2.1 of this Agreement and held by Affiliate Stockholders
(as defined below) together with (i) any securities issued or issuable to the
Affiliate Stockholders upon the exchange of any such Parent Common Stock and
(ii) any other security issued as a dividend or other distribution with respect
to such Parent Common Stock.
(b) Required Registration; Additional Obligations of Parent.
(i) As soon as practicable, but in any event not more than thirty (30) days
after the Effective Time, Parent shall prepare and file with the SEC a
registration statement on Form S-3 or other comparable form which form Parent is
eligible to use, covering the resale of the Registrable Shares held by those
Company Stockholders who are affiliates (as defined in the Securities Exchange
Act) of the Company as of the Effective Time, but not affiliates of Parent after
the Effective Time, or their permitted distributees (collectively, "Affiliate
Stockholders"). Parent shall cause the Registration Statement on Form S-3 (the
"Resale Registration Statement") and all registrations, qualifications and
compliances (including, without limitation, obtaining appropriate qualifications
under applicable state securities or Blue Sky laws and compliance with any other
applicable governmental requirements or regulations) as the Affiliate
Stockholders may reasonably request and that would permit or facilitate the sale
of Registrable Shares to become effective as soon as practicable and in any
event within ninety (90) days after the Effective Time. Notwithstanding the
foregoing, Parent shall not be deemed to be in violation of this paragraph as a
result of any delays caused by the SEC or the Company Stockholders, or as a
result of compliance with Rule 3-12 of Regulation S-X.
(ii) Parent shall (i) furnish to each Affiliate Stockholder,
such number of copies of any prospectus (including any preliminary prospectus
and any amended or supplemented prospectus) in conformity with the requirements
of the Securities Act, and such other documents, as each Affiliate Stockholder
may reasonably request in order to effect the offering and sale of the shares of
Parent Common Stock to be offered and sold, but only while Parent shall be
required under the provisions of this Agreement to cause the Resale Registration
Statement to remain current; (ii) notify each Affiliate Stockholder upon the
happening of any event as a result of which the prospectus included in the
Resale Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated in
the prospectus or necessary to make the statements in the prospectus not
misleading in the light of the circumstances then existing and thereafter
promptly take action to correct the misstatement or omission; (iii) so long as
the Resale Registration Statement remains effective, promptly furnish to each
Affiliate Stockholder such number of copies of any supplement, to such
prospectus as may have been filed by Parent; (iv) notify each Affiliate
Stockholder, shortly after it shall receive notice thereof, of the date and time
the Resale Registration Statement and each post-effective amendment thereto has
become effective or a supplement to any prospectus forming a part of the Resale
Registration Statement has been filed;
47
(v) notify each Affiliate Stockholder promptly after it obtains knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Resale Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
(c) Effectiveness; Suspension Right. (i) From and after the
effectiveness of the Resale Registration Statement as contemplated by Section
6.14(b), Parent will use its best efforts to maintain such effectiveness and
other applicable registrations, qualifications and compliances until the earlier
of (A) such time as all of the Registrable Shares have been sold by the
Affiliate Stockholders, or (B) two (2) years after the Effective Date (the
"Registration Effective Period"), and from time to time Parent will amend or
supplement the Resale Registration Statement and the prospectus contained
therein as and to the extent necessary to comply with the Securities Act, the
Exchange Act and any applicable state securities statute or regulation, subject
to the following limitations and qualifications.
(ii) Following the Registration Statement Effective Date,
the Affiliate Stockholders will be permitted, subject to the Suspension Right
(as defined in paragraph (iii) below) to offer and sell Registrable Shares
during the Registration Effective Period pursuant to the Resale Registration
Statement provided that the Resale Registration Statement remains effective and
no stop order or suspension of the use of the Resale Registration Statement has
been imposed by the SEC.
(iii) Subject to the provisions of this Section 6.14, Parent
shall have the right at any time to require that the Affiliate Stockholders
suspend further open market offers and sales of Registrable Shares whenever, and
for so long as, in the reasonable judgment of Parent after consultation with
counsel there is in existence material undisclosed information or events with
respect to Parent (the "Suspension Right"). In the event Parent exercises the
Suspension Right, such suspension will continue for that minimal period of time
reasonably necessary for disclosure to occur at a time that is not materially
detrimental to Parent and its stockholders or until such time as the information
or event is no longer material, each as determined in good faith by Parent after
consultation with counsel. Parent will promptly give the Affiliate Stockholders
notice of any such suspension and will use its best efforts to limit the length
of the suspension to ten (10) days. Notwithstanding any other provision of this
Section 6.14, such suspension shall not be exercised more than three (3) times
during any twelve month period or for an aggregate of more than sixty (60) days
during any twelve month period. In addition, during any period when a suspension
is in effect hereunder, Parent will suspend the use of, and not file, any other
registration statements.
(d) Expenses. Parent shall bear all costs and expenses of
registration under this Section 6.12, including, without limitation, printing
expenses, legal fees and disbursements of counsel for Parent, legal fees and
disbursements of one counsel for the Affiliate Stockholders in an aggregate
amount not in excess of $15,000, Blue Sky expenses, accounting fees and filing
fees, but excluding underwriting commissions or similar charges in connection
with the resale of the Registrable Shares.
Section 6.15 Blue Sky Laws. Parent shall take such steps as
may be necessary to comply with the securities and blue sky Laws of all
jurisdictions that are applicable to the
48
issuance of the Parent Common Stock in connection with the Merger. Company shall
use its commercially reasonable efforts to assist Parent as may be necessary to
comply with the securities and Blue Sky Laws of all jurisdictions that are
applicable in connection with the issuance of Parent Common Stock in connection
with the Merger.
ARTICLE 7.
CLOSING CONDITIONS
Section 7.1 Conditions to Obligations of Each Party Under This
Agreement. The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable Law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the Knowledge of Parent or the Company,
threatened by the SEC.
(b) Stockholder Approval. The Company Stockholder Approval and
the Parent Stockholder Approval shall have been obtained.
(c) No Order. No Governmental Entity, nor any federal or state
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
judgment or injunction or order (whether temporary, preliminary or permanent),
in any case which is in effect and which prevents or prohibits consummation of
the Merger.
(d) Consents and Approvals. Other than the filing provided for
under Section 1.2, all consents, approvals and authorizations of any
Governmental Entity required of Parent, the Company or any of their Subsidiaries
to consummate the Merger, the failure of which to be obtained or taken,
individually or in the aggregate, would have a Parent Material Adverse Effect
(determined, for purposes of this clause, after giving effect to the Merger),
shall have been obtained; provided, however, that the provisions of this Section
7.1(d) shall not be available to any party whose failure to fulfill its
obligations pursuant to Section 6.5 shall have been the cause of, or shall have
resulted in, the failure to obtain such consent, approval or authorization.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable
to the Company's stockholders in the Merger and such other shares of Parent
Common Stock to be reserved for issuance in connection with the Merger shall
have been approved for listing on Nasdaq, subject to official notice of
issuance.
Section 7.2 Additional Conditions to Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to effect the Merger and
the other transactions contemplated herein are also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company (i) contained in this Agreement shall be true and
correct (without giving effect to
49
any limitation as to "materiality" or "Company Material Adverse Effect" set
forth therein) at and as of the Effective Time as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date), except where the failure of such representations and
warranties to be true and correct (without giving effect to any limitation as to
"materiality" or "Company Material Adverse Effect" set forth therein) would not,
individually or in the aggregate, result in a Company Material Adverse Effect,
(ii) contained in Section 3.6(d) shall be true and correct as of October 31,
2002 in all respects. Parent shall have received a certificate signed by an
executive officer of the Company to the foregoing effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time. Parent shall have received a certificate of an executive officer
of the Company to the foregoing effect.
(c) Parent Tax Opinion. Parent shall have received the opinion
of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, dated as of the Effective Time, to the effect that on the
basis of the facts, representations and assumptions set forth in such opinion,
the Transaction will be treated for federal income Tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ shall receive and rely upon representations
contained in letters of Parent and the Company to be delivered as of the
Effective Time substantially in the forms attached hereto as Exhibits 7.2(c)(i)
and 7.2(c)(ii), respectively. The opinion referred to in this Section 7.2(c)
shall not be waivable after receipt of the Company Stockholder Approval or the
Parent Stockholder Approval referred to in Section 7.1(b), unless further
stockholder approval is obtained with appropriate disclosure.
Section 7.3 Additional Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger and the other
transactions contemplated in this Agreement is also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement shall be true and correct
(without giving effect to any limitation as to "materiality" or "Parent Material
Adverse Effect" set forth therein) at and as of the Effective Time as if made at
and as of such time (except to the extent expressly made as of an earlier date,
in which case as of such earlier date), except where the failure of such
representations and warranties to be true and correct (without giving effect to
any limitation as to "materiality" or "Parent Material Adverse Effect" set forth
therein) would not, individually or in the aggregate, result in a Parent
Material Adverse Effect. The Company shall have received a certificate signed by
an executive officer of Parent to the foregoing effect.
(b) Agreements and Covenants. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of an executive
officer of Parent to the foregoing effect.
(c) Company Tax Opinion. The Company shall have received the
opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., dated as of the
Effective Time, to the effect that on the basis of the facts, representations
and assumptions set forth in such opinion, the Transaction will be treated for
federal income Tax purposes as a reorganization within the
50
meaning of Section 368(a) of the Code. In rendering such opinion, Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. shall receive and rely upon
representations contained in letters of Parent and the Company to be delivered
as of the Effective Time substantially in the form attached hereto as Exhibits
7.2(c)(i) and 7.2(c)(ii), respectively. The opinion referred to in this Section
7.3(c) shall not be waivable after receipt of the Company Stockholder Approval
or the Parent Stockholder Approval referred to in Section 7.1(b), unless further
stockholder approval is obtained with appropriate disclosure.
(d) Rights Agreement. No Shares Acquisition Date or
Distribution Date shall have occurred pursuant to the Rights Agreement.
(e) Amendment to Parent Certificate of Incorporation. The
Charter Amendment shall have been duly filed with the Secretary of State of the
State of Nevada.
(f) Alfimeprase Testing. Parent shall not have received an
order from the FDA placing the Phase I studies of Alfimeprase on clinical hold
based on an Alfimeprase-caused death(s).
(g) Parent Board Composition. The Board of Directors of Parent
shall be as set forth on Schedule 1.6 attached hereto (subject to modification
in accordance with Section 1.6 hereof).
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, by action taken or authorized by the Board
of Directors of the terminating party or parties, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or the stockholders of Parent:
(a) By mutual written consent of Parent and the Company, which
consent shall have been approved by action of their respective Boards of
Directors;
(b) By written notice of either the Company or Parent, if the
Merger shall not have been consummated prior to May 31, 2003 (such date, as it
may be extended as provided below, shall be referred to herein as the "Outside
Date"); provided, however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement (including without limitation such party's
obligations set forth in Section 6.5) has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Outside Date;
(c) By written notice of either the Company or Parent, if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
Merger, and such order, decree, ruling or other action shall have become final
and nonappealable (which order, decree, ruling or other action the parties shall
have used their reasonable best efforts to resist, resolve or lift, as
applicable, subject to Section 6.5);
51
(d) By written notice of the Company or Parent, as the case
may be, if the Board of Directors of the other party shall have (i) withdrawn or
adversely modified (including, without limitation, any disclosure as a result of
its fiduciary duty of disclosure having the effect of an adverse modification),
resolved to withdraw or adversely modify (including, without limitation, any
disclosure as a result of its fiduciary duty of disclosure having the effect of
an adverse modification), the Company Recommendation or the Parent
Recommendation, as the case may be; or (ii) approved or recommended, or resolved
to approve or recommend, to its stockholders an Acquisition Proposal other than
that contemplated by this Agreement;
(e) By the Company or Parent, as the case may be, at any time
prior to the Company Stockholder Approval or the Parent Stockholder Approval, as
the case may be, upon five Business Days' prior notice to the other party, if
its Board of Directors shall have determined as of the date of such notice that
an Acquisition Proposal is a Superior Proposal; provided, however, that (i) the
terminating party shall have complied with Section 6.4, (ii) prior to any such
termination, the terminating party shall, if requested by the other party in
connection with a revised proposal by it, negotiate in good faith for such five
Business Day period with the other party, and (iii) the Board of Directors of
the terminating party shall have concluded in good faith, as of the effective
date of such termination, after taking into account any revised proposal by the
other party during such five Business Day period, that an Acquisition Proposal
is a Superior Proposal and; provided, further, that it shall be a condition to
termination by the terminating party pursuant to this Section 8.l(e) that the
terminating party shall have made the payment of the fee to the other party
required by Section 8.2(e)(i) or Section 8.2(f)(i), as the case may be;
(f) By written notice of Parent (if Parent is not in material
breach of its obligations or its representations and warranties under this
Agreement), if there has been a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement which (i) would
result in a failure of a condition set forth in Section 7.2(a) or 7.2(b) and
(ii) cannot be cured prior to the Outside Date, provided that Parent shall have
given the Company written notice, delivered at least twenty days prior to such
termination, stating Parent's intention to terminate this Agreement pursuant to
this Section 8.1(f) and the basis for such termination;
(g) By written notice of the Company (if the Company is not in
material breach of its obligations or its representations and warranties under
this Agreement), if there has been a breach by Parent of any representation,
warranty, covenant or agreement contained in this Agreement which (i) would
result in a failure of a condition set forth in Section 7.3(a) or 7.3(b) and
(ii) cannot be cured prior to the Outside Date, provided that the Company shall
have given Parent written notice, delivered at least twenty days prior to such
termination, stating the Company's intention to terminate this Agreement
pursuant to this Section 8.1(g) and the basis for such termination; or
(h) By written notice of either Parent or the Company if (i)
the Company Stockholder Approval shall not have been obtained at the Company
Stockholders' Meeting duly convened therefor (or at any adjournment or
postponement thereof) at which a quorum is present and the vote to adopt and
approve this Agreement and the Merger is taken, or (ii) the Parent Stockholder
Approval shall not have been obtained at the Parent Stockholders' Meeting duly
52
convened therefor (or at any adjournment or postponement thereof) at which a
quorum is present and the vote to approve the Share Issuance and the Charter
Amendment is taken.
Section 8.2 Effect of Termination.
(a) Limitation on Liability. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Merger Sub or the Company or their respective
Subsidiaries, officers or directors, except with respect to Sections 6.2, 6.3,
this Section 8.2 and Article 9 and with respect to any liabilities or damages
incurred or suffered by a party as a result of the breach in any material
respect by the other party of any of its representations, warranties, covenants
or other agreements set forth in this Agreement.
(b) Parent Expenses. Parent and the Company agree that if this
Agreement is terminated pursuant to Section 8.1(f), then the Company shall pay
Parent an amount equal to the sum of Parent's Expenses up to an amount equal to
$750,000; provided, that no amount shall be paid pursuant to this Section 8.2(b)
if an amount is paid pursuant to Section 8.2(e).
(c) Company Expenses. Parent and the Company agree that if
this Agreement is terminated pursuant to Section 8.1(g), then Parent shall pay
the Company an amount equal to the sum of the Company's Expenses up to an amount
equal to $750,000; provided, that no amount shall be paid pursuant to this
Section 8.2(c) if an amount is paid pursuant to Section 8.2(f).
(d) Payment of Expenses. Payment of Expenses pursuant to
Sections 8.2(b) or 8.2(c) shall be made not later than two Business Days after
delivery to the other party of notice of demand for payment and a documented
itemization setting forth in reasonable detail all Expenses of the party
entitled to receive payment (which itemization may be supplemented and updated
from time to time by such party until the ninetieth day after such party
delivers such notice of demand for payment).
(e) Company Termination Fee. The Company shall pay to Parent a
termination fee (the "Company Termination Fee") of $1,750,000 in immediately
available funds in the event that this Agreement is terminated solely as
follows: (i) if the Company shall terminate pursuant to Section 8.1(e), (ii) if
Parent shall terminate pursuant to Section 8.1(d); (iii) if Parent shall
terminate pursuant to Section 8.1(f) as a result of the Company's breach of
Section 6.2(a), (iv) if (A) either party shall terminate this Agreement pursuant
to Section 8.1(h)(i) and, at any time after the date of this Agreement and
before the vote on this Agreement at the Company Stockholders' Meeting, an
Acquisition Proposal with respect to the Company shall have been publicly
announced and not bona fide withdrawn and (B) a Competing Transaction with
respect to the Company is consummated or the Company enters into a definitive
agreement with respect to a Competing Transaction, in either case, within twelve
months following the termination of this Agreement; or (v) if (A) either party
shall terminate this Agreement pursuant to Section 8.1(b) and, at any time after
the date of this Agreement and before the Termination Date, an Acquisition
Proposal with respect to the Company shall have been publicly announced and not
bona fide withdrawn, (B) following the existence of such Acquisition Proposal
and prior to any such termination, the Company shall have intentionally breached
(and not cured after notice thereof) any of its covenants or agreements set
forth in this Agreement in any material respect,
53
which breach shall have materially contributed to the failure of the Effective
Time to occur on or before the Termination Date, and (C) a Competing Transaction
with respect to the Company is consummated or the Company enters into a
definitive agreement with respect to a Competing Transaction, in either case,
within twelve months following the termination of this Agreement.
(f) Parent Termination Fee. Parent shall pay to the Company a
termination fee (the "Parent Termination Fee") of $1,750,000 in immediately
available funds in the event that this Agreement is terminated solely as
follows: (i) if Parent shall terminate pursuant to Section 8.1(e), (ii) if the
Company shall terminate pursuant to Section 8.1(d); (iii) if the Company shall
terminate pursuant to Section 8.1(g) as a result of Parent's breach of Section
6.2(b), (iv) if (A) either party shall terminate this Agreement pursuant to
Section 8.1(h)(ii) and, at any time after the date of this Agreement and before
the vote on this Agreement at the Parent Stockholders' Meeting, an Acquisition
Proposal with respect to Parent shall have been publicly announced and not bona
fide withdrawn and (B) a Competing Transaction with respect to Parent is
consummated or Parent enters into a definitive agreement with respect to a
Competing Transaction, in either case, within twelve months following the
termination of this Agreement; or (v) if (A) either party shall terminate this
Agreement pursuant to Section 8.1(b) and, at any time after the date of this
Agreement and before the Termination Date, an Acquisition Proposal with respect
to Parent shall have been publicly announced and not bona fide withdrawn, (B)
following the existence of such Acquisition Proposal and prior to any such
termination, Parent shall have intentionally breached (and not cured after
notice thereof) any of its covenants or agreements set forth in this Agreement
in any material respect, which breach shall have materially contributed to the
failure of the Effective Time to occur on or before the Termination Date, and
(C) a Competing Transaction with respect to Parent is consummated or Parent
enters into a definitive agreement with respect to a Competing Transaction, in
either case, within twelve months following the termination of this Agreement.
(g) All Payments. The Company Termination Fee and the Parent
Termination Fee required to be paid pursuant to Section 8.2(e)(i) or 8.2(f)(i),
as the case may be, shall be paid prior to, and shall be a pre-condition to the
effectiveness of, termination of this Agreement pursuant to Section 8.1(e). Any
payment required to be made pursuant to Section 8.2(e)(ii) or 8.2(f)(ii) shall
be made not later than two Business Days after the date of termination. Any
payment required to be made pursuant to Section 8.2(e)(iii), 8.2(e)(iv),
8.2(f)(iii) or 8.2(f)(iv) shall be made not later than two Business Days after
the entering into of a definitive agreement with respect to, or the consummation
of, a Competing Transaction, as applicable. In no event shall more than one
Company Termination Fee or Parent Termination Fee be made. All payments under
Section 8.2 shall be made by wire transfer of immediately available funds to an
account designated by the party entitled to receive payment. The Company and
Parent acknowledge that the agreements contained in Section 8.2 are an integral
part of the transactions contemplated by this Agreement and that, without these
agreements, neither the Company nor Parent would enter into this Agreement.
Accordingly, if either party fails promptly to pay any amount due pursuant to
this Section 8.2 and, in order to obtain such payment, the Company or Parent, as
applicable, commences a suit which results in a judgment against the other party
for the fee set forth in this Section 8.2, such defaulting party shall pay to
the prevailing party its costs and expenses (including reasonable attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.
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Section 8.3 Amendment. This Agreement may be amended by the
mutual agreement of the parties hereto at any time prior to the Effective Time
only by an instrument in writing signed by the parties hereto.
Section 8.4 Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto, and (c) waive compliance by the other
party with any of the agreements or conditions contained herein; provided,
however, that after any approval of the transactions contemplated by this
Agreement by the stockholders of either party, there may not be, without further
approval of such stockholders, any extension or waiver of this Agreement or any
portion thereof which, by Law or in accordance with the rules of Nasdaq,
requires further approval by such stockholders. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
or parties to be bound thereby, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
Section 8.5 Fees and Expenses. Subject to Sections 8.2(a),
8.2(b), 8.2(c) and 8.2(g), all expenses incurred by the parties hereto shall be
borne solely and entirely by the party which has incurred the same; provided,
however, that each of Parent and the Company shall pay one-half of the expenses
related to printing, filing and mailing the Registration Statement and the Proxy
Statement and all SEC and other regulatory filing fees incurred in connection
with the Registration Statement and the Proxy Statement.
ARTICLE 9.
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
Section 9.2 Notices. Any notices or other communications
required or permitted under, or otherwise in connection with this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon confirmation of receipt when transmitted by facsimile
transmission (but only if followed by transmittal by national overnight courier
or hand for delivery on the next Business Day) or on receipt after dispatch by
registered or certified mail, postage prepaid, addressed, or on the next
Business Day if transmitted by national overnight courier, in each case as
follows:
If to Parent or Merger Sub, addressed to it at:
Hyseq, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Executive Officer
55
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(a) If to the Company, addressed to it at:
Variagenics, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President and Chief Business Officer
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇ ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Section 9.3 Certain Definitions. For purposes of this
Agreement, the term:
"Acquisition Proposal" means, with respect to the Company or
Parent, except as set forth on Section 9.3 to the Company Disclosure Letter or
Section 9.3 to the Parent Disclosure Letter, as the case may be, any offer or
proposal concerning any (a) merger, consolidation, business combination, or
similar transaction involving such party pursuant to which either (i) the
stockholders of such party immediately prior to such transaction would own less
than 90% of any class of equity securities of the entity surviving or resulting
from such transaction (or the ultimate parent entity thereof), or (ii) the
individuals comprising the board of directors of such party prior to such
transaction would not constitute a majority of the board of directors of such
ultimate parent entity, (b) sale or other disposition of assets of such party
and its Subsidiaries representing 10% or more of the consolidated assets of such
party and its Subsidiaries, in a single transaction or a series of related
transactions, (c) issuance, sale, or other disposition of securities (or
options, rights or warrants to purchase, or securities convertible into or
exchangeable for, such securities) in each case by such party to any person
(other than ▇▇. ▇▇▇▇▇▇▇▇) or group representing 10% or more of the voting power
of such party, or (d) transaction in which any person (other than ▇▇. ▇▇▇▇▇▇▇▇)
shall acquire beneficial ownership, or the right to acquire beneficial ownership
or any group shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, 10% or more of the outstanding voting capital
stock of the Company.
"Affiliate" of a specified person means a person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the person specified.
56
"beneficial ownership" (and related terms such as
"beneficially owned" or "beneficial owner") has the meaning set forth in Rule
13d-3 under the Exchange Act.
"Blue Sky Laws" means state securities or "blue sky" Laws.
"Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended as of the date hereof.
"Company Intellectual Property" means all Intellectual
Property owned or licensed by the Company or a Company Subsidiary as of the date
of this Agreement or the Closing Date.
"Company Material Adverse Effect" means any effect on, change
affecting, or condition having an effect on, the Company or any Company
Subsidiary that is, or would reasonably be expected to be, materially adverse to
(a) the business, financial condition or results of operations of the Company
and the Company Subsidiaries, taken as a whole, except, in each case, for any
such change or condition resulting from or arising out of (i) changes or
developments in the biotechnology industry generally, which changes or
developments do not disproportionately affect the Company relative to other
participants in the biotechnology industry in any material respect, (ii) changes
or developments in financial or securities markets or the economy in general
which changes do not disproportionately affect the Company in any material
respect, (iii) any change in the Company's stock price or trading volume, in and
of itself (iv) the announcement of the transactions contemplated by this
Agreement, (v) receipt by the Company or its Representative of notice from
Nasdaq with respect to the de-listing of any class of equity securities of the
Company from the Nasdaq National Market System or Nasdaq Small Cap Market, (vi)
the de-listing of any class of Company equity securities from the Nasdaq
National Market System or Nasdaq Small Cap Market or (vii) acts of war,
insurrection, sabotage or terrorism, or (b) the ability of the Company to
consummate the transactions contemplated by this Agreement.
"Company Option" means any option to purchase Company Common
Stock or any Company Warrant.
"Company Patents" are all issued patents owned or licensed by
the Company whether foreign or domestic.
"Company Stock Option Plan" means the Amended 1997 Employee,
Director and Consultant Stock Option Plan, as amended to date, and the addendums
thereto.
"Competing Transaction" means, with respect to the Company or
Parent, any (a) merger, consolidation, business combination, or similar
transaction involving such party pursuant to which either (i) the stockholders
of such party immediately prior to such transaction would own less than 70% of
any class of equity securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), or (ii) the individuals
comprising the board of directors of such party prior to such transaction would
not constitute a majority of the
57
board of directors of such ultimate parent entity, (b) sale or other disposition
of assets of such party and its Subsidiaries representing 50% or more of the
consolidated assets of such party and its Subsidiaries, in a single transaction
or a series of related transactions, (c) issuance, sale, or other disposition of
securities (or options, rights or warrants to purchase, or securities
convertible into or exchangeable for, such securities) in each case by such
party to any person (other than ▇▇. ▇▇▇▇▇▇▇▇) or group representing 30% or more
of the voting power of such party, or (d) transaction in which any person (other
than ▇▇. ▇▇▇▇▇▇▇▇) shall acquire beneficial ownership, or the right to acquire
beneficial ownership or any group shall have been formed which beneficially owns
or has the right to acquire beneficial ownership of, 30% or more of the
outstanding voting capital stock of the Company.
"Contracts" means any of the agreements, contracts, leases,
powers of attorney, notes, loans, evidence of indebtedness, purchase orders,
letters of credit, settlement agreements, franchise agreements, undertakings,
covenants not to compete, employment agreements, licenses, instruments,
obligations, commitments, understandings, policies, purchase and sales orders,
quotations and other executory commitments to which any company is a party or to
which any of the assets of the companies are subject, whether oral or written,
express or implied.
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of securities or as trustee
or executor, by Contract or credit arrangement or otherwise.
"Environmental Laws" means any federal, state, local or
foreign statute, Law, ordinance, regulation, rule, code, treaty, writ or order
and any enforceable judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree, judgment, stipulation,
injunction, permit or authorization pertaining to the Company, any Company
Subsidiary, Parent or any Parent Subsidiary, in each case having the force and
effect of Law, relating to the pollution, protection, investigation or
restoration of the environment, health and safety as affected by the environment
or natural resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal, release,
threatened release or discharge of Hazardous Materials or noise, odor, wetlands,
pollution or contamination.
"Environmental Permits" means any permit, approval,
identification number, license and other authorization required under any
applicable Environmental Law.
"Equity Interest" means any share, capital stock, partnership,
member or similar interest in any entity, and any option, warrant, right or
security (including debt securities) convertible, exchangeable or exercisable
therefor.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
"ERISA Affiliate" means any entity or trade or business
(whether or not incorporated) other than the Company or Parent that together
with the Company or Parent, as applicable, is considered under common control
and treated as a single employer under Section 4.14(b), (c), (m) or (o) of the
Code.
58
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Expenses" includes all reasonable out-of-pocket expenses
(including, without limitation, all reasonable fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its Affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Registration
Statement and Proxy Statement, as applicable, and the solicitation of
stockholder approvals and all other matters related to the transactions
contemplated hereto.
"GAAP" means generally accepted accounting principles as
applied in the United States.
"Governmental Entity" means domestic or foreign governmental,
administrative, judicial or regulatory authority.
"group" has the meaning ascribed to such term pursuant to Rule
13d-5(b)(1) under the Exchange Act).
"Hazardous Materials" means (a) any petroleum, petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls regulated under
applicable Environmental Laws or (b) any toxic or hazardous chemical, material,
pollutant, contaminant or waste regulated under any applicable Environmental
Law.
"Intellectual Property" means intellectual property or other
proprietary rights of every kind, foreign or domestic, including all patents,
patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works,
apparatus, trade secrets, trademarks, trademark registrations and applications,
domain names, service marks, service ▇▇▇▇ registrations and applications, trade
names, trade secrets, know-how, trade dress, copyright registrations, customer
lists, confidential marketing and customer information, licenses, confidential
technical information, software, and all documentation thereof.
"Knowledge" of any person which is not an individual means,
with respect to any specific matter, the actual knowledge of such person's
executive officers and any other officer having primary responsibility for such
matter after reasonably inquiry.
"Law" means foreign or domestic law, statute, code, ordinance,
rule, regulation, order, judgment, writ, stipulation, award, injunction, decree
or arbitration award or finding.
"Liens" means any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, encumbrance, charge or other claims
of third parties of any kind.
"Nasdaq" means the Nasdaq Stock Market.
59
"Parent Articles" means Parent's Amended and Restated Articles
of Incorporation, as amended through the date of this Agreement.
"Parent Intellectual Property" means all Intellectual Property
owned or licensed by Parent or a Parent Subsidiary as of the date of this
Agreement or the Closing Date.
"Parent Material Adverse Effect" means any effect on, change
affecting, or condition having an effect on, Parent or any Parent Subsidiary
that is, or would reasonably be expected to be, materially adverse to (a) the
business, financial condition or results of operations of Parent and the Parent
Subsidiaries, taken as a whole, except, in each case, for any such change or
condition resulting from or arising out of (i) changes or developments in the
biotechnology industry generally, which changes or developments do not
disproportionately affect Parent relative to other participants in the
biotechnology industry in any material respect, (ii) changes or developments in
financial or securities markets or the economy in general which changes do not
disproportionately affect Parent in any material respect, (iii) any change in
Parent's stock price or trading volume, in and of itself, (iv) the announcement
of the transactions contemplated by this Agreement, (v) receipt by the Company
or its Representative of notice from Nasdaq with respect to the de-listing of
any class of equity securities of the Company from the Nasdaq National Market
System, or (vi) acts of war, insurrection, sabotage or terrorism, or (b) the
ability of Parent to consummate the transactions contemplated by this Agreement.
"Parent Option" means any option or warrant to purchase Parent
Common Stock.
"Parent Patents" are all issued patents owned or licensed by
Parent whether foreign or domestic.
"Parent Stock Option Plan" means Parent's Stock Option Plan,
Parent's 2002 Equity Incentive Plan, Parent's Non-Employee Director Stock Option
Plan and Parent's Scientific Advisory Board/Consultants Stock Option Plan, in
each case as amended to date, and the addendums thereto.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (a) Liens for Taxes, assessments or
similar charges incurred in the ordinary course of business consistent with past
practice that are not yet due and payable or are being contested in good faith;
(b) pledges or deposits made in the ordinary course of business consistent with
past practice; (c) Liens of mechanics, materialmen, warehousemen or other like
Liens securing obligations incurred in the ordinary course of business
consistent with past practice that are not yet due and payable or are being
contested in good faith; and (iv) similar Liens and encumbrances which are
incurred in the ordinary course of business consistent with past practice and
which do not in the aggregate materially detract from the value of such assets
or properties or materially impair the use thereof in the operation of such
business.
"person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group.
"SEC" means the Securities and Exchange Commission.
60
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Share Issuance" means the issuance of Parent Common Stock
pursuant to Section 2.1(a).
"Significant Subsidiary" has the meaning set forth in Rule
1-02 of Regulation S-X.
"Subsidiary" of any person means any corporation, partnership,
joint venture or other legal entity of which such person (either alone or
through or together with any other subsidiary), owns, directly or indirectly, a
majority of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation, partnership, joint venture or other legal
entity.
"Superior Proposal" means, with respect to the Company or
Parent, as the case may be, any bona fide offer or proposal (on its most
recently amended or modified terms, if amended or modified) made by a person
other than either such party that (a) (i) concerns any merger, consolidation,
business combination or similar transaction involving such party pursuant to
which stockholders of such party immediately prior to such transaction would own
less than 50% of the voting power of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (ii) concerns any sale or
other disposition directly or indirectly of assets of such party and its
Subsidiaries representing 67% or more of the consolidated assets of such party
and its Subsidiaries, or (iii) concerns any merger, consolidation, business
combination or similar transaction involving such party pursuant to which
stockholders of such party immediately prior to such transaction would own less
than 65% of the voting power of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), and the individuals
comprising the board of directors of such party immediately prior to such
transaction do not constitute a majority of the board of directors of such
surviving or resulting entity (or the ultimate parent entity thereof), (b) is on
terms which such party's Board of Directors in good faith concludes (following
consultation with its financial advisors and outside counsel) are more favorable
to such party's stockholders (in their capacities as stockholders) than the
transactions contemplated by this Agreement (including any revisions hereto),
and (c) is, in the good faith judgment of such party, reasonably likely to be
financed and completed.
"Taxes" means all taxes of any kind, including, without
limitation, those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity.
"Tax Returns" means any report, return (including information
return), claim for refund, or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
"Treasury Regulations" means the United States Treasury
regulations promulgated under the Code.
61
Section 9.4 Interpretation. When a reference is made in this
Agreement to an Article, a Section or Exhibit, such reference shall be to an
Article of, a Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.
Section 9.5 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 9.6 Entire Agreement. This Agreement (together with
the Exhibits, Parent and Company Disclosure Letters and the other documents
delivered pursuant hereto) and the Confidentiality Agreement constitute the
entire agreement of the parties and supersede all prior agreements and
undertakings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof.
Section 9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto, in whole or in part (whether by operation of Law or otherwise),
without the prior written consent of the other parties, and any attempt to make
any such assignment without such consent shall be null and void, except that
Merger Sub may assign, in its sole discretion, any or all of its rights,
interests and obligations under this Agreement to any direct wholly-owned
Subsidiary of Parent without the consent of the Company.
Section 9.8 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and their
respective successors and assigns, and nothing in this Agreement, express or
implied, other than pursuant to Section 6.10, is intended to or shall confer
upon any other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
62
Section 9.9 Mutual Drafting. Each party hereto has
participated in the drafting of this Agreement, which each party acknowledges is
the result of extensive negotiations between the parties.
Section 9.10 Governing Law; Consent to Jurisdiction. (a) This
Agreement and the transactions contemplated hereby, and all disputes between the
parties under or related to the Agreement or the facts and circumstances leading
to its execution, whether in Contract, tort or otherwise, shall be governed by
and construed in accordance with the Laws of the State of Delaware, applicable
to contracts executed in and to be performed entirely within the State.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United States
of America, sitting in Delaware, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby irrevocably and unconditionally (i)
agrees not to commence any such action or proceeding except in such courts, (ii)
agrees that any claim in respect of any such action or proceeding may be heard
and determined in such Delaware State court or, to the extent permitted by Law,
in such Federal court, (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in any such Delaware State or
Federal court, and (iv) waives, to the fullest extent permitted by Law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such Delaware State or Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by Law. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.2. Nothing in
this Agreement shall affect the right of any party to this Agreement to serve
process in any other manner permitted by Law.
Section 9.11 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at Law or in equity.
Section 9.12 Disclosure. Any matter disclosed in any section
of a party's Disclosure Letter shall be considered disclosed for other sections
of such Disclosure Letter, but only to the extent such matter on its face would
reasonably be expected to be pertinent to a particular section of a party's
Disclosure Letter in light of the disclosure made in such section. The provision
of monetary or other quantitative thresholds for disclosure does not and shall
not be deemed to create or imply a standard of materiality hereunder.
Section 9.13 Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
63
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
HYSEQ, INC.
a Nevada corporation
By: ▇▇▇ ▇. Love
--------------------------------------
Name: ▇▇▇ ▇. Love
Title: President and CEO
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: SVP and CFO
VERTICAL MERGER CORP.
a Delaware corporation
By: ▇▇▇ ▇. Love
--------------------------------------
Name: ▇▇▇ ▇. Love
Title: President
VARIAGENICS, INC.
a Delaware corporation
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Business
Officer
[SIGNATURE PAGE - AGREEMENT AND PLAN OF MERGER]