EXHIBIT 10.16
RAMUS MEDICAL TECHNOLOGIES - PDT CARDIOVASCULAR, INC.
INVESTMENT AGREEMENT
RAMUS MEDICAL TECHNOLOGIES -
PDT CARDIOVASCULAR, INC.
INVESTMENT AGREEMENT
THIS RAMUS MEDICAL TECHNOLOGIES - PDT CARDIOVASCULAR, INC. INVESTMENT
AGREEMENT (the "AGREEMENT") is made as of the 27th day of December, 1996 by and
between RAMUS MEDICAL TECHNOLOGIES, a California corporation (the "COMPANY") and
PDT CARDIOVASCULAR, INC., a Delaware corporation ("PDTC").
WHEREAS:
A. PDTC has agreed to purchase ***** shares of the Company's Series A
Preferred Stock at a price of ***** per share;
B. The Company, and its shareholders, have agreed to grant to PDTC an
option to acquire the Company for a price of ***** , as more fully described
herein (the "PDTC OPTION"); and
C. PDTC and the Company have also agreed to execute a development
agreement pursuant to which PDTC will have exclusive rights to the Company's
technology for photodynamic therapy applications, as more fully described herein
(the "CO-DEVELOPMENT AGREEMENT").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) Restated Articles
of Incorporation in the form attached hereto as ANNEX A.
(b) Subject to the terms and conditions of this Agreement, PDTC
agrees to purchase at the Closing, and the Company agrees to sell and issue
to PDTC ***** shares (the "SHARES") of the Series A Preferred Stock at a
price of ***** per share.
1.2 CLOSING. The purchase and sale of the Shares shall take place at
the offices of the Company at 10:00 a.m. on December 27, 1996, or at such
other time and place as the Company and PDTC mutually agree upon orally or
in writing (which time and place are designated as the "CLOSING"). At the
Closing, the Company shall deliver to PDTC a certificate representing the
Shares which PDTC is purchasing by delivery to the Company of a check or
wire transfer in the amount of the purchase price therefor payable to the
Company's order.
*****Confidential Treatment Requested
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to PDTC that:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as proposed to be conducted in its
Business Plan dated July 1996 (the "BUSINESS PLAN") heretofore furnished to
PDTC. The Company is not required to be qualified as a foreign corporation
in any state in which the failure to be so qualified would have a material
adverse effect on the Company.
2.2 CAPITALIZATION. The authorized capital of the Company consists
or will consist as of the Closing of:
(a) PREFERRED STOCK. Five Million (5,000,000) shares of
preferred stock (the "PREFERRED STOCK"), of which Two Million Five Hundred
Thousand (2,500,000) such shares have been designated Shares. The rights,
privileges and preferences of the Shares are as stated in the Company's
Restated Articles of Incorporation attached hereto as ANNEX A.
(b) COMMON STOCK. Fifteen Million (15,000,000) shares of common
stock (the "COMMON STOCK") have been authorized for issuance, of which (i)
Three Million Five Hundred Thousand (3,500,000) shares are currently
outstanding and (ii) Seven Hundred Fifty Thousand (750,000) shares of which
have been reserved for issuance pursuant to the Plan (as defined below).
(c) NO OUTSTANDING OPTIONS, WARRANTS, RIGHTS OR AGREEMENTS.
Except for (i) the conversion privileges of the Series A Preferred Stock
and (ii) the rights of holders of options granted or to be granted pursuant
to the Company's 1995 Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan (the "PLAN"), in each case as specified on
SCHEDULE I hereto, there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase
or acquisition from the Company of any shares of its capital stock.
2.3 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement (and all agreements referred to or
annexed hereto), the performance of all obligations of the Company
hereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Shares being sold hereunder and the Common Stock issuable
upon conversion of the Shares and the other actions and documents
contemplated hereunder have been taken or will be taken prior to the
Closing, and this Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms.
2.4 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Shares which
are being purchased by PDTC hereunder, when issued, sold and delivered in
accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and non-assessable and, based in part upon the
representations of PDTC in this Agreement, will be issued in compliance
with all applicable federal and state securities laws. The Common Stock
issuable upon conversion of the Shares purchased under this Agreement has
been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Articles of Incorporation, shall
be duly and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws, as presently in effect, of
the United States and each of the states whose securities laws govern the
offer or sale of any of the Shares.
2.5 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state, local or provincial governmental
authority on the part of the Company is required in connection with the
consummation of the transactions contemplated by this Agreement, except for
filings required under applicable state and federal securities laws, all of
which will be effected within fifteen (15) days of the sale of the Shares.
2.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Each employee,
officer and consultant of the Company has executed the Company's standard
form of Proprietary Information and Inventions Agreement. The Company,
after reasonable investigation, is not aware that any of its employees,
officers or consultants are in violation thereof, and the Company will use
its best efforts to prevent any such violation. To the best of the
Company's knowledge, no employee, officer, director or consultant of the
Company has violated the provisions of such Proprietary Information and
Inventions Agreement to which he or she is a party and which relates to the
business or operations of the Company.
2.7 INTELLECTUAL PROPERTY, PATENTS AND TRADEMARKS. The Company has
sufficient title and ownership of all its intellectual property, including
patents, patent applications, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
as described in the Business Plan without any conflict with or infringement
of the rights of others, and there are no claims against such intellectual
property. There are no outstanding options, licenses or agreements of any
kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person
or entity. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person
or entity. The Company knows of no reason that the opinion of its patent
counsel, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ and Crew dated November 11, 1996 previously
delivered to PDTC is not true and correct.
2.8 NO CONFLICT. None of (a) the approval by the Board of Directors
and stockholders of the Company of this Agreement, or any of the agreements
referred to herein ("RELATED DOCUMENTS"), or (b) the execution or the
delivery by the Company of this
Agreement or any Related Documents, or the performance by the Company of
its obligations hereunder or thereunder or the consummation of the
transactions contemplated hereby or thereby, or (c) the issuance by the
Company of the Shares will (A) conflict with or result in any violation or
constitute a default under the Articles of Incorporation or Bylaws of the
Company or any agreement, mortgage, indenture, franchise, license, permit,
authorization, lease or other instrument, or any judgment, decree, order,
law or regulation by which the Company or any of its properties or assets
is bound, or (B) result in the creation or imposition of any lien, security
interest, charge, encumbrance, restriction or claim of any nature upon, or
give to others any interest or right, including any right of termination or
cancellation, in or with respect to, or otherwise adversely affect, any
property, asset or business of the Company, or (C) conflict with any other
restriction of any kind or character to which the Company is subject or to
which any of its properties is bound.
2.9 CORPORATE RECORDKEEPING. The corporate record and stock transfer
books of the Company are complete, accurate and up to date with all
necessary signatures and set forth all meetings and actions taken by the
respective incorporators, stockholders and directors of each such party.
2.10 COMPLIANCE WITH LAWS. To the best of the Company's knowledge,
the Company is in compliance in all material respects with all federal,
state, local and foreign statutes, laws, ordinances, regulations, rules,
judgments, orders and decrees applicable to it or its respective assets,
properties, business or operations.
2.11 DISCLOSURE. There is no material additional fact of which the
Company is aware that has not been disclosed in writing to PDTC that in the
opinion or belief of the Company materially adversely affects, or so far as
the Company can now reasonably foresee, will materially and adversely
affect the properties, business, condition (financial or otherwise) or
prospects of the Company.
2.12 CONFLICT OF INTEREST. All purchasing transactions since
inception relating to the Company have been at market prices. Except as
disclosed on SCHEDULE 2.12, no officer or director of the Company or any
affiliate of any such person has or, within the last year has had, either
directly or indirectly:
(a) any equity or debt interest in any corporation, partnership,
joint venture, association, organization or other person which furnishes or
sells or during such period furnished or sold services or products to the
Company, or purchases or during such period purchased from the Company any
goods or services, or otherwise does or during such period did business
with the Company; or
(b) a beneficial interest in any contract, commitment or
agreement to which the Company is or was a party or under which it was
obligated or bound or to which its properties may be or may have been
subject, other than stock options and other contracts, commitments or
agreements between the Company and such persons in their capacities as
employees, independent contractors, officers or directors of the Company.
2.13 NO UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due (including, without limitation,
any liability for taxes and interest, penalties and other charges payable
with respect to any such liability or obligations) which individually or in
the aggregate are material to the condition (financial or otherwise) of the
Company, or prospects of the Company, which are not disclosed in the
unaudited financial statements, or incurred in the ordinary course of
business subsequent to the latest of the unaudited financial statements.
2.14 EMPLOYEE BENEFIT PLANS. The Company has no employee benefit
plans, as defined in Section 3(3) of the Employment Retirement Income
Securities Act.
2.15 EMPLOYEE RELATIONS. The Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge
of the Company, sought to represent any of the employees, representatives
or agents of the Company. There is no strike or other labor dispute
involving the Company pending, or to the knowledge of the Company
threatened, which could have a material adverse effect on the assets,
properties, financial condition, prospects or business (as now conducted or
as proposed to be conducted) of the Company, nor is the Company aware of
any labor organization activity involving its employees. The Company is
not aware that any officer or key employee intends to terminate his or her
employment with the Company. The Company believes its relations with its
employees are satisfactory.
2.16 USE OF PROCEEDS. The proceeds of the sale of the Common Stock to
PDTC hereunder shall be used by the Company for working capital and other
general corporate purposes.
2.17 ENVIRONMENTAL MATTERS. To the Company's best knowledge:
(a) all the assets and property currently or previously owned,
leased, operated or used by the Company in connection with its businesses
(the "ENVIRONMENTAL PROPERTY"), all current and previous conditions on and
uses of the Environmental Property and all current and previous ownership
and operations of the Environmental Property and the Company (including,
without limitation, transportation and disposal of Hazardous Materials (as
hereinafter defined) by or for the Company) comply, have at all times
complied, and will comply with, and do not cause, and have not caused,
liability to be incurred by the Company under any current or past federal
or state law relating to the protection of health or the environment,
including, without limitation, the common law, including the law of
nuisance and strict liability ("ENVIRONMENTAL LAW") except where non-
compliance has had and will have no material adverse effect on the assets,
properties, financial condition, prospects or business (as now conducted or
as proposed to be conducted) of the Company; and the Company is not in
violation of and has not violated any Environmental Law which violation has
had or will have a material adverse effect on the assets, properties,
financial condition, prospects or business (as now conducted or as proposed
to be conducted) of the Company;
(b) the Company has properly obtained and is in compliance with
all necessary permits, registrations, approvals and licenses, and has
properly made all filings with and submissions to any government or other
authority, required by any Environmental Law, the failure of which to
obtain, comply with or make would have a material adverse effect on the
assets, properties, financial condition, prospects or business (as now
conducted or as proposed to be conducted) of the Company. No deficiencies
have been asserted by any such government or authority with respect to such
items which deficiencies have had or will have a material adverse effect on
the assets, properties, financial condition, prospects or business (as now
conducted or as proposed to be conducted) of the Company; and
(c) there has been no spill, discharge, leak, leaching,
emission, migration, injection, disposal, escape, dumping or release of any
kind on, beneath, above or into the Environmental Property or into the
environment surrounding the Environmental Property of any (i) pollutants or
contaminants, other than automobile emissions, (ii) hazardous, toxic,
infectious or radioactive substances, chemicals, materials or wastes
(including, without limitation, those defined as hazardous under any
Environmental Law), (iii) petroleum including crude oil or any derivative
or fraction thereof, (iv) asbestos fibers, other than contained in
automobile break linings or (v) solid wastes ((i) through (v) collectively,
the "HAZARDOUS MATERIALS") which have had or will have a material adverse
effect on the assets, properties, financial condition, prospects or
business (as now conducted or as proposed to be conducted) of the Company.
2.18 REGISTRATION RIGHTS. Except as provided in that certain
Registration Rights Agreement dated as of the date hereof to be entered
into in conjunction with this Agreement, and which is attached hereto as
ANNEX B, the Company has not granted or agreed to grant any rights to have
any security of the Company registered under any federal, state or other
securities law, including piggyback rights, to any person or entity.
2.19 BUSINESS PLAN. The Business Plan represents management's best
estimate and forecast of the Company's business requirements in all
material respects and is believed to be true and correct. The Company has
no current plans to raise additional capital, except as contemplated in
this Agreement, until approximately one (1) year from the date hereof.
3. REPRESENTATIONS AND WARRANTIES OF PDTC. PDTC hereby represents and
warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms. PDTC
represents that it has full power and authority to enter into this
Agreement.
3.2 ACCREDITED INVESTOR. At the Closing, PDTC will be an
"accredited investor" within the meaning of SEC Rule 501 of Regulation D,
as presently in effect.
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
PDTC in reliance upon PDTC's representations to the Company, which by
PDTC's execution of this Agreement hereby confirms that the Shares to be
received by PDTC and the Common Stock
issuable upon conversion of the Shares (collectively, the "SECURITIES")
will be acquired for investment for PDTC's own account, not as a nominee
or agent, and not with a view to the resale or distribution of any part
thereof, and that PDTC has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, PDTC further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer
or grant participations to such person or to any third person, with
respect to any of the Securities.
3.4 INVESTMENT EXPERIENCE. PDTC is able to fend for itself, can bear
the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares.
3.5 RESTRICTED SECURITIES. PDTC understands that the Shares it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration
under the Securities Act of 1933, as amended (the "ACT"), only in certain
limited circumstances. In this connection, PDTC represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Act.
3.6 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, PDTC further agrees not to make any
disposition of all or any portion of the Securities, unless and until the
transferee has agreed in writing for the benefit of the Company to be bound
by this SECTION 3; and
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) PDTC shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement,
reasonably satisfactory to the Company, of the circumstances surrounding
the proposed disposition, and (ii) if reasonably requested by the Company,
PDTC shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Act. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant
to Rule 144, except in unusual circumstances.
3.7 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or more of the following legends as applicable:
(a) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT
TO RULE 144 OF SUCH ACT.
(b) Any legend required by the laws of any state, as applicable.
4. CONDITIONS OF PDTC'S OBLIGATIONS AT CLOSING. The obligations of PDTC
under Section 1.1(b) of this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in SECTION 2 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the
Closing.
4.3 QUALIFICATION. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale of the
Securities to PDTC pursuant to this Agreement, or such offer and sale shall
be exempt from such qualification under the California Corporate Securities
Law of 1968, as amended, and the Company shall have delivered evidence of
the same to PDTC.
4.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to PDTC, and PDTC shall have received all such counterpart
original and certified or other copies of such documents as they may
reasonably request.
4.5 CO-DEVELOPMENT AGREEMENT. PDTC shall have executed and delivered
to the Company the Co-Development Agreement for all photodynamic therapy
applications of the Company's technology in the form of ANNEX C attached
hereto.
4.6 OPTION TO PURCHASE THE COMPANY. The Company, and its
shareholders, shall have executed and delivered to PDTC the PDTC Option in
the form of ANNEX D attached hereto, which Option is (i) an option to
purchase the entire Company for ***** and (ii) expires (the "OPTION
EXERCISE DATE") on the later of ***** from the date hereof, or ***** after
the day on which the first surgical procedure to implant the Company's
initial product in a coronary artery in a human subject involving coronary
artery bypass surgery is completed in formally conducted clinic trials
supervised by the United States Food and Drug Administration or the
regulatory equivalent in the country in which treatment is undertaken.
*****Confidential Treatment Requested
4.7 ***** DEBT. *****.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to PDTC under this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions by PDTC:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of PDTC contained in SECTION 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
5.2 PAYMENT OF PURCHASE PRICE. PDTC shall have delivered to the
Company the purchase price as specified in SECTION 1.1 herein.
5.3 QUALIFICATION. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale to PDTC
of the Securities, or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as
amended.
5.4 CO-DEVELOPMENT AGREEMENT. PDTC shall have executed and delivered
to the Company the Co-Development Agreement for all photodynamic therapy
applications of the Company's technology in the form of ANNEX C attached
hereto.
5.5 OPTION AGREEMENT. PDTC shall have executed and delivered to the
Company the PDTC Option Agreement.
6. ADDITIONAL COVENANTS OF THE COMPANY.
6.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
PDTC:
(a) as soon as practicable, but in any event within forty-five
(45) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and
statement of shareholder's equity as of the end of such year, and a
schedule as to the sources and applications of funds for such year,
together with accompanying discussion and analysis by the Company's
management, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied, and audited and certified by independent public
accountants of nationally recognized standing selected by the Company AND
REASONABLY APPROVED BY PDTC; and
(b) within twenty (20) days of the end of each quarter, an
unaudited income statement, schedule as to the sources and application of
funds and a balance sheet for and as of the end of such month, in
reasonable detail.
*****Confidential Treatment Requested
6.2 INSPECTION. The Company shall permit PDTC at its expense to
visit and inspect the Company's properties, to examine its books of account
and records, to discuss the Company's affairs, finances and accounts with
its officers, employees and accountants all at such reasonable times as may
be requested by PDTC, or to consult with and advise the directors and
officers of the Company on the management of its business; PROVIDED,
HOWEVER, that the Company shall not be obligated pursuant to this SECTION
6.2 to provide access to any information which it reasonably considers to
be a trade secret or similar confidential information.
6.3 BOARD OF DIRECTORS' MEETINGS. PDTC shall receive notices of any
and all Board of Directors', or any committees thereof, meetings in
accordance with the Bylaws of the Company as if PDTC were a member of such
board and each such committee, and shall be entitled to attend, as an
observer, all such Board of Directors, or any committees thereof, meetings;
PROVIDED, HOWEVER, that PDTC shall hold in confidence and trust and act in
a fiduciary manner with respect to all information so provided, which is
designated as confidential by the Company, and, PROVIDED, FURTHER, that the
Company reserves the right to withhold any information and to exclude such
information which could adversely affect the attorney-client privilege
between the Company and its counsel or if the Board of Directors has
received a written reasoned opinion from the Company's counsel to the
effect that fiduciary requirements under the California Corporations Code
would prohibit the Company from providing such information to PDTC or any
shareholder. In addition, the Company will provide PDTC with copies of any
written consents of the Board of Directors, or any committees thereof, at
the time they are first circulated to any director for consideration or
signature.
6.4 FIRST REFUSAL RIGHTS. Except for shares issued pursuant to the
Plan or to ***** pursuant to SECTION 4.7 hereof, in the event that the
Company determines to issue additional securities of the Company, of any
kind or nature, whether debt or equity, or whether Common Stock or shares
convertible into Common Stock of the Company (the "NEW ISSUE"), the Company
will deliver to PDTC a notice of its intention to do so at least ten (10)
business days prior to the date of the New Issue, describing the price per
security at which the New Issue is to be issued, the proposed issuee(s) and
all other terms and conditions of the New Issue. If PDTC so elects, it may
subscribe for the entire amount of the offering or any percentage thereof.
PDTC must give written notice to the Company of its intention to acquire
such New Issue within thirty (30) days of receipt of the foregoing notice.
If there are special terms and considerations involved in the issuance of
the security, PDTC may provide a reasonable economic equivalent of any
unique consideration being provided by the proposed purchaser(s), which
reasonable economic equivalent will constitute compliance with the first
refusal right. If PDTC does not elect to subscribe for the New Issue, the
Company shall not issue or agree to issue New Issue to any person on terms
different from those on which the Securities were offered to PDTC, without
first complying with the provisions of this SECTION 6.4. If the Company
does not effect the New Issue within sixty (60) days of the notice given by
PDTC to the Company under this SECTION 6.4, the provisions of this SECTION
6.4 shall again apply also to such offering.
*****Confidential Treatment Requested
6.5 PRE-EMPTIVE RIGHTS. Except for shares issued pursuant to the
Plan, in addition to the rights described in SECTION 6.4 above, PDTC shall
be entitled to full pre-emptive rights to acquire its pro rata share of any
offering of the New Issue, whether at the time of the New Issue or upon
conversion of the New Issue into Common Stock. The Company shall deliver
to PDTC written notice of the proposed issue of New Issue at least ten (10)
business days prior to the proposed issuance describing the price per share
at which the New Issue is to be issued, the proposed issuee(s) and all
other terms and conditions of the New Issue or the conversion of the New
Issue into Common Stock. Delivery of such notice shall constitute an offer
by the Company to PDTC to purchase its pro rata share (based on the then
outstanding shares of Common Stock) of the securities being offered on the
terms set forth in the notice. If there are special terms and
consideration involved in the issuance of the New Issue, PDTC may provide a
reasonable economic equivalent of an unique consideration being provided by
the proposed purchaser(s) which reasonable economic equivalent will
constitute compliance with the pre-emptive rights.
6.6 PDTC OPTION TO ACQUIRE THE COMPANY. The Company will take no
action that would eliminate, modify or reduce the PDTC Option including,
without limitation, the sale or transfer of any material assets of the
Company, except that the Company may enter into such license agreements
which do not constitute a disguised sale of the assets of the Company.
6.7 OTHER OPERATING COVENANTS.
(a) The Company agrees not to undertake the following without
prior notice to PDTC:
(i) Increase or modify the compensation except as disclosed
in the Business Plan.
(ii) Enter into any capital expenditures in an amount
exceeding FIFTY THOUSAND DOLLARS ($50,000) except as disclosed in the
Business Plan.
(iii) Enter into any real estate or equipment lease
providing for annual payments in excess of TWENTY FIVE THOUSAND
DOLLARS ($25,000) per annum or a term of more than three (3) years
except as disclosed in the Business Plan.
(b) The Company agrees not to undertake the following without
the prior written consent of PDTC:
(i) Take any action which would adversely impact PDTC's
rights under the Co-Development Agreement or the PDTC Option.
(ii) Pay or declare any dividends of any nature.
(iii) Enter into any joint venture, strategic alliance
or similar arrangement or license which would adversely impact the Co-
Development Agreement or the PDTC Option, except as expressly
permitted by the Option Agreement.
(c) The Company agrees to:
(i) Maintain key man term life insurance on the life of
▇▇▇▇▇▇▇ ▇. Love in an amount not less than THREE MILLION DOLLARS
($3,000,000), if available at commercially reasonable premiums.
(ii) Vigorously pursue all corporate opportunities.
(iii) Maintain suitable invention and confidentiality
agreements with all of its employees and consultants.
6.8 TERMINATION OF COVENANTS. The covenants set forth in this
SECTION 6 shall terminate as to PDTC on the earlier to occur of (i) the
effectiveness of a registration statement filed by the Company under the
Securities Act of 1933, as amended, or (ii) at the time that PDTC no longer
owns Common Stock or other securities convertible into Common Stock
equivalent to twenty percent (20%) or more of the then outstanding Common
Stock.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties and representations of
the Company and PDTC contained in or made pursuant to this Agreement shall
expire on the earlier to occur of the Option Expiration Date or the closing
date with respect to the Option Agreement and shall in no way be affected
by any investigation of the subject matter thereof made by or on behalf of
PDTC or the Company.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
(including transferees of any of the Securities sold. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise specifically provided herein, any
notice, demand, request or other communication herein requested or
permitted to be given shall be in writing and may be personally served,
telecopied, telexed or sent by recognized international courier service or
United States mail and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of a telecopy or telex or eight
(8) business days after deposit in the United States mail in the
continental United States (registered or certified, with postage prepaid
and properly addressed). For purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
SECTION 7.6) shall be as follows:
If to Company: Ramus Medical Technologies
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▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Love, President
With a copy to: Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to PDTC: PDT Cardiovascular, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇, President
With a copy to: Nida & ▇▇▇▇▇▇▇, PC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
7.7 FINDER'S FEE. Except for the finder's fee due to HAI Financial
by the Company, each party hereto represents that it neither is, nor will
be, obligated for any finder's fee or commission in connection with this
transaction.
The Company agrees to indemnify and hold harmless PDTC from any
liability for any commission or compensation in the nature of a finder's
fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
7.8 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or the Restated
Articles of Incorporation, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party
may be entitled.
7.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and PDTC. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement
at the time outstanding (including securities into which such securities
are convertible), each future holder of all such securities, and the
Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
7.11 AGGREGATION OF STOCK. All of the Shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose
of determining the availability of any rights under this Agreement.
7.12 INDEMNITY.
(a) The Company shall indemnify, defend and save harmless PDTC
from, against, for and in respect of any loss which arises out of or
relates to (i) a state of facts as a result of which any representation
made by the Company in SECTION 3 hereof or in any document delivered
pursuant to this Agreement is untrue, inaccurate or misleading in any
respect as of the date hereof, or (ii) the breach of any warranty made by
the Company in SECTION 3 hereof, or (iii) any failure of the Company to
comply with, perform or observe any other term, provision or condition
contained in this Agreement or in any document delivered pursuant to this
Agreement; and any reasonable expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder including, without
limitation, court filing fees, court costs, arbitration fees or costs,
witness fees, and fees and disbursements of legal counsel, investigators,
expert witnesses, accountants and other professionals in connection
therewith.
(b) Each of the parties hereto agrees to render to the other
parties such assistance as they may reasonably require and to cooperate in
good faith with the other parties in order to ensure the proper and
adequate defense of any claim, action, suit or proceeding brought by any
third party.
(c) The remedies of the parties provided for in this SECTION
7.12 shall be cumulative, shall not preclude the assertion by any party of
any other rights such party may have under this Agreement, applicable law
or otherwise and shall survive redemption or repurchase of the Securities.
7.13 LOST OR DESTROYED CERTIFICATES. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate evidencing any Securities and of a letter of
indemnity reasonably satisfactory to the Company (PROVIDED that in the case
of an institutional holder, its own letter of indemnity shall be deemed
sufficient), and upon reimbursement to the Company of all reasonable
expenses incident thereto, and upon surrender or cancellation of such
certificate, if mutilated, the Company will make and deliver a new
certificate of like tenor in lieu of such lost, stolen, destroyed or
mutilated certificate.
7.14 PUBLIC DISCLOSURE. Except as may be required to comply with
applicable law and the requirements of PDTC's parent corporation, as an
entity whose stock is publicly traded, no party to this Agreement shall
make or cause to be made any press release or similar public announcement
or communication concerning the execution or performance of this Agreement
and any of the transactions contemplated hereby, unless specifically
approved in advance and in writing by the Company and PDTC.
Notwithstanding the foregoing, unless required by an opinion of PDTC's
counsel, PDTC will not disclose the non-exercise of its Option described in
SECTION 6.6 hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
RAMUS MEDICAL TECHNOLOGIES,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. LOVE
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Title: President
ADDRESS:
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▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PDTC:
PDT CARDIOVASCULAR, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chairman
ADDRESS:
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE I
*****
*****Confidential Treatment Requested
SCHEDULE 2.12
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, a director of the Company, is a shareholder of Stradling,
Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇. During the year, Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
has acted as corporate counsel to the Company and has received fees in
connection with the rendering of such legal services.
On November 12, 1996, ▇▇▇▇▇▇▇ ▇. Love, President, Chief Executive Officer and
a director of the Company, borrowed $35,000 from the Company pursuant to the
terms of a Promissory Note dated such date. The principal and interest due
under such Promissory Note are due and payable on December 31, 1996.
ANNEX A
RESTATED ARTICLES OF INCORPORATION
FIRST RESTATED ARTICLES OF INCORPORATION
OF RAMUS MEDICAL TECHNOLOGIES,
a California corporation
The undersigned, ▇▇▇▇▇▇▇ ▇. Love and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said corporation.
TWO: The Articles of Incorporation of said corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this corporation is Ramus Medical Technologies.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
(A) CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares that the corporation is authorized to issue is twenty
million (20,000,000) shares. Fifteen million (15,000,000) shares shall be
Common Stock and five million (5,000,000) shares shall be Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by these Restated Articles of Incorporation may be
issued from time to time in series. The rights, preferences, privileges, and
restrictions granted to and imposed on the Series A Preferred Stock, which
series shall consist of 2,500,000 shares, are as set forth below in this
Article III(B). The Board of Directors is hereby authorized to fix or alter the
rights, preferences, privileges and restrictions granted to or imposed upon
additional series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or of any of them. Subject to
compliance with applicable protective voting rights that have been or may be
granted to the Preferred Stock or any series thereof in any Certificate of
Determination or the corporation's Restated Articles of Incorporation
("Protective Provisions"), but notwithstanding any other rights of the Preferred
Stock or any series thereof, the rights, privileges, preferences and
restrictions of any such additional series may be subordinated to, PARI PASSU
with (including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences, redemption and/or approval of matters
by vote or written consent), or senior to any of those of any present or future
class or series of Preferred or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized to
increase or decrease the number of shares of any series (other than the Series A
Preferred Stock), prior or subsequent to the issue of that series, but not below
the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
1. DIVIDEND PROVISIONS. Subject to the rights of series of
Preferred Stock that may from time to time come into existence, the holders of
shares of Series A Preferred Stock shall be entitled to receive dividends, out
of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation) on the Common Stock of this corporation, at the rate of $0.10 per
share per annum or, if greater (as determined on a per annum basis and on an as
converted basis for the Series A Preferred Stock), an amount equal to that paid
on any other outstanding shares of this corporation, payable quarterly when, as
and if declared by the Board of Directors. Such dividends shall not be
cumulative.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to the sum of (i) $1.00 for each outstanding share of Series A
Preferred Stock (the "Original Series A Issue Price") and (ii) an amount equal
to declared but unpaid dividends on each such share (such amount of declared but
unpaid dividends being referred to herein as the "Premium"). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of the corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred Stock in proportion to the amount of such stock owned by each
such holder.
(b) After the distribution described in subsection (a) above has
been paid, subject to the rights of series of Preferred Stock which may from
time to time come into existence, the remaining assets of the corporation
available for distribution to shareholders shall be distributed among the
holders of Common Stock pro rata based on the number of shares of Common Stock
held.
(c) A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than fifty percent (50%) of the voting power of the corporation is disposed
of, shall be deemed to be a liquidation, dissolution or winding up within the
meaning of this Section 2.
3. REDEMPTION. The Preferred Stock is not redeemable.
4. CONVERSION. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Subject to subsection 4(c), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share at the office of this
corporation or any transfer agent for the Series A Preferred Stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing the Original Series A Issue Price by the Conversion Price at the
time in effect for such share. The initial
Conversion Price per share for shares of Series A Preferred Stock shall be
the Original Series A Issue Price; provided, however, that the Conversion
Price for the Series A Preferred Stock shall be subject to adjustment as set
forth in subsection 4(c).
(ii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
then in effect for such Series A Preferred Stock immediately upon the
consummation of the corporation's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement under the
Securities Act of 1933, as amended, the public offering price of which was not
less than $5.00 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) and $7,500,000 in the aggregate.
(b) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock under Section 4(a)(i) and (ii) above, he shall surrender the certificate
or certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A Preferred Stock, and shall give written
notice by mail, postage prepaid, to this corporation at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series A Preferred
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
If the conversion is in connection with any underwritten offer of securities
registered pursuant to the Securities Act of 1933, the conversion may, at the
option of any holder tendering Series A Preferred Stock for conversion, be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Series A Preferred Stock shall
not be deemed to have converted such Series A Preferred Stock until immediately
prior to the closing of such sale of securities.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) (A) Upon each issuance by the corporation of any
Additional Stock (as defined below), after the date upon which any shares of the
Series A Preferred Stock were first issued (the "Purchase Date" with respect to
such series), without consideration or for a consideration per share less than
the greater of the Current Market Value Per Share (as defined below) or the
Conversion Price for such series in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for such series in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock that the aggregate consideration received
by the corporation for such issuance would purchase at the greater of such
Current Market Value Per Share or such Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of such Additional Stock;
provided, however, that foregoing calculation shall not take into account shares
deemed issued pursuant to Section 4(c)(i)(E) on account of options, rights or
convertible or exchangeable securities (or the actual or deemed consideration
therefor), except to the extent (i) such options, rights or convertible or
exchangeable securities have been exercised, converted or exchanged or (ii) the
consideration to be paid upon such exercise, conversion or exchange per share of
underlying
Common Stock is less than or equal to the per share consideration for the
Additional Stock which has given rise to the Conversion Price adjustment
being calculated. For the purpose of any computation under this subsection
4(c), "Current Market Value Per Share" shall mean the fair market value per
share of such Additional Stock as determined by the Board of Directors;
provided, however, in the event that a majority of the holders Series A
Preferred Stock disagree with the determination of Current Market Value Per
Share by the Board of Directors, such determination shall be made by an
unaffiliated investment banking firm of recognized national standing mutually
agreed to by the Board of Directors and the majority of the holders of Series
A Preferred Stock; provided, further, the fees and expenses of such
investment banking firm shall be borne by the corporation if the dollar
amount of the Current Market Value Per Share as determined by such investment
banking firm is greater than or equal to 110% of the dollar amount of the
Current Market Value Per Share as determined by the Board of Directors, but
otherwise shall be borne entirely by the holders of Series A Preferred Stock
on a pro rata basis.
(B) No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments that are not required to be made by
reason of this sentence shall be carried forward and shall be either taken
into account in any subsequent adjustment made prior to 3 years from the date
of the event giving rise to the adjustment being carried forward, or shall be
made at the end of 3 years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for
in subsections 4(c)(i)(E)(3) and (E)(4) below, no adjustment of such
Conversion Price pursuant to this subsection 4(c)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 4(c)(i)(C) and 4(c)(i)(D) above), if any, received by the
corporation upon the issuance of such options or rights plus the then applicable
exercise price provided in such options or rights for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but
without taking into account potential antidilution adjustments) for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration, if
any, received by the corporation for any such securities and related options
or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received
by the corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
conversion Price of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recompute to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A Preferred Stock, to the extent
in any way affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to such securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4(c)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4(c)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this corporation after the Purchase Date other than the following:
(A) Common Stock issued pursuant to a transaction
described in subsection (4)(c)(iii) hereof, or
(B) shares of Common Stock issuable or issued to
employees, consultants or directors of this corporation directly or pursuant to
a stock option plan or restricted stock plan approved by the Board of Directors
of this corporation, or
(C) shares of Common Stock or securities convertible
into Common Stock issued to persons or entities with which the Company has
business relationships, provided such issuances are for other than primarily
equity financing purposes.
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Conversion Price of the Series A Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with number of shares
issuable with respect to Common Stock Equivalents determined from time to
time in the manner provided for deemed issuances in subsection 4(c)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(c)(iii), then,
in each such case for the purpose of this subsection 4(d), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3 or Section 5), provision shall be made so that the holders of the
Series A Preferred Stock shall thereafter be entitled to receive upon conversion
of the Series A Preferred Stock the number of shares of stock or other
securities or property of the Company or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of the Series A Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
Conversion price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. This corporation will not, by any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by this corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A Preferred Stock against
impairment. However, nothing herein shall be construed to prohibit the
corporation from soliciting consent from the holders of a majority of the then
outstanding Series A
Preferred Stock to waive the Conversion Rights granted in this Section 4.
All holders of Series A Preferred Stock shall be bound by any such consent to
waive.
(g) NO FRACTIONAL SHARES AND CERTIFICATES AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 4,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such proposes.
(j) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited with a private courier or in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
5. VOTING RIGHTS. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Series A Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded
to the nearest whole share), and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of
the holders of Common Stock, and shall be entitled, notwithstanding any
provision hereof, to notice of any shareholders' meeting in accordance with
the bylaws of this corporation, and shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote.
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock that may from time to time come into existence, this corporation
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the Series A Preferred
Stock which is entitled, other than solely by law, to vote with respect to the
matter:
(a) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares;
(b) increase the authorized number of shares of Series A
Preferred Stock;
(c) increase the authorized number of shares of Preferred Stock;
(d) create any new class or series of stock or any other
securities convertible into equity securities of the corporation having a
preference over, or being on a parity with, the Series A Preferred Stock;
(e) do any act or thing which would result in taxation of the
holders of shares of the Series A Preferred Stock under Section 305 of the
Internal Revenue Code of 1954, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time amended);
(f) make any payment of dividends (other than dividends payable
wholly in shares of Common Stock) to the holders of the Common Stock; or
(g) make any repurchase or acquisition of the shares of the
corporation other than as provided in these Articles or in accordance with the
repurchase rights of the corporation as set forth in any stock purchase
agreements between the corporation and its employees or consultants.
7. STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be cancelled and shall not be issuable by the corporation. The
Articles of Incorporation of this corporation shall be appropriately amended to
effect the corresponding reduction in the corporation's authorized capital
stock.
8. REPURCHASE OF SHARES. In connection with repurchases by this
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
(C) COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of this corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
(A) The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(B) This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with the agents, vote of shareholders or disinterested
directors, or otherwise in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations code with respect
to actions for breach of duty to the corporation and its shareholders.
* * *
THREE: The foregoing amendment and restatement has been approved by the
Board of Directors of said corporation.
FOUR: The foregoing amendment and restatement was approved by the holders
of the requisite number of shares of this corporation in accordance with
Sections 902 and 903 of the California General Corporation Law. The total
number of outstanding shares of Common Stock entitled to vote with respect to
the foregoing amendment was 3,500,000 shares and all such shares voted in favor
of such amendment. No other shares of capital stock are issued and outstanding.
IN WITNESS WHEREOF, the undersigned have executed this certificate on
December 23, 1996.
/s/ ▇▇▇▇▇▇▇ ▇. LOVE
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▇▇▇▇▇▇▇ ▇. Love
President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing First Restated Articles of Incorporation and know the contents
thereof, and that the statements therein are true.
Executed at Santa Barbara, California, on December 23, 1996.
/s/ ▇▇▇▇▇▇▇ ▇. LOVE
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▇▇▇▇▇▇▇ ▇. Love
President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Secretary
ANNEX B
REGISTRATION RIGHTS AGREEMENT
SERIES A PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
RAMUS MEDICAL TECHNOLOGIES
DECEMBER 27, 1996
TABLE OF CONTENTS
PAGE
1. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 REQUEST FOR REGISTRATION . . . . . . . . . . . . . . . . . . . . . 2
1.3 COMPANY REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 OBLIGATIONS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 3
1.5 FURNISH INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 6
1.6 EXPENSES OF DEMAND REGISTRATION. . . . . . . . . . . . . . . . . . 6
1.7 EXPENSES OF COMPANY REGISTRATION . . . . . . . . . . . . . . . . . 6
1.8 UNDERWRITING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . 6
1.9 DELAY OF REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . 7
1.10 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. . . . . . . . . . . 9
1.12 FORM S-3 REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . 10
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . 10
1.14 "MARKET STAND-OFF" AGREEMENT . . . . . . . . . . . . . . . . . . . 11
1.15 AMENDMENT OF REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . 11
1.16 TERMINATION OF REGISTRATION RIGHTS . . . . . . . . . . . . . . . . 11
1.17 MORE FAVORABLE REGISTRATION RIGHTS . . . . . . . . . . . . . . . . 12
2. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . 12
2.2 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 TITLES AND SUBTITLES . . . . . . . . . . . . . . . . . . . . . . . 12
2.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 AGGREGATION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . 12
SERIES A PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
THIS SERIES A PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT is made as
of the 27th day of December, 1996, by and among Ramus Medical Technologies, a
California corporation (the "Company"), and PDT Cardiovascular, Inc.
("Purchaser") and ***** ("*****") (Purchaser and ***** shall be known,
collectively, as the "Investors").
WHEREAS, Purchaser is a party to the Investment Agreement with the
Company, of even date herewith (the "Investment Agreement"), pursuant to which
Purchaser has purchased shares of the Company's Series A Preferred Stock; and
WHEREAS, pursuant to the Investment Agreement, the Company has agreed
to grant Purchaser registration rights in respect of the Series A Preferred
Stock purchased by Purchaser;
WHEREAS, ***** has purchased shares of the Company's Series A
Preferred Stock as of the date hereof.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term the "Act" shall mean the Securities Act of
1933, as amended to date, and the term the "1934 Act" shall mean the
Securities Exchange Act of 1934, as amended to date;
(b) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration
or ordering of effectiveness of such registration statement or document;
(c) The term "Registrable Securities" means the Common
Stock issuable or issued upon conversion of the Company's Series A Preferred
Stock;
(d) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(e) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.3 hereof; and
(f) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission ("SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
*****Confidential Treatment Requested
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after
January 1, 2002, a written request from the Holders of at least fifty percent
(50%) of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of at least
fifty percent (50%) of the Registrable Securities then outstanding, then the
Company shall, within ten (10) days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations of
subsection 1.2(b), effect as soon as practicable, and in any event shall use
its best efforts to effect within 90 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered within ten (10) days of the mailing of such notice by
the Company in accordance with Section 2.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section
1.2 and the Company shall include such information in the written notice
referred to in subsection 1.2(a). The underwriter or underwriters will be
selected by the Company and shall be reasonably acceptable to a majority in
interest of the Initiating Holders. In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company as
provided in subsection 1.4(e) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting shall not
be reduced unless all other securities are first entirely excluded from the
underwriting.
(c) The Company is obligated to effect only one (1) such
registration pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would
be seriously detrimental to the Company and its shareholders for such
registration statement to be filed and it is therefore essential to defer the
filing of such registration statement, the Company shall have the right to
defer taking action with respect to such filing for a period of not more than
90 days after receipt of the request of the Initiating Holders.
1.3 COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities under the Act in connection with the
public offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Company stock
plan, or a registration on any form which does not include or incorporate
substantially the same information as would be required to be included in a
registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within ten (10) days after
mailing of such notice by the Company in accordance with Section 2.5, the
Company shall, subject to the provisions of Section 1.8, cause to be registered
under the Act all of the Registrable Securities that each such Holder has
requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
twenty (120) days, unless such registration is or may be effected on form S-3
(or any successor form) in which case the Company shall keep such registration
effective until such Registrable Securities are disposed.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be reasonably requested by
any holder of Registrable Securities or any underwriter of Registrable
Securities or as may be necessary to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration
statement in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or supplement to the
prospectus.
(c) Before filing a registration statement or prospectus
or any amendments or supplements thereto, furnish to the Holders of the
Registrable Securities covered by such registration statement and the
underwriters, if any, a copy of all such documents proposed to be filed, which
documents will be subject to the review of such Holders and underwriters, and
the Company will not file any registration statement or amendment thereto or
any prospectus or any supplement thereto to which the Holders of a majority in
aggregate principal amount of the Registrable Securities covered by such
registration statement or the underwriters, if any, shall reasonably object
within 10 days after receipt of such documents proposed to be filed.
(d) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(e) Prior to any public offering of Registrable
Securities, register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and their respective counsel
in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any seller or underwriter reasonably requests in writing and
do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by
registration statement; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject.
(f) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.
(g) Notify the selling holders of Registrable Securities
and the managing underwriters, if any, promptly, and (if requested by any such
person) confirm such advice in writing,
(1) when the prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the
registration statement or any post-effective amendment, when the
same has become effective,
(2) of any request by the SEC for amendments or supplements
to the registration statement or the prospectus or for additional
information,
(3) of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement or the initiation of
any proceedings for that purpose,
(4) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the registrable
securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
(5) at any time when a prospectus relating to the offer or
sale of any Registrable Securities is required to be delivered under
the Act, of the existence of any fact known to the Company which
results in the registration statement, the prospectus or any
document incorporated therein by reference containing an untrue
statement of material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(h) Make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration statement at the
earliest possible moment.
(i) if requested by the managing underwriter or
underwriters of any holder of Registrable Securities being sold in connection
with an underwritten offering, promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriters and
the holders of a majority in aggregate principal amount of the Registrable
Securities being sold agree should be included therein relating to the plan of
distribution with respect to such Registrable Securities, including without
limitation information with respect to the amount of Registrable Securities
being sold to such underwriters, the purchase price being paid therefor by
such underwriters and with respect to any other terms of the underwritten (or
best efforts underwritten) offering of the Registrable Securities to be sold
in such offering; and make all required filings of such prospectus supplement
or post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment.
(j) If requested, furnish, without charge, to (i) counsel
to the selling holders of Registrable Securities and each managing
underwriter, at least one signed copy of the registration statement and (ii)
each selling holder of Registrable Securities, at least one conformed copy of
the registration statement, and, with respect to copies furnished pursuant to
both clauses (i) and (ii) hereof, any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated
therein by reference and all exhibits (including those incorporated by
reference).
(k) Cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to be sold and not bearing any restrictive legends; and enable such
Registrable Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days
prior to any sale of Registrable Securities to the underwriters.
(l) If any fact contemplated by paragraph (g)(5) above
shall exist, prepare a supplement or post-effective amendment to the
registration statement or the related prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities, the
prospectus will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading.
(m) Use its best efforts to cause all Registrable
Securities covered by the Registration statement to be listed on each
securities exchange or quotation system on which similar securities issued by
the Company are then listed, if requested by the holders of a majority in
aggregate principal amount of such Registrable Securities or the managing
underwriters, if any.
(n) Obtain a CUSIP number for all Registrable Securities,
not later than the effective date of the registration statement;
(o) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to
their security holders, earnings statements satisfying the provisions of
Section 11(a) of the Securities Act (in accordance with Rule 158 thereunder or
otherwise), no later than 45 days after the end of any 12-month period (or 90
days, if such period is a fiscal year) (1) commencing at the beginning of the
fiscal quarter following that in which Registrable Securities are sold to
underwriters in an underwritten offering, of, if not sole to underwriters in
such an offering, (2) beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the registration
statement, which statements shall cover said 12-month periods.
(p) Cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence investigation
by an underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD).
(q) Promptly prior to the filing of any document (other
than any document filed pursuant to Items 601 of Regulation S-K) that is to be
incorporated by reference into the registration statement or the prospects
(after initial filing of the registration statement) provide draft copies of
such document to counsel to the selling holders of Registrable Securities and
to the managing underwriters, if any, make the Company's representatives
available for discussion of such document and make such changes in such
document prior to the filing thereof as counsel for such selling holders or
underwriters may reasonably request.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to
the Registrable Securities of any selling Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required under the Act to effect the registration of
such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 or Section 1.12 if, due to
the operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's
obligation to initiate such registration as specified in subsection 1.2(a) or
subsection 1.12(b)(2), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section1.2, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses).
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.13), including (without limitation) all registration,
filing, and qualification fees, printers and accounting fees relating or
apportionable thereto and the fees and disbursements of one counsel for the
selling Holders selected by them, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then only
in such quantity as the underwriters determine in their sole discretion will
not jeopardize the success of the offering by the Company. The Company shall
use its best efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit all Registrable Securities requested
to be included in the registration for such offering to include all such
Registrable Securities in such offering on the same terms and conditions as
any other securities included therein. If the total amount of securities,
including Registrable Securities, requested by shareholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with
the success of the offering, then the Company shall be required to include in
the offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling Holders according to the total amount
of securities entitled to be included therein owned by each selling Holder or
in such other proportions as shall mutually be agreed to by such selling
Holders) but in no event shall (i) the amount of securities of the selling
Holders included in the offering be reduced below twenty percent (20%) of the
total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities in which
case the selling Holders may be excluded if the underwriters make the
determination described above and no other shareholder's securities are
included or (ii) notwithstanding (i) above, any shares being sold by a
shareholder exercising a demand registration right similar to that granted in
Section 1.2 or 1.3 be excluded from such offering. For purposes of the
preceding parenthetical concerning apportionment, for any selling Holder which
is a Holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder,
or the estates and family members of any such partners and retired partners
and any trusts for the benefit of any of the foregoing persons shall be deemed
to be a single "selling Holder", and any pro-rata reduction with respect to
such "selling Holder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling Holder," as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, or the 1934 Act, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, or any rule or
regulation promulgated under the Act, or the 1934 Act; and the Company will
pay to each such Holder, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.10(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the 1934 Act, insofar
as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay
any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this subsection
1.10(b), in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 1.10 (b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, the
indemnifying party(ies) shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified party and
the payment of all reasonable expenses. Such indemnifying party shall have
the right to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel shall be the
expense of such indemnifying party unless (a) the indemnifying party(ies) have
agreed to pay such fees and expenses or (b) the indemnifying party(ies) shall
have failed to employ counsel reasonably satisfactory to such indemnified
party in any such action or proceeding or (c) the named parties to any such
action or proceeding (including any impleaded parties) include such
indemnified party and the indemnifying party(ies), and such indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to such indemnified party which are different from or
additional to those available to the indemnifying party(ies) (in which case,
if such indemnified party notifies the indemnifying party(ies) in writing that
it elects to employ separate counsel at the expense of the indemnifying
party(ies), the indemnifying party(ies) shall not have the right to assume the
defense of such action or proceeding on behalf of such indemnified party, it
being understood, however, that the indemnifying party(ies) shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm or
attorneys at any time for such indemnified party or any other indemnified
parties, which firm shall be designated in writing by such indemnified
parties). The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if and to the
extent prejudicial to its ability to defend such action, shall relieve such
indemnifying party of liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Holders the benefits of Rule 144 and Rule 144A
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed
by the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after
the end of the fiscal year in which the first registration statement filed by
the Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act;
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form; and
(e) if the Company is not required to file reports with
the SEC under the Act or the 1934 Act, the Company will, upon the request of
any holder of Registrable Securities made after the date hereof, (i) make
publicly available such information as is necessary to permit sales pursuant
to Rule 144 under the Act and (ii) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the Act.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive
from any Holder or Holders a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such
Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written
request given within 15 days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this
Section 1.12: (1) if Form S-3 is not available for such offering by the
Holders; (2) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of
less than $500,000; (3) if the Board of Directors shall have determined, and
the Company shall furnish to the Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such Form S-3 Registration to be effected at such time,
in which event the Company shall have the right to defer the filing of the
Form S-3 registration statement for a period of not more than 90 days after
receipt of the request of the Holder or Holders under this Section1.12;
provided, however, that the Company shall not utilize this right more than
once in any twelve month period; (4) if
the Company has, within the twelve (12) month period preceding the date of
such request, already effected a registration on Form S-3 for the Holders
pursuant to this Section 1.12 or for any other holders of the Company's
capital stock in which the Holders shall have been granted the opportunity to
participate without limitation or has effected three (3) prior such
registrations on Form S-3 for the Holders or for any other holders of the
Company's capital stock in which the Holders shall have been granted the
opportunity to participate without limitation; (5) if less than 30% of the
Holders request such registration, or (6) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file and
cause to be effective a registration statement covering the Registrable
Securities and other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Holders. All
expenses incurred in connection with a registration requested pursuant to
Section 1.12, including (without limitation) all registration, filing,
qualification, printer's and accounting fees and the reasonable fees and
disbursements of counsel for the selling Holder or Holders, and counsel for
the Company, shall be borne by the Company. Registrations effected pursuant
to this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Section 1.2 or 1.3, respectively.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee
or assignee of such securities who, after such assignment or transfer, holds
at least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within thirty (30) days,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; and provided, further, that such assignment shall not be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is, in the written opinion of
counsel to the Company reasonably acceptable to the Holder, not restricted
under the Act. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired
partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who
would not qualify individually for assignment of registration rights shall
have a single attorney-in-fact for the purpose of exercising any rights,
receiving notices or taking any action under this Section 1.
1.14 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees
that, during the period of duration specified by the Company and an
underwriter of common stock or other securities of the Company (not to exceed
180 days), following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at
any time during such period except common stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company and all
other persons with registration rights (whether or not pursuant to this
Agreement) are similarly bound.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.15 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of a majority of the Registrable Securities then outstanding. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon
each holder of any Registrable Securities then outstanding, each future holder
of all such Registrable Securities, and the Company.
1.16 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in this Section 1 after three (3)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with
the initial firm commitment underwritten offering of its securities to the
general public; provided that the Company is current in all of its reports
required to be filed with the SEC during such three-year period.
1.17 MORE FAVORABLE REGISTRATION RIGHTS. If the Company shall
grant to any party more favorable registration rights than those set forth
herein, then such more favorable registration rights shall be granted to
Investors or Holders.
2. MISCELLANEOUS.
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Series A Preferred Stock of the
Company held by Investors or any Common Stock of the Company issued upon
conversion thereof). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California.
2.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or four
days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at
the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties.
2.6 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.7 AGGREGATION OF STOCK. All shares of the Series A Preferred
Stock of the Company held or acquired by affiliated entities or persons shall
be aggregated together for the purpose of determining the availability of any
rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
RAMUS MEDICAL TECHNOLOGIES
By: /s/ ▇▇▇▇▇▇▇ ▇. LOVE
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▇▇▇▇▇▇▇ ▇. Love, President
Address: ▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PDT CARDIOVASCULAR, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chairman
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Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ *****
---------------------------------
Address: *****
*****Confidential Treatment Requested
ANNEX C
CO-DEVELOPMENT AGREEMENT
December 27, 1996
Ramus Medical Technologies
▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: CO-DEVELOPMENT AGREEMENT
Gentlemen:
By this letter we are pleased to confirm the terms of our mutual
agreements regarding the co-development between PDT Cardiovascular, Inc.
("PDTC") and Ramus Medical Technologies ("Ramus") of technology and devices for
use in applying photodynamic therapy technology to Ramus' autologous vascular
grafts for coronary arteries and for other vessels ("Ramus Products"). PDTC
(and its affiliates) is a pharmaceutical and medical device company which, using
its proprietary technology and know-how, has developed and will continue to
develop, on its own or in collaboration with third party vendors, photoreactive
drugs and related electromagnetic energy sources, whether used separately or in
combination ("Photodynamic Therapy"), for use in photodynamic therapy. Ramus is
a development stage medical device company which, using its proprietary
technology and know-how, has developed the Ramus Products and will continue to
develop the Ramus Products.
PDTC and Ramus agree to use reasonable efforts to cooperate in the
joint development of technology, instruments, devices and products for applying
PDTC's Photodynamic Therapy technology to Ramus Products. Unless otherwise
agreed to in writing by the parties, PDTC shall conduct, or arrange for one or
more a third parties to conduct, all reasonably necessary non-human tests in
preparation and support of a regulatory submission (the "Pre-Clinical Tests"),
and Ramus shall manufacture Ramus Products for use in the Pre-Clinical Tests in
quantities agreed to in writing by the parties. Unless otherwise agreed to in
writing by the parties, PDTC shall also conduct, or arrange for one or more a
third parties to conduct, all reasonably necessary tests performed on humans in
preparation and support of regulatory submissions (the "Clinical Tests") of co-
developed technology and devices.
Ramus will provide without charge reasonable quantities of Ramus
Products to PDTC for purposes of the co-development of technology and devices
and for the Pre-Clinical Tests and Clinical Tests. PDTC will provide its
photodynamic therapy technology to the co-development of technology and devices
and the Pre-Clinical Tests and Clinical Tests without charge. All other costs
of the Pre-Clinical Tests and Clinical Tests will be paid for by PDTC.
Unless otherwise agreed to in writing by the parties, PDTC will, with
counsel of its choice, prepare, file and prosecute, in the name of PDTC and at
PDTC's expense, any applicable
regulatory submissions covering Co-Developed Technology (as defined below)
and instruments, devices or products, or functionally separable component
thereof, that embody, incorporate, are composed of, function or are produced
by means of, or derive utility from any Co-Developed Technology
("Co-Developed Devices"), including any "investigational device exemption"
application ("IDE"), "investigational new drug" application ("IND"),
Pre-Market Approval Application or 501(k) Application ("PMA") or New Drug
Application ("NDA") or any other application submitted to the United States
Food and Drug Administration or any successor agency ("FDA") for the purpose
of conducting clinical investigations of a drug or device, obtaining
premarket or regulatory approval for a drug or device, and any supplement or
abbreviated application relating thereto (or the equivalent in any foreign
country). The parties also agree to cooperate to secure government or
private price approvals and reimbursement qualifications in preparation for
product launch of co-developed devices in the field of photodynamic therapy.
PDTC and Ramus agree to provide each other with access to information or data
relating to Co-Developed Devices which the other may need for regulatory
submissions or compliance. The actual costs of any regulatory submission
shall be paid by PDTC.
PDTC and Ramus shall jointly own the entire right, title and interest
in and to all technology conceived, made, created, developed, produced, designed
or reduced to practice, jointly by PDTC and Ramus, or their respective
affiliates, during the course and as a result of the performance of their work
and services under this co-development agreement ("Co-Developed Technology") and
all Co-Developed Devices; provided, however, PDTC grants to Ramus an exclusive
worldwide license under PDTC's interest in the Co-Developed Technology on terms
to be agreed upon by the parties to make, use, offer for sale, import, export,
distribute and sell Co-Developed Devices outside of Photodynamic Therapy
applications. PDTC will retain all right, title and interest in and to all
ideas, concepts, inventions (whether or not patentable), discoveries,
improvements, unpublished research and development information, information
disclosed (whether or not claimed) in patent applications or unissued patents,
trade secrets, technical and other information and data, including apparatus,
compositions, methods, processes, techniques, controls, routines, systems
(including quality assurance systems), procedures, reports, operating, test and
performance data, and process, mechanical, material and product specifications
("Know-How") owned by or licensed to PDTC or any of its affiliates other than
Co-Developed Technology ("PDTC Technology"), and Ramus will retain all right,
title and interest in and to all Know-How owned by or licensed to Ramus or any
of its affiliates other than Co-Developed Technology ("Ramus Technology").
PDTC will retain the entire right, title and interest in and to any compound
owned by or licensed to PDTC or any of its affiliates, to the extent that PDTC
has the right to use, make, sell or license such compound ("PDTC Drugs"), and
nothing in this agreement shall give Ramus any rights in or to any PDTC Drugs.
Until after the expiration of the term of this agreement, except as
expressly set forth herein or otherwise agreed to in writing by the parties:
(i) neither PDTC nor Ramus shall, directly or indirectly, grant any rights in,
to or under the Co-Developed Technology to any third party; (ii) neither PDTC
nor Ramus shall, directly or indirectly, make, use, sell, distribute or license
Co-Developed Devices; (iii) Ramus shall not, directly or indirectly, make, use,
sell, distribute or license any Co-Developed Device with any Photodynamic
Therapy drugs other than PDTC Drugs; and (iv) Ramus shall not, directly or
indirectly, make, use, sell, distribute or license any Ramus Technology or any
products developed thereunder, other than as required for the manufacture, use,
sale, distribution or license of Co-Developed Devices in the field of
photodynamic therapy or involving any other form or provider of photodynamic
therapy. The terms of any commercialization of any Co-Developed Devices or Co-
Developed Technology shall be agreed by the parties in writing prior to such
commercialization.
If a patentable invention embodying Co-Developed Technology, or
related to Co-Developed Devices or to photodynamic therapy using Ramus Products,
is (a) conceived in the course of this agreement and (b) reduced to practice
either during the term of this agreement or during the six (6) month period
after its termination, PDTC and Ramus shall together determine whether to file
patent applications covering the invention. Both parties agree to begin
application and prosecution in a timely manner once patentable inventions are
identified and disclosed. Any such patent applications shall be prepared by
PDTC and filed jointly in the name of PDTC and Ramus. PDTC shall prepare,
prosecute and maintain any and all United States and foreign patents embodying
Co-Developed Technology or related to Co-Developed Devices or photodynamic
therapy using Ramus Products. The reasonable costs thereof shall be shared
equally by the parties. If PDTC elects not to prepare, prosecute or maintain
any such patent, Ramus shall have the right, but not the obligation, to do so in
its own name and for its own benefit and PDTC agrees to execute an assignment of
its rights in such patent to Ramus. If PDTC and Ramus mutually agree in writing
to allow either party to utilize any Patent outside the field of photodynamic
therapy using Ramus Products, such agreement shall include, at a minimum, terms
as to the development, manufacture and royalty obligations of the parties.
In exercising the rights, and in carrying out the duties and
obligations set forth in this agreement, each party shall comply with all
applicable state, federal and country laws or rules. Each party shall also
comply to the extent of its duties hereunder with all applicable state, federal
or other rules and regulations governing the manufacture, records, distribution,
promotion, marketing and sale of Co-Developed Devices and that it shall
specifically comply with applicable current good clinical practices, good
laboratory practices and good manufacturing practices promulgated from time to
time by the FDA in accordance with the Food, Drug & Cosmetic Act (21 U.S.
Section 301, ET SEQ.) as such shall be amended from time to time and
regulations promulgated thereunder, as amended from time to time (or the
equivalent in any foreign country). PDTC and Ramus will promptly notify each
other of, and provide copies of, any correspondence and other documentation
received or prepared in connection with any FDA action or notification regarding
Co-Developed Devices.
Unless otherwise agreed to by the parties, the parties will maintain
in confidence information relating to PDTC Technology, Ramus Technology, Co-
Developed Technology or Co-Developed Devices (including without limitation,
information developed in Pre-Clinical Tests and Clinical Tests) and licenses,
patents, patent applications, technology or processes and business plans, in
each case, of the other party, including information designated as confidential
in writing from one party to another (all of the foregoing hereinafter referred
to as "Confidential Information"), disclosed to the other and shall not, during
the term of this agreement and for a period of five (5) years thereafter, use
such Confidential Information, except as permitted by this agreement or disclose
the same to anyone other than those of its officers, directors, employees,
affiliates and sublicensees as are necessary in connection with either parties'
activities as contemplated in this agreement. This obligation of
confidentiality shall not apply to the extent that (i) a party is required to
disclose information by applicable law, such as pursuant to Securities and
Exchange Commission rules and regulations, or by order of a governmental agency
or a court of competent jurisdiction; (ii) a party can demonstrate that the
disclosed information was, at the time of disclosure, already in the public
domain other than as a result of actions or failure to act of a party, its
officers, directors, employees, affiliates and sublicensees in violation hereof;
(iii) the disclosed information was rightfully known by a party or its
affiliates or sublicensees (as shown by its written records) prior to the date
of disclosure to the other party in connection with this agreement; or (iv) the
disclosed information was received by a party or its affiliates or sublicensees
on an unrestricted basis from a third party which is not the other party or an
affiliate of the other party and not under a duty of confidentiality, and which
was rightfully known to said source.
This co-development agreement shall be effective as of the date
hereof, and shall continue in full force and effect for the greater of seventeen
(17) years or twelve (12) years from the date of first NDA or PMA approval for
commercial sale of Co-Developed Devices or the life of any patent issued on the
Co-Developed Technology. Provided that both parties agree in writing, at least
one hundred eighty (180) days prior to the expiration of the then existing term,
PDTC and Ramus shall have the option to extend the term of this agreement by
successive two (2) year periods.
If the foregoing correctly sets forth our agreement with respect to
the matters set forth herein, please so indicate by signing two copies of this
agreement and returning one of such signed copies to PDTC, whereupon this
agreement will constitute our binding agreement with respect to the matters set
forth herein.
Very truly yours,
PDT CARDIOVASCULAR, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Chairman
Accepted and agreed to as of
the 27th day of December 1996
RAMUS MEDICAL TECHNOLOGIES
By: /s/ ▇▇▇▇▇▇▇ ▇. LOVE
--------------------------------
Title: President
ANNEX D
PDTC OPTION
OPTION TO PURCHASE
RAMUS MEDICAL TECHNOLOGIES
THIS OPTION TO PURCHASE RAMUS MEDICAL TECHNOLOGIES (the "OPTION AGREEMENT")
is made and entered into on the date hereinafter set forth by and among RAMUS
MEDICAL TECHNOLOGIES, a California corporation ("RAMUS"), PDT CARDIOVASCULAR,
INC., a Delaware corporation ("PDTC"), and the other shareholders of Ramus
identified in SCHEDULE 1 hereto (collectively, the "SHAREHOLDERS").
WHEREAS:
A. PDTC and Ramus are entering into an Investment Agreement of even date
(the "INVESTMENT AGREEMENT");
B. The Shareholders own all of the outstanding shares of capital stock of
Ramus or hold all of the outstanding options, rights or other securities to
acquire the shares of capital stock of Ramus;
C. The Investment Agreement contemplates Ramus granting to PDTC an option
to purchase Ramus as set forth herein; and
D. The Shareholders have also agreed to join in this Option Agreement.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. OPTION.
1.1 OPTION TO PURCHASE RAMUS. In consideration of the execution and
performance of the Investment Agreement, Ramus and the Shareholders hereby agree
that PDTC has fully complied with all obligations in the Investment Agreement as
required to date, Ramus and the Shareholders do hereby grant to PDTC an option
(the "OPTION") to purchase Ramus for the purchase price set forth in SECTION 1.2
below.
1.2 PURCHASE PRICE. Subject to the provisions of SECTION 4 with
respect to the issuance of PDT Shares, the purchase price for all of Ramus shall
be equal to ***** (the "PURCHASE PRICE").(1) The Purchase Price will be
distributed on a pro rata basis to the holders of outstanding Ramus common stock
(the "COMMON STOCK"). Each Shareholder agrees to convert any convertible
securities into Common Stock and to exercise any options, rights or other
securities granting the right to acquire shares of Common Stock upon notice by
PDTC of the exercise of the Option; PROVIDED, HOWEVER, PDTC hereby expressly
acknowledges and agrees that, as provided in the option agreements of those
Shareholders who are option holders, such option holders may provide for the
exchange of their options for their applicable portion of the Purchase Price
having a value equal to the difference, or spread, between (i) their applicable
portion of the Purchase Price issuable upon exercise of the option had the
option been exercised immediately prior to the closing and (ii) the applicable
exercise price of the option.
*****Confidential Treatment Requested
-------------------
(1) PDTC's Shares shall not be subject to the Option, and the Purchase Price
shall be reduced accordingly. For example, if at the Closing of the Option
purchase, PDTC owns thirty percent (30%) of the PDT Shares, the Purchase
Price would be seventy percent (70%) of *****.
2. TERM OF THE OPTION. The Option shall commence as of the execution of
this Option Agreement and shall expire (the "EXPIRATION DATE") on the later of
***** from the execution of this Option Agreement, or ***** after the day on
which the first surgical procedure to implant the Company's initial product in a
coronary artery in a human subject involving coronary artery bypass surgery is
completed in its formally conducted clinical trials supervised by the United
States Food and Drug Administration, or the regulatory equivalent in the country
in which treatment is undertaken. Ramus covenants to give notice to PDTC, as
provided herein, of the first human implant by Ramus, as set forth in the
preceding sentence, within ten (10) days of the date that such human implant is
first undertaken.
3. NOTICE OF EXERCISE. Notice of exercise of the Option (the "NOTICE")
shall be accomplished in writing on or prior to the Expiration Date. The Notice
shall include an executed Purchase and Sale Agreement for the purchase and sale
of Ramus (the "PURCHASE AND SALE AGREEMENT"). The Purchase and Sale Agreement
shall be in the form attached hereto as EXHIBIT A, with such changes therein as
the parties reasonably determine are necessary to implement the desired forms
and transaction (sale of shares or a merger), and shall provide for a closing
within ninety (90) days of the date of the Notice. After delivery of the
Notice, if requested by Ramus, PDTC will provide the loan described in the Stock
Purchase Agreement.
4. PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price will be payable in cash and the stock of
PDTC's parent corporation, PDT, Inc. (the "PDT SHARES"), or entirely in cash or
entirely in PDT Shares, at the option of PDTC. PDTC cannot convert this from a
stock sale to an asset sale without the prior written consent of Ramus and its
Shareholders.
(b) If PDTC elects to deliver the PDT Shares, it will deliver a
sufficient percentage of the Purchase Price to the Shareholders to permit them
to receive the PDT Shares as part of a tax-free reorganization as determined by
PDTC's independent auditors. ***** In the event that any of the Purchase Price
is to be payable in PDT Shares, each of the following conditions shall have been
satisfied on or prior to the closing contemplated by this Option Agreement:
(i) PDT, Inc. shall have had declared effective by the Securities and Exchange
Commission a registration statement covering the resale by all of the
Shareholders of the PDT Shares received by such Shareholders, in form and
substance reasonably satisfactory to Ramus, and Ramus and the Shareholders will
cooperate with PDT, Inc. in registering said PDT Shares; and (ii) *****; and
(iii) the PDT Shares shall be listed for trading on the NASDAQ National Market
System (NMS) or a national securities exchange.
(c) The aggregate number of PDT Shares to be delivered by PDTC shall
be increased by ***** for each ***** of the Purchase Price paid for in PDT
Shares in consideration of the following agreement of the Shareholders:
(i) the Shareholders agree not to sell more than the greater of
***** the PDT Shares owned by them, or ***** during any five (5) trading
day period, unless the PDT Shares are sold to PDT or the PDT Employee Stock
Ownership Plan.
(ii) the Shareholders may sell the PDT Shares in a private
transaction occurring off market and not reported in National Market
Systems (NMS) or other national securities exchange which is either
approved by PDT or which is included in the limitations of (i) above.
*****Confidential Treatment Requested
(iii) each share certificate representing the PDT Shares will
contain a legend reflecting the foregoing.
5. ADDITIONAL SHAREHOLDERS. Ramus shall not issue any capital stock or
any securities convertible into, exchangeable for or exercisable for capital
stock of Ramus (whether preferred, common or otherwise) unless the purchaser,
grantee or other recipient thereof shall have executed a Joinder Agreement to
this Option Agreement in the form of EXHIBIT B at the time that they first
become a holder of or entitled to such securities. Ramus shall use its best
efforts to secure the execution by its existing option holders of the Joinder
Agreement and will not issue new options that do not include a condition of
executing the Joinder Agreement.
6. EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS. Ramus shall have
entered into Employment Agreements and Consulting Agreements to the satisfaction
of Ramus. Employment Agreements would be required for ***** if they are still
employed by Ramus at the time that this Option is exercised and provided that
they will agree to the compensation terms in effect immediately preceding the
exercise of the Option, together with any other managers that PDTC wishes to
retain. The Employment Agreements will provide for customary provisions and
shall include six (6) months' severance for termination without cause, and no
severance if termination is for cause. *****. Any of the foregoing agreements
will be terminable in the event of a breach of the covenants not to compete by
that party.
7. PROXY; LEGENDS. Each Shareholder, by signing this Option Agreement,
and each person who shall execute a Joinder Agreement by signing such Joinder
Agreement, grants PDTC an irrevocable proxy with respect to all of such person's
securities in Ramus, whether now or hereafter held by such person, for the
purpose of voting, converting, exchanging, exercising or transferring such
securities in connection with any exercise of the Option by PDTC. The parties
agree and acknowledge that such proxy is irrevocable by the existing
Shareholders and other persons who join this Option Agreement in accordance with
Section 705(e) of the California Corporations Code. Each outstanding security
of Ramus (including any right to acquire a security) and each security or other
right thereafter issued by Ramus shall bear a legend reflecting the granting of
such proxy and the existence of the Option in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF AN OPTION AGREEMENT AMONG RAMUS MEDICAL
TECHNOLOGIES ("RAMUS"), PDT CARDIOVASCULAR, INC. ("PDTC") AND CERTAIN
OTHER PERSONS PURSUANT TO WHICH THIS SECURITY IS SUBJECT TO AN OPTION
TO PURCHASE GRANTED IN FAVOR OF PDTC. PURSUANT TO SUCH OPTION
AGREEMENT, THE HOLDERS OF THIS SECURITY HAS GRANTED AN IRREVOCABLE
PROXY IN FAVOR OF PDTC WITH RESPECT TO CERTAIN MATTERS RELATING TO
SUCH OPTION. A COPY OF THE OPTION AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF RAMUS.
8. ROLE OF HAI FINANCIAL. Ramus and the Shareholders hereby acknowledge
that HAI Financial ("HAI") is acting as an advisor to Ramus and will be entitled
to be paid a fee upon the exercise of the Option by PDTC and upon funding of
PDTC's investment in Ramus. Ramus and the Shareholders further acknowledge that
the principal of HAI, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), is a director and
shareholder of PDTC's parent corporation, PDT, Inc. After consultation with
counsel and with full knowledge of the relationship and possible conflict of
interest, Ramus and the Shareholders agree that
*****Confidential Treatment Requested
HAI or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ involvement in this transaction shall in no way
invalidate the Option or serve as an excuse for non-performance by either
Ramus or the Shareholders for performing their obligations hereunder. The
following waiver and release is not intended to apply to claims which Ramus
may have against HAI or Foscue, nor is it intended to apply to any breach of
the Investment Agreement or this Option Agreement, by PDTC. However, an
assertion of a breach of the Investment Agreement or this Option Agreement
shall not excuse Ramus and the Shareholders from performing their obligations
under the Option. Ramus and the Shareholders irrevocably and unconditionally
waive and release any and all claims against PDTC, PDT, their respective
officers, directors, employees, agents and insureds from HAI's involvement
with Ramus, the Shareholders or this transaction, whether now existing or
hereafter arising.
Ramus and the Shareholders acknowledge that they are aware of, understand
and hereby waive the rights of Section 1542 of the California Civil Code, which
provides:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor."
9. NO SOLICITATION. The Shareholders will not take, nor will they permit
Ramus, or authorize or permit any investment banker, financial advisor,
attorney, accountant or other person retained by or acting for or on behalf of
any Shareholder or Ramus to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to Ramus or permitting access
to the assets and properties and books and records of Ramus), any offer or
inquiry from any person concerning a proposed sale or license of Ramus'
technology or a proposed sale of the shares of Ramus or a merger or other
business combination between Ramus and a third-party. The foregoing shall not
preclude the sale of securities which does not result in a change of control and
which otherwise complies with this Option Agreement. Unless PDTC refuses to
provide financing in accordance with Sections 6.4 or 6.5 of the Investment
Agreement, Ramus will be permitted to negotiate a proposed license of Ramus's
technology to an entity not affiliated with Ramus or its shareholders, officers
or directors after *****, so long as PDTC shall approve the license. If PDTC
refuses to approve the license within ten (10) days of submission of the license
(the "LICENSE REVIEW PERIOD") by Ramus to PDTC, PDTC will purchase ***** in
***** at a price of ***** per share, payable in cash, within ten (10) business
days of the expiration of the License Review Period. If any Shareholder or
Ramus (or any such person acting for or on their behalf) receives from any
person any offer, inquiry or informational request referred to above, such
Shareholder or Ramus, as applicable, will promptly advise such person, by
written notice, of the terms of this SECTION 9 and will promptly, orally and in
writing, advise PDTC of such offer, inquiry or request and deliver a copy
thereof and of such notice to PDTC.
10. MISCELLANEOUS.
10.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Option Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties. Nothing
in this Option Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto or their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Option Agreement, except as expressly provided in this Option Agreement.
*****Confidential Treatment Requested
10.2 SPECIFIC PERFORMANCE. PDTC shall be entitled to all rights
available under law, as well as injunctive relief, including the right to demand
specific performance of the Option by Ramus and the Shareholders.
10.3 GOVERNING LAW. This Option Agreement shall be governed by and
construed under the laws of the State of California.
10.4 COUNTERPARTS. This Option Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Option Agreement are used for convenience only and are not be considered in
construing or interpreting this Option Agreement.
10.6 NOTICES. Unless otherwise specifically provided herein, any
notice, demand, request or other communication herein requested or permitted to
be given shall be in writing and may be personally served, telecopied, telexed
or sent by recognized international courier service or United States mail and
shall be deemed to have been given when delivered in person or by courier
service, upon receipt of a telecopy or telex or five (5) business days after
deposit in the United States mail in the continental United States (registered
or certified, with postage prepaid and properly addressed). For purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this SECTION 10.6) shall be as follows:
If to Company: Ramus Medical Technologies
▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Love, President
With a copy to: Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to PDTC: PDT Cardiovascular, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇, President
With a copy to: Nida & ▇▇▇▇▇▇▇, PC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
10.7 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Option Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
10.8 AMENDMENTS AND WAIVERS. Any term of this Option Agreement may be
amended and the observance of any term of this Option Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of Ramus and
PDTC. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon the parties, their successors and assigns.
10.9 SEVERABILITY. If one or more provisions of this Option
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Option Agreement and the balance of the Option
Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
10.10 TERMINATION. This Option Agreement, and the obligations of
the parties with respect thereto, shall terminate on the Option Termination
Date.
10.11 PUBLIC DISCLOSURE. Except as may be required to comply with
applicable law, and the requirements of PDTC's parent corporation, as an
entity whose stock is publicly traded, no party this Option Agreement shall
make or cause to be made any press release or similar public announcement or
communication concerning the execution or performance of this Option
Agreement and any of the transactions contemplated hereby, unless
specifically approved in advance and in writing by Ramus and PDTC.
Notwithstanding the foregoing, unless required by an opinion of PDTC's
counsel, PDTC will not disclose the non-exercise of its Option described in
this Option Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
this 27th day of December, 1996.
RAMUS
RAMUS MEDICAL TECHNOLOGIES,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. LOVE
---------------------------------
Title: President
PDTC
PDT CARDIOVASCULAR, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Title: Chairman
SHAREHOLDERS
/s/ ▇▇▇▇▇▇▇ ▇. LOVE
------------------------------------
/s/ *****
------------------------------------
*****Confidential Treatment Requested
EXHIBIT A
Purchase and Sale Agreement
FORM OF
STOCK PURCHASE AGREEMENT
dated as of ________________
by and between
PDT CARDIOVASCULAR, INC.
and
THE SELLERS IDENTIFIED ON SCHEDULE 1 HERETO
with respect to all
outstanding capital stock of
RAMUS MEDICAL TECHNOLOGIES
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
PAGE
NO.
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ARTICLE I - SALE OF SHARES AND CLOSING
1.01 PURCHASE AND SALE 1
1.02 PURCHASE PRICE 1
1.03 CLOSING 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLERS
2.01 ORGANIZATION OF SELLER 2
2.02 AUTHORITY 2
2.03 ORGANIZATION OF THE COMPANY 3
2.04 CAPITAL STOCK 3
2.05 SUBSIDIARIES 3
2.06 NO CONFLICTS 4
2.07 GOVERNMENTAL APPROVALS AND FILINGS 4
2.08 BOOKS AND RECORDS 4
2.09 FINANCIAL STATEMENTS 5
2.10 ABSENCE OF CHANGES 5
2.11 NO UNDISCLOSED LIABILITIES 7
2.12 TAXES 8
2.13 LEGAL PROCEEDINGS 9
2.14 COMPLIANCE WITH LAWS AND ORDERS 9
2.15 BENEFIT PLANS; ERISA 9
2.16 REAL PROPERTY 12
2.17 TANGIBLE PERSONAL PROPERTY; INVESTMENT ASSETS 13
2.18 INTELLECTUAL PROPERTY RIGHTS 13
2.19 CONTRACTS 14
2.20 LICENSES 15
2.21 INSURANCE 16
2.22 AFFILIATE TRANSACTIONS 16
2.23 EMPLOYEES; LABOR RELATIONS 17
2.24 ENVIRONMENTAL MATTERS 17
2.25 SUBSTANTIAL CUSTOMERS AND SUPPLIERS 18
2.26 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS 19
2.27 NO POWERS OF ATTORNEY 19
2.28 ACCOUNTS RECEIVABLE 19
2.29 BROKERS 19
2.30 DISCLOSURE 19
2.31 INCORPORATION BY REFERENCE 20
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 ORGANIZATION 20
3.02 AUTHORITY 20
3.03 NO CONFLICTS 20
3.04 GOVERNMENTAL APPROVALS AND FILINGS 21
PAGE
NO.
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3.05 LEGAL PROCEEDINGS 21
3.06 PURCHASE FOR INVESTMENT 21
3.07 ACCREDITED INVESTOR 21
3.08 PURCHASE ENTIRELY FOR OWN ACCOUNT 21
3.09 INVESTMENT EXPERIENCE 21
3.10 PDT SHARES 21
ARCTICLE IV - COVENANTS OF SELLERS
4.01 REGULATORY AND OTHER APPROVALS 22
4.02 HSR FILINGS 22
4.03 INVESTIGATION BY PURCHASER 22
4.04 NO SOLICITATIONS 23
4.05 CONDUCT OF BUSINESS 23
4.06 EMPLOYEE MATTERS 24
4.07 CERTAIN RESTRICTIONS 24
4.08 AFFILIATE TRANSACTIONS 26
4.09 BOOKS AND RECORDS 26
4.10 NONCOMPETITION 26
4.11 NOTICE AND CURE 27
4.12 FULFILLMENT OF CONDITIONS 27
ARTICLE V - COVENANTS OF PURCHASER
5.01 REGULATORY AND OTHER APPROVALS 28
5.02 HSR FILINGS 28
5.03 NOTICE AND CURE 28
5.04 FULFILLMENT OF CONDITIONS 28
5.05 REGISTRATION OF PDT SHARES 29
5.06 ADVANCE BY PURCHASER TO THE COMPANY 29
ARTICLE VI - CONDITIONS TO OBLIGATIONS OF PURCHASER
6.01 REPRESENTATIONS AND WARRANTIES 29
6.02 PERFORMANCE; NO DEFAUL 29
6.03 OFFICERS' CERTIFICATES 29
6.04 ORDERS AND LAWS 29
6.05 REGULATORY CONSENTS AND APPROVALS 30
6.06 THIRD PARTY CONSENTS 30
6.07 OPINION OF COUNSEL 30
6.08 GOOD STANDING CERTIFICATES 30
6.09 SPECIAL PROCEDURES REPORT 30
6.10 RESIGNATIONS OF DIRECTORS AND OFFICERS 31
6.11 ENVIRONMENTAL SURVEY 31
6.12 PROCEEDINGS 31
6.13 EMPLOYMENT AND NONCOMPETITION AGREEMENTS 31
6.14 EQUITY RIGHTS 31
6.15 RELEASES 31
6.16 COMPLETION OF DUE DILIGENCE; FINANCIAL STATEMENTS 31
PAGE
NO.
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6.17 JOINDER 31
6.18 AUDITED FINANCIAL STATEMENTS 31
ARTICLE VII - CONDITIONS TO OBLIGATIONS OF SELLERS
7.01 REPRESENTATIONS AND WARRANTIES 32
7.02 PERFORMANCE 32
7.03 OFFICERS' CERTIFICATES 32
7.04 ORDERS AND LAWS 32
7.05 REGULATORY CONSENTS AND APPROVALS 32
7.06 THIRD PARTY CONSENTS 32
7.07 OPINION OF COUNSEL 33
7.08 PROCEEDINGS 33
7.09 GOOD STANDING CERTIFICATES 33
7.10 EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS 33
ARTICLE VIII - TAX MATTERS AND POST-CLOSING TAXES
8.01 INDEMNIFICATION 33
8.02 CONTROL OF CONTEST 33
8.03 ACCESS TO INFORMATION 34
8.04 RETENTION OF RECORDS 34
8.05 RESOLUTION OF DISAGREEMENTS AMONG PARTIES 34
8.06 TAX RETURNS 34
8.07 PRE-FILING APPROVAL OF TAX RETURNS AND REPORTS 34
8.08 COMPANY'S FINAL RETURNS 35
ARTICLE IX - SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS
9.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS 35
ARTICLE X - INDEMNIFICATION
10.01 TAX INDEMNIFICATION 35
10.02 OTHER INDEMNIFICATION 36
10.03 METHOD OF ASSERTING CLAIMS 36
ARTICLE XI - TERMINATION AND DEFAULT
11.01 TERMINATION 39
11.02 EFFECT OF TERMINATION 40
ARTICLE XII - DEFINITIONS
12.01 DEFINITIONS 40
ARTICLE XIII - MISCELLANEOUS
13.01 NOTICES 48
13.02 ENTIRE AGREEMENT 49
13.03 EXPENSES 49
13.04 PUBLIC ANNOUNCEMENTS 49
PAGE
NO.
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13.05 CONFIDENTIALITY 49
13.06 FURTHER ASSURANCES; POST-CLOSING COOPERATION 50
13.07 WAIVER 51
13.08 AMENDMENT 51
13.09 NO THIRD PARTY BENEFICIARY 51
13.10 NO ASSIGNMENT; BINDING EFFECT 51
13.11 HEADINGS 51
13.12 ARBITRATION 51
13.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS 52
13.14 INVALID PROVISIONS 52
13.15 AGENT 53
13.16 GOVERNING LAW 53
13.17 COUNTERPARTS 53
13.18 SIGNATURES 53
EXHIBITS
--------
EXHIBIT A Escrow Agreement
EXHIBIT B Officer's Certificate of Sellers
EXHIBIT C Opinion of Counsel to Sellers and Company
EXHIBIT D Special Procedures Report
EXHIBIT E Officer's Certificate of Purchaser
EXHIBIT F Secretary's Certificate of Purchaser
EXHIBIT G Opinion of Counsel to Purchaser
SCHEDULES
---------
SCHEDULE 1 List of Sellers
FORM OF
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT dated as of _______________ is made and
entered into by and between PDT CARDIOVASCULAR, INC., a Delaware corporation
("PURCHASER"), and each of the shareholders of RAMUS MEDICAL TECHNOLOGIES., a
California corporation, listed on SCHEDULE 1 hereto (each a "SELLER" and
collectively, "SELLERS"). Capitalized terms not otherwise defined herein have
the meanings set forth in SECTION 12.01.
WHEREAS, Sellers own _____________________________________ (________)
shares of common stock, no par value, of Ramus Medical Technologies, a
California corporation (the "COMPANY"), constituting all issued and outstanding
shares of capital stock of the Company, or the rights to acquire such shares as
indicated on SCHEDULE 1, excluding shares owned by Purchaser prior to the
execution of this Agreement (such shares being referred to herein as the
"SHARES");
WHEREAS, ▇▇▇▇▇▇▇ ▇. Love ("LOVE") is a Seller and owns _________
percent (___%) of the Shares owned by the Sellers; and
WHEREAS, Sellers desire to sell, and Purchaser desires to purchase,
the Shares on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 PURCHASE AND SALE. Each Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from each Seller, all of the right, title and
interest of such Seller in and to the Shares owned by such Seller at the
Closing, as hereinafter defined, on the terms and subject to the conditions set
forth in this Agreement.
1.02 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE
PRICE") for the Shares and for the covenant of the Sellers contained in Section
4.11 is as follows:
(a) *****(1)
(b) The Purchase Price will be payable at the option of the Purchaser
in immediately available United States funds or in the shares of Common Stock of
the Purchaser's parent corporation, PDT, Inc., a Delaware corporation (the "PDT
SHARES") or any combination thereof, provided that the PDT Shares must be
received on a tax-free basis in the opinion of PDT's auditors, and subject to
Sellers cooperating and agreeing to all conditions necessary to create a tax-
free exchange for PDT Shares. *****.
(1) The Purchase price will be reduced by the percentage ownership of the
Shares already owned by PDTC at the time of the Closing.
*****Confidential Treatment Requested
(c) The Purchase Price will be payable pro rata to the Sellers with
***** of the Purchase Price being paid in cash and PDT Shares to the Sellers and
***** of cash and PDT Shares will be transferred immediately to ________________
(the "ESCROW AGENT") under an escrow agreement substantially in the form
attached hereto as EXHIBIT A (the "ESCROW AGREEMENT") to be retained by the
Escrow Agent for a period of one year as provided in the Escrow Agreement. Any
payments due under SECTION 2.29 hereof to HAI Financial will be reduced from
the sums due the Sellers and will be payable to HAI Financial as if it were a
Seller.
1.03 CLOSING. The Closing will take place at the offices of
Purchaser, or at such other place as Purchaser and Sellers mutually agree, at
10:00 a.m. local time, on the Closing Date. Purchaser will pay the installments
of the Purchase Price payable under clauses (b) and (c) of SECTION 1.02 by
checks payable in United States funds to the order of the Agent, as hereinafter
defined. Such checks shall be delivered to the Agent.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Love, jointly and severally as to all warranties and representations,
and the remaining Sellers on an individual basis as to SECTIONS 2.01, 2.02 AND
2.04 hereof, represent and warrant to Purchaser as follows:
2.01 ORGANIZATION OF SELLER. Each Seller is (a) an individual acting
on its own behalf, (b) an individual acting as trustee of a trust that is duly
organized, validly existing and in good standing under the Law of the
jurisdiction set forth in SCHEDULE 1 or (c) a corporation duly organized,
validly existing and in good standing under the Law of the jurisdiction of its
organization as set forth in SCHEDULE 1. Each Seller has full individual,
trustee or corporate power and authority to execute and deliver this Agreement
and the Operative Agreements to which it is a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby, including to own, hold, sell and transfer
(pursuant to this Agreement) the Shares.
2.02 AUTHORITY. The execution and delivery by each Seller of this
Agreement and the Operative Agreements to which it is a party, and the
performance by each Seller of its obligations hereunder, and thereunder, have
been duly and validly authorized by any trustee, beneficiary, board, stockholder
or other Person whose authorization is required, except as provided in SECTION
2.07 OF THE DISCLOSURE SCHEDULE, no other action on the part of any Seller or
any trustee, beneficiary, board, stockholder or other Person being necessary.
This Agreement has been duly and validly executed and delivered by each Seller
and constitutes, and upon the execution and delivery by each Seller of the
Operative Agreements to which it is a party, such Operative Agreements will
constitute legal, valid and binding obligations of each Seller enforceable
against each Seller in accordance with their terms.
2.03 ORGANIZATION OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the Law of the
State of California, and has full corporate power and authority to conduct
its business as and to the extent now conducted and to own, use and lease its
Assets and Properties. SECTION 2.03 OF THE DISCLOSURE SCHEDULE lists all
lines of business in which the Company is participating or engaged. The
Company is duly qualified, licensed or admitted to do business and is in good
standing in those jurisdictions specified in SECTION 2.03 OF THE DISCLOSURE
SCHEDULE, which are the only jurisdictions in which the ownership, use or
leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission
*****Confidential Treatment Requested
necessary, except for those jurisdictions in which the adverse effects of all
such failures by the Company and the Subsidiaries to be qualified, licensed
or admitted and in good standing can in the aggregate be eliminated without
material cost or expense by the Company or a Subsidiary, as the case may be,
becoming qualified or admitted and in good standing. The name of each
director and officer of the Company on the date hereof, and the position with
the Company held by each, are listed in SECTION 2.03 OF THE DISCLOSURE
SCHEDULE. Love has, prior to the execution of this Agreement, delivered to
Purchaser true and complete copies of the articles of incorporation and
by-laws of the Company as in effect on the date hereof.
2.04 CAPITAL STOCK. The authorized capital stock of the Company
consists solely of ________________________ (__________) shares of Common Stock
and ____________________ (________) shares of Preferred Stock, of which only the
Shares have been issued. The Shares are duly authorized, validly issued,
outstanding, fully paid and nonassessable. Sellers own the Shares, beneficially
and of record, free and clear of all Liens, in the manner and as set forth in
SECTION 2.04 OF THE DISCLOSURE SCHEDULE. Except for this Agreement and as
disclosed in SECTION 2.04 OF THE DISCLOSURE SCHEDULE, there are no outstanding
Options with respect to the Company. The delivery of a certificate or
certificates at the Closing representing the Shares in the manner provided in
SECTION 1.03 will transfer to Purchaser good and valid title to the Shares, free
and clear of all Liens.
2.05 SUBSIDIARIES. SECTION 2.05 OF THE DISCLOSURE SCHEDULE lists the
name of each Subsidiary and all lines of business in which each Subsidiary is
participating or engaged. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the Law of its jurisdiction of
incorporation identified in SECTION 2.05 OF THE DISCLOSURE SCHEDULE, and has
full corporate power and authority to conduct its business as and to the extent
now conducted and to own, use and lease its Assets and Properties. Each
Subsidiary is duly qualified, licensed or admitted to do business and is in good
standing in those jurisdictions specified in SECTION 2.05 OF THE DISCLOSURE
SCHEDULE, which are the only jurisdictions in which the ownership, use or
leasing of such Subsidiary's Assets and Properties, or the conduct or nature of
its business, makes such qualification, licensing or admission necessary, except
for those jurisdictions in which the adverse effects of all such failures by the
Company and the Subsidiaries to be qualified, licensed or admitted and in good
standing can in the aggregate be eliminated without material cost or expense by
the Company or a Subsidiary, as the case may be, becoming qualified, licensed or
admitted and in good standing. SECTION 2.05 OF THE DISCLOSURE SCHEDULE lists
for each Subsidiary the amount of its authorized capital stock, the amount of
its outstanding capital stock and the record owners of such outstanding capital
stock. Except as disclosed in SECTION 2.05 OF THE DISCLOSURE SCHEDULE, all of
the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned,
beneficially and of record, by the Company or Subsidiaries wholly owned by the
Company free and clear of all Liens. Except as disclosed in SECTION 2.05 OF THE
DISCLOSURE SCHEDULE, there are no outstanding Options with respect to any
Subsidiary. The name of each director and officer of each Subsidiary on the
date hereof, and the position with such Subsidiary held by each, are listed in
SECTION 2.05 OF THE DISCLOSURE SCHEDULE. Love has prior to the execution of
this Agreement delivered to Purchaser true and complete copies of the
certificate or articles of incorporation and by-laws (or other comparable
corporate charter documents) of each of the Subsidiaries as in effect on the
date hereof.
2.06 NO CONFLICTS. The execution and delivery by Love of this
Agreement do not, and the execution and delivery by Love of the Operative
Agreements to which it is a party, the performance by Love of his obligations
under this Agreement and such Operative Agreements and the consummation of the
transactions contemplated hereby, and thereby, will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or
provisions of the certificate or articles of incorporation or by-laws (or
other comparable corporate charter documents) of the Company or any
Subsidiary or Love or of any trust agreement (or other comparable governing
documents) of Love;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in SECTION 2.07 OF THE DISCLOSURE
SCHEDULE, conflict with or result in a violation or breach of any term or
provision of any material Law or Order applicable to Love, the Company or any
Subsidiary or any of their respective Assets and Properties; or
(c) except as disclosed in SECTION 2.06 OF THE DISCLOSURE SCHEDULE,
(i) conflict with or result in a violation or breach of, (ii) constitute (with
or without notice or lapse of time or both) a default under, (iii) require Love,
the Company or any Subsidiary to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, (iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi) result in the creation or
imposition of any Lien upon Love, the Company or any Subsidiary or any of their
respective Assets and Properties under, any material Contract or License to
which Love, the Company or any Subsidiary is a party or by which any of their
respective Assets and Properties is bound.
2.07 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in
SECTION 2.07 OF THE DISCLOSURE SCHEDULE, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the part of
Love, the Company or any Subsidiary is required in connection with the
execution, delivery and performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
2.08 BOOKS AND RECORDS. The minute books and other similar records of
the Company and the Subsidiaries as made available to Purchaser prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the stockholders, the boards of directors and committees of
the boards of directors of the Company and the Subsidiaries. The stock transfer
ledgers and other similar records of the Company and the Subsidiaries as made
available to Purchaser prior to the execution of this Agreement accurately
reflect all record transfers prior to the execution of this Agreement in the
capital stock of the Company and the Subsidiaries. Except as set forth in
SECTION 2.08 OF THE DISCLOSURE SCHEDULE, neither the Company nor any Subsidiary
has any of its Books and Records recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company or a Subsidiary.
2.09 FINANCIAL STATEMENTS. Prior to the execution of this Agreement,
Love has delivered to Purchaser true and complete copies of the following
financial statements:
(a) the audited balance sheets of the Company and its consolidated
subsidiaries as of __________________________, and the related audited
consolidated statements of operations, stockholders' equity and cash flows for
each of the fiscal years then ended, together with a true and correct copy of
the unqualified report with no exceptions or modifications, but with allowable
explanatory language with respect to the Company's ability to continue as a
going concern, on such audited information by _____________________, and all
letters from such accountants with respect to the results of such audits; and
(b) the unaudited balance sheets of the Company and its consolidated
subsidiaries as of _________________, and the related unaudited consolidated
statements of operations, stockholders' equity and cash flows for the portion of
the fiscal year then ended.
Except as set forth in the notes thereto and as disclosed in SECTION 2.09 OF THE
DISCLOSURE SCHEDULE, all such financial statements (i) were prepared in
accordance with GAAP on a consistent basis, (ii) fairly present the consolidated
financial condition and results of operations of the Company and its
consolidated subsidiaries as of the respective dates thereof and for the
respective periods covered thereby, and (iii) were compiled from the Books and
Records of the Company and the Subsidiaries regularly maintained by management
and used to prepare the financial statements of the Company and the Subsidiaries
in accordance with the principles stated therein. The Company and the
Subsidiaries have maintained their respective Books and Records in a manner
sufficient to permit the preparation of financial statements in accordance with
GAAP, such Books and Records fairly reflect, in all material respects, the
income, expenses, assets and liabilities of the Company and the Subsidiaries and
the Books and Records provided a fair and accurate basis for the preparation of
the Audited Financial Statements and the Unaudited Financial Statements. Except
for those Subsidiaries listed in SECTION 2.09 OF THE DISCLOSURE SCHEDULE, the
financial condition and results of operations of each Subsidiary are, and for
all periods referred to in this SECTION 2.09 have been, consolidated with those
of the Company.
2.10 ABSENCE OF CHANGES. Except for the execution and delivery of
this Agreement and the transactions to take place pursuant hereto on or prior to
the Closing Date, since the Audited Financial Statement Date there has not been
any material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the Business or Condition of the Company. Without
limiting the foregoing, except as disclosed in SECTION 2.10 OF THE DISCLOSURE
SCHEDULE, there has not occurred between the Audited Financial Statement Date
and the date hereof:
(i) any declaration, setting aside or payment of any dividend or
other distribution in respect of the capital stock of the Company or any
Subsidiary not wholly owned by the Company, or any direct or indirect
redemption, purchase or other acquisition by the Company or any Subsidiary
of any such capital stock of or any Option with respect to the Company or
any Subsidiary not wholly owned by the Company;
(ii) any authorization, issuance, sale or other disposition by the
Company or any Subsidiary of any shares of capital stock of or Option with
respect to the Company or any Subsidiary, or any modification or amendment
of any right of any holder of any outstanding shares of capital stock of or
Option with respect to the Company or any Subsidiary;
(iii) (x) any increase in the salary, wages or other compensation of
any officer, employee or consultant of the Company or any Subsidiary whose
annual salary is, or after giving effect to such change would be, $100,000
or more, except increases in the ordinary course of business, consistent
with past practice; (y) any establishment or modification of (A) targets,
goals, pools or similar provisions in respect of any fiscal year under any
Benefit Plan, employment-related Contract or other employee compensation
arrangement or (B) salary ranges, increase guidelines or similar provisions
in respect of any Benefit Plan, employment-related Contract or other
employee compensation arrangement, except for changes in the ordinary
course of business, consistent with past practice; or (z) any adoption,
entering into or becoming bound by any Benefit Plan, employment-related
Contract or collective bargaining agreement, or amendment, modification or
termination (partial or complete) of any Benefit Plan, employment-related
Contract or collective bargaining agreement not in the ordinary course of
business, except to the extent required by applicable Law and, in the event
compliance with legal requirements
presented options, only to the extent the option which the Company or
Subsidiary reasonably believed to be the least costly was chosen; other
than such bonus payments permitted under SECTION 4.07(b);
(iv) (A) incurrences by the Company or any Subsidiary of Indebtedness
in an aggregate principal amount exceeding $25,000 (net of any amounts
discharged during such period), or (B) any voluntary purchase,
cancellation, prepayment or complete or partial discharge in advance of a
scheduled payment date with respect to, or waiver of any right of the
Company or any Subsidiary under, any Indebtedness of or owing to the
Company or any Subsidiary; other than borrowings by the Company in the
ordinary course of business.
(v) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the plant, real or personal
property or equipment of the Company or any Subsidiary in an aggregate
amount exceeding $10,000;
(vi) any material change in (x) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or policy
of the Company or any Subsidiary, (y) any method of calculating any bad
debt, contingency or other reserve of the Company or any Subsidiary for
accounting, financial reporting or Tax purposes, or any change in the
fiscal year of the Company or any Subsidiary or (z) the financial
projections of the Company or any Subsidiary;
(vii) any write-off or write-down of or any determination to
write-off or write-down, not in the ordinary course or business, any of the
Assets and Properties of the Company or any Subsidiary in an aggregate
amount exceeding $10,000;
(viii) any acquisition or disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Assets and Properties of the Company
or any Subsidiary, other than in the ordinary course of business consistent
with past practice;
(ix) any (x) amendment of the certificate or articles of incorporation
or by-laws (or other comparable corporate charter documents) of the Company
or any Subsidiary, (y) recapitalization, reorganization, liquidation or
dissolution of the Company or any Subsidiary or (z) merger or other
business combination involving the Company or any Subsidiary and any other
Person;
(x) any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with
respect to (A) any material Contract which is required (or had it been in
effect on the date hereof would have been required) to be disclosed in the
Disclosure Schedule pursuant to SECTION 2.19(a) or (B) any material License
held by the Company or any Subsidiary, except for amendments,
modifications, terminations, waivers or consents in the ordinary course of
business;
(xi) capital expenditures or commitments for additions to property,
plant or equipment of the Company and the Subsidiaries constituting capital
assets in an aggregate amount exceeding $50,000 without Purchaser's consent
which shall not unreasonably be withheld;
(xii) any commencement or termination by the Company or any Subsidiary
of any new line of business;
(xiii) any transaction by the Company or any Subsidiary with Love, any
officer, director, Affiliate (other than the Company or any Subsidiary) or
Associate of Love or any Associate of any such officer, director or
Affiliate (A) outside the ordinary course of business consistent with past
practice or (B) other than on an arm's-length basis, other than pursuant to
any Contract in effect on the Audited Financial Statement Date and
disclosed pursuant to SECTION 2.19(a)(vii) OF THE DISCLOSURE SCHEDULE;
(xiv) any entering into of a Contract to do or engage in any of the
foregoing after the date hereof; or
(xv) any other transaction involving or development affecting the
Company or any Subsidiary outside the ordinary course of business
consistent with past practice.
2.11 NO UNDISCLOSED LIABILITIES. Except as reflected or reserved
against in the balance sheet included in the Audited Financial Statements or in
the notes thereto or as disclosed in SECTION 2.11 OF THE DISCLOSURE SCHEDULE or
any other Section of the Disclosure Schedule, there are no Liabilities against,
relating to or affecting the Company or any Subsidiary or any of their
respective Assets and Properties, other than Liabilities incurred in the
ordinary course of business consistent with past practice which in the aggregate
are not material to the Business or Condition of the Company.
2.12 TAXES.
(a) Except to the extent that any such failure would not have a
material adverse effect on the Company, the Company and each of its Subsidiaries
have (i) timely filed all Tax Returns required to be filed in any jurisdiction
to which it is subject, except as disclosed in SECTION 2.12 OF THE DISCLOSURE
SCHEDULE, (ii) either timely paid in full all Taxes due to be paid or collected
by it and all Taxes claimed to be due from it by each such jurisdiction (except
for any such Taxes as are being contested in good faith by appropriate
proceedings), and any interest, additions to Tax and penalties with respect
thereto, or provided adequate reserves for the payment thereof (which reserves
are reflected in the Company's Audited Financial Statements), and (iii) fully
accrued on its Audited Financial Statements and Books and Records all Taxes, and
any interest, additions to Tax and penalties with respect thereto, for any
period through the date hereof which are not yet due, including such as are
being contested. There are no agreements for extension of the time of
assessment or payment of any Taxes of the Company or any of its Subsidiaries.
No waiver of any statute of limitations has been executed by or on behalf of the
Company or any of its Subsidiaries. There are no examinations by the IRS of or
relating to the Company or any of its Subsidiaries presently in process, or, to
the Knowledge of Love, threatened against the Company or any of its
Subsidiaries. Neither the IRS nor any other taxing authority is now asserting
or, to the Knowledge of Love, threatening to assert, any deficiency or
assessment for additional Taxes, including any interest, penalties or fines,
against the Company or any of its Subsidiaries. No federal income tax returns
of the Company or any of its Subsidiaries have been audited by the IRS. Except
as set forth in SCHEDULE 2.12 OF THE DISCLOSURE SCHEDULE, state, local and
foreign income tax returns of the Company and its Subsidiaries have never been
audited by the appropriate tax authorities for the jurisdictions indicated in
SECTION 2.12 OF THE DISCLOSURE SCHEDULE. None of the Company or any of its
Subsidiaries has incurred any liability for Taxes other than in the ordinary
course of business and none of the Company or any of its Subsidiaries has
incurred any liability for Taxes which, in the aggregate, would result in a
material decrease in the net worth of the Company or any of its Subsidiaries.
Love has provided or made available to Purchaser or its authorized
representative complete and correct copies of all income Tax, franchise or
capital stock Tax, sales, occupational, employment, personal property, real
property or other Tax Returns related to the Company or any of its Subsidiaries
and its business for each of the __________ fiscal years of the Company ended
_______________________________, respectively, together with complete and
correct copies of any
reports of Tax authorities relating to examination of such returns and all
prior returns for the __________ fiscal years prior to
_______________________, respectively, that have been audited, together with
any elections to adopt any particular method of treating an item for Tax
purposes and any closing agreements applicable to the Company or any of its
Subsidiaries.
(b) No election under Section 341(f) of the Code has been made by
Love to treat the Company as a "consenting corporation" as defined therein.
(c) None of the Company or any of its Subsidiaries has been formed or
availed of for the purpose of avoiding the Tax with respect to its shareholders
or the shareholders of any other corporation by permitting earnings on profits
to be accumulated instead of being divided or distributed.
(d) No compensation or benefits paid by the Company or any of its
Subsidiaries or payable by the Company or any of its Subsidiaries in connection
with the transactions contemplated by or effected in connection with this
Agreement has been or will be nondeductible by the Company or any such
Subsidiary or subject to any excise or penalty payable under the Code, including
Sections 280G or 4999 thereof.
2.13 LEGAL PROCEEDINGS. Except as disclosed in SECTION 2.13 OF THE
DISCLOSURE SCHEDULE (with paragraph references corresponding to those set forth
below):
(a) there are no Actions or Proceedings pending or, to the Knowledge
of Love, threatened against, relating to or affecting Love, the Company or any
Subsidiary or any of their respective Assets and Properties which (i) could
reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements or otherwise result in a material diminution of the benefits
contemplated by this Agreement or any of the Operative Agreements to Purchaser,
or (ii) if determined adversely to Love, the Company or a Subsidiary, could
reasonably be expected to result in (x) any injunction or other equitable relief
against the Company or any Subsidiary that would interfere in any material
respect with its business or operations or (y) Losses by the Company or any
Subsidiary, individually or in the aggregate with Losses in respect of other
such Actions or Proceedings, exceeding $25,000;
(b) there are no facts or circumstances Known to Love that could
reasonably be expected to give rise to any Action or Proceeding that would be
required to be disclosed pursuant to clause (a) above; and
(c) there are no Orders outstanding against the Company or any
Subsidiary.
Prior to the execution of this Agreement, Love has delivered to Purchaser all
responses of counsel for the Company and the Subsidiaries to auditors' requests
for information delivered in connection with the Audited Financial Statements
(together with any updates provided by such counsel) regarding Actions or
Proceedings pending or threatened against, relating to or affecting the Company
or any Subsidiary.
2.14 COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in
SECTION 2.14 OF THE DISCLOSURE SCHEDULE, neither the Company nor any Subsidiary
is or has at any time within the last five (5) years been, or has received any
notice that it is or has at any time within the last five (5) years been, in
violation of or in default under, in any material respect, any Law or Order
applicable to the Company or any Subsidiary or any of their respective Assets
and Properties.
2.15 BENEFIT PLANS; ERISA.
(a) SECTION 2.15(a) OF THE DISCLOSURE SCHEDULE (i) contains a true
and complete list and description of each of the Benefit Plans, (ii) identifies
each of the Benefit Plans that is a Qualified Plan, (iii) identifies each
Benefit Plan which at any time during the five-year period preceding the date of
this Agreement was a Defined Benefit Plan and (iv) lists, describes and
identifies each other Plan maintained, established, sponsored or contributed to
by an ERISA Affiliate, or any predecessor thereof, which, during the five-year
period preceding the date of this Agreement, was at any time a Defined Benefit
Plan. Neither the Company nor any Subsidiary has scheduled or agreed upon
future increases of benefit levels (or creations of new benefits) with respect
to any Benefit Plan, and no such increases or creation of benefits have been
proposed, made the subject of representations to employees or requested or
demanded by employees under circumstances which make it reasonable to expect
that such increases will be granted. Except as disclosed in SECTION 2.15(a) OF
THE DISCLOSURE SCHEDULE, no loan is outstanding between the Company or any
Subsidiary and any Benefit Plan.
(b) Neither the Company nor any Subsidiary maintains or is obligated
to provide benefits under any life, medical or health plan (other than as an
incidental benefit under a Qualified Plan) which provides benefits to retirees
or other terminated employees other than benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(c) Except as set forth in SECTION 2.15(c) OF THE DISCLOSURE
SCHEDULE, each Benefit Plan covers only employees who are employed by the
Company or a Subsidiary (or former employees or beneficiaries with respect to
service with the Company or a Subsidiary), so that the transactions contemplated
by this Agreement will require no spin-off of assets and liabilities or other
division or transfer of rights with respect to any such plan.
(d) Neither the Company, any Subsidiary, any ERISA Affiliate nor any
other corporation or organization controlled by or under common control with any
of the foregoing within the meaning of Section 4001 of ERISA has at any time
contributed to any "multiemployer plan," as that term is defined in Section 4001
of ERISA.
(e) Each of the Benefit Plans is, and its administration is and has
been since inception, in all material respects in compliance with, and neither
the Company nor any Subsidiary has received any claim or notice that any such
Benefit Plan is not in compliance with, all applicable Laws and Orders and
prohibited transactions exemptions, including the requirements of ERISA, the
Code, the Age Discrimination in Employment Act, the Equal Pay Act and Title VII
of the Civil Rights Act of 1964. Each Qualified Plan is qualified under Section
401(a) of the Code, and, if applicable, complies with the requirements of
Section 401(k) of the Code. Each Benefit Plan which is intended to provide for
the deferral of income, the reduction of salary or other compensation or to
afford other Tax benefits complies with the requirements of the applicable
provisions of the Code or other Laws required in order to provide such Tax
benefits.
(f) Neither the Company nor any Subsidiary is in default in
performing any of its contractual obligations under any of the Benefit Plans or
any related trust agreement or insurance contract. All contributions and other
payments required to be made by the Company or any Subsidiary to any Benefit
Plan with respect to any period ending before or at or including the Closing
Date have been made or reserves adequate for such contributions or other
payments have been or will be set aside therefor and have been or will be
reflected in Financial Statements in accordance with GAAP. There are no
material outstanding liabilities of any Benefit Plan other than liabilities for
benefits to be paid to participants in such Benefit Plan and their beneficiaries
in accordance with the terms of such Benefit Plan.
(g) No event has occurred, and there exists no condition or set of
circumstances in connection with any Benefit Plan, under which the Company or
any Subsidiary, directly or indirectly (through any indemnification agreement or
otherwise), could reasonably be expected to be subject to any risk of material
liability under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of ERISA
or Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in
liability to the PBGC under Section 302(c)(ii), 4062, 4063, 4064 or 4069 of
ERISA, or otherwise, with respect to the Company, any Subsidiary, Purchaser or
any corporation or organization controlled by or under common control with any
of the foregoing within the meaning of Section 4001 of ERISA, and no event or
condition exists or has existed which could reasonably be expected to result in
any such liability with respect to Purchaser, the Company, any Subsidiary or any
such corporation or organization. No "reportable event" within the meaning of
Section 4043 of ERISA has occurred with respect to any Defined Benefit Plan. No
termination re-establishment or spin-off re-establishment transaction has
occurred with respect to any Subject Defined Benefit Plan. No Subject Defined
Benefit Plan has incurred any accumulated funding deficiency whether or not
waived. No filing has been made and no proceeding has been commenced for the
complete or partial termination of, or withdrawal from, any Benefit Plan which
is a Pension Benefit Plan.
(i) Except as described in SECTION 2.15(i) OF THE DISCLOSURE
SCHEDULE, no benefit under any Benefit Plan, including any severance or
parachute payment plan or agreement, will be established or become accelerated,
vested, funded or payable by reason of any transaction contemplated under this
Agreement.
(j) To the Knowledge of Love, there are no pending or threatened
claims by or on behalf of any Benefit Plan, by any Person covered thereby, or
otherwise, which allege violations of Law which could reasonably be expected to
result in liability on the part of Purchaser, the Company, any Subsidiary or any
fiduciary of any such Benefit Plan, nor is there any basis for such a claim.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(l) The fair market value of the assets of each Subject Defined
Benefit Plan, as determined as of the last day of the plan year of such plan
which coincides with or first precedes the date of this Agreement, was not less
than the present value of the projected benefit obligations under such plan at
such date as established on the basis of the actuarial assumptions applicable
under such Subject Defined Benefit Plan at said date and, to the Knowledge of
Love, there have been no material changes in such values since said date.
(m) Complete and correct copies of the following documents have been
furnished to Purchaser prior to the execution of this Agreement:
(i) the Benefit Plans and any predecessor plans referred to therein,
any related trust agreements, and service provider agreements, insurance
contracts or agreements with investment managers, including all amendments
thereto;
(ii) current summary Plan descriptions of each Benefit Plan subject to
ERISA, and any similar descriptions of all other Benefit Plans;
(iii) the most recent Form 5500 and Schedules thereto for each Benefit
Plan subject to ERISA reporting requirements;
(iv) the most recent determination of the IRS with respect to the
qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any Benefit Plan
funded through a trust;
(vi) the most recent actuarial report of the qualified actuary of any
Subject Defined Benefit Plan or any other Benefit Plan with respect to
which actuarial valuations are conducted; and
(vii) all qualified domestic relations orders or other orders
governing payments from any Benefit Plan.
2.16 REAL PROPERTY.
(a) SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE contains a true and
correct list of (i) each parcel of real property owned by the Company or any
Subsidiary, (ii) each parcel of real property leased by the Company or any
Subsidiary (as lessor or lessee) and (iii) all Liens (other than Permitted
Liens) relating to or affecting any parcel of real property referred to in
clause (i).
(b) Except as disclosed in SECTION 2.16(a) OF THE DISCLOSURE
SCHEDULE, the Company or a Subsidiary has good and marketable fee simple title
to each parcel of real property owned by it, free and clear of all Liens other
than Permitted Liens. Except for the real property leased to others referred to
in clause (ii) of paragraph (a) above, the Company or a Subsidiary is in
possession of each parcel of real property owned by it, together with all
buildings, structures, facilities, fixtures and other improvements thereon. The
Company and the Subsidiaries have adequate rights of ingress and egress with
respect to the real property listed in SECTION 2.16(a) OF THE DISCLOSURE
SCHEDULE and all buildings, structures, facilities, fixtures and other
improvements thereon. None of such real property, buildings, structures,
facilities, fixtures or other improvements, or the use thereof, contravenes or
violates any building, zoning, administrative, occupational safety and health or
other applicable Law in any material respect (whether or not permitted on the
basis of prior nonconforming use, waiver or variance).
(c) The Company or a Subsidiary has a valid and subsisting leasehold
estate in and the right to quiet enjoyment of the real properties leased by it
for the full term of the lease thereof. Each lease referred to in clause (ii)
of paragraph (a) above is a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company or a Subsidiary and of each other
Person that is a party thereto, and except as set forth in SECTION 2.16(c) OF
THE DISCLOSURE SCHEDULE, there is no, and neither the Company nor any Subsidiary
has received notice of any, default (or any condition or event which, after
notice or lapse of time or both, would constitute a default) thereunder.
Neither the Company nor any Subsidiary owes any brokerage commissions with
respect to any such leased space.
(d) Love has delivered to Purchaser prior to the execution of this
Agreement true and complete copies of (i) all deeds, leases, mortgages, deeds of
trust, certificates of occupancy, title insurance policies, title reports,
surveys and similar documents, and all amendments thereof, with respect to the
real property owned by the Company and the Subsidiaries, and (ii) all leases
(including any amendments and renewal letters) and, to the extent reasonably
available, all other documents referred to in clause (i) of this paragraph (d)
with respect to the real property leased by the Company and the Subsidiaries.
(e) Except as disclosed in SECTION 2.16(e) OF THE DISCLOSURE
SCHEDULE, no tenant or
other party in possession of any of the real properties owned by the Company
and the Subsidiaries, has any right to purchase, or holds any right of first
refusal to purchase, such properties.
(f) Except as disclosed in SECTION 2.16(f) OF THE DISCLOSURE
SCHEDULE, the improvements on the real property identified in SECTION 2.16(a) OF
THE DISCLOSURE SCHEDULE are in good operating condition and in a state of good
maintenance and repair, ordinary wear and tear excepted, are adequate and
suitable for the purposes for which they are presently being used and, to the
Knowledge of Love, there are no condemnation or appropriation proceedings
pending or threatened against any of such real property or the improvements
thereon.
(g) Neither the Company nor any Subsidiary is or has been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(i)(A)(ii).
2.17 TANGIBLE PERSONAL PROPERTY; INVESTMENT ASSETS.
(a) The Company or a Subsidiary is in possession of and has good
title to, or has valid leasehold interests in or valid rights under Contract to
use, all tangible personal property used in or reasonably necessary for the
conduct of their business, including all tangible personal property reflected on
the balance sheet included in the Unaudited Financial Statements and tangible
personal property acquired since the Unaudited Financial Statement Date other
than property disposed of since such date in the ordinary course of business
consistent with past practice. All such tangible personal property is free and
clear of all Liens, other than Permitted Liens and Liens disclosed in
SECTION 2.17(a) OF THE DISCLOSURE SCHEDULE, and as of Closing, is in good
working order and condition, ordinary wear and tear excepted, and its use
complies in all material respects with all applicable Laws.
(b) SECTION 2.17(b) OF THE DISCLOSURE SCHEDULE describes each
Investment Asset owned by the Company or any Subsidiary on the date hereof.
Except as disclosed in SECTION 2.17(b) OF THE DISCLOSURE SCHEDULE, all such
Investment Assets are owned by the Company or a Subsidiary free and clear of all
Liens other than Permitted Liens.
2.18 INTELLECTUAL PROPERTY RIGHTS. The Company and the Subsidiaries
have interests in or use only the Intellectual Property disclosed in
SECTION 2.18 OF THE DISCLOSURE SCHEDULE, each of which the Company or a
Subsidiary either has all right, title and interest in or a valid and binding
rights under Contract to use. No other Intellectual Property is used or
necessary in the conduct of the business of the Company or any Subsidiary.
Except as disclosed in SECTION 2.18 OF THE DISCLOSURE SCHEDULE, (i) the Company
or a Subsidiary has the exclusive right to use the Intellectual Property
disclosed in SECTION 2.18 OF THE DISCLOSURE SCHEDULE, (ii) all registrations
with and applications to Governmental or Regulatory Authorities in respect of
such Intellectual Property are valid and in full force and effect and are not
subject to the payment of any Taxes or maintenance fees or the taking of any
other actions by the Company or a Subsidiary to maintain their validity or
effectiveness, (iii) there are no restrictions on the direct or indirect
transfer of any Contract, or any interest therein, held by the Company or any
Subsidiary in respect of such Intellectual Property, (iv) Love has delivered to
Purchaser prior to the execution of this Agreement documentation with respect to
any invention, process, design, computer program or other know-how or trade
secret included in such Intellectual Property, which documentation is accurate
in all material respects and reasonably sufficient in detail and content to
identify and explain such invention, process, design, computer program or other
know-how or trade secret and to facilitate its full and proper use without
reliance on the special knowledge or memory of any Person, (v) the Company and
the Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of their trade secrets, (vi) neither the Company nor
any Subsidiary is, or has received any notice that it is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
Contract to
use such Intellectual Property, (vii) to the Knowledge of Love, no such
Intellectual Property is being infringed by any other Person, and (viii)
there are no claims by third parties against the Intellectual Property.
Neither Love, the Company nor any Subsidiary has received notice that the
Company or any Subsidiary is infringing any Intellectual Property of any
other Person, no claim is pending or, to the Knowledge of Love, has been made
to such effect that has not been resolved and, to the Knowledge of Love,
neither the Company nor any Subsidiary is infringing any Intellectual
Property of any other Person.
2.19 CONTRACTS.
(a) SECTION 2.19(a) OF THE DISCLOSURE SCHEDULE (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Contracts or other arrangements (true and complete
copies or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been delivered to Purchaser prior to the execution of
this Agreement), to which the Company or any Subsidiary is a party or by which
any of their respective Assets and Properties is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term or otherwise relating to employment or independent
contracting or the termination of employment or independent contracting,
the name, position and rate of compensation of each Person party to such a
Contract and the expiration date of each such Contract; and (B) any written
or unwritten representations, commitments, promises, communications or
courses of conduct (excluding Benefit Plans and any such Contracts referred
to in clause (A)) involving an obligation of the Company or any Subsidiary
to make payments in any year, other than with respect to salary or
incentive compensation payments in the ordinary course of business, to any
employee exceeding $50,000 or any group of employees exceeding $100,000 in
the aggregate;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company or any
Subsidiary to engage in any business activity or compete with any Person
or, except as provided in SECTION 4.11, prohibiting or limiting the ability
of any Person to compete with the Company or any Subsidiary;
(iii) all partnership, joint venture, shareholders' or other similar
Contracts with any Person;
(iv) all Contracts relating to Indebtedness of the Company or any
Subsidiary in excess of $10,000 or to preferred stock issued by the Company
or any Subsidiary;
(v) all material Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees;
(vi) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties, other than dispositions or
acquisitions in the ordinary course of business consistent with past
practice, and (B) any merger or other business combination;
(vii) all Contracts between or among the Company or any Subsidiary, on
one part, and Love, any officer, director, Affiliate (other than the
Company or any Subsidiary) or Associate of Love or any Associate of any
such officer, director or Affiliate, on another part;
(viii) all collective bargaining or similar labor Contracts;
(ix) all Contracts that (A) limit or contain restrictions on the
ability of the Company or any Subsidiary to declare or pay dividends on, to
make any other distribution in respect of or to issue or purchase, redeem
or otherwise acquire its capital stock, to incur Indebtedness, to incur or
suffer to exist any Lien, to purchase or sell any Assets and Properties, to
change the lines of business in which it participates or engages or to
engage in any Business Combination or (B) require the Company or any
Subsidiary to maintain specified financial ratios or levels of net worth or
other indicia of financial condition; and
(x) all other Contracts (other than Benefit Plans, leases listed in
SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE and insurance policies listed in
SECTION 2.21 OF THE DISCLOSURE SCHEDULE) that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by or to the
Company or any Subsidiary of more than $10,000 annually and (B) cannot be
terminated within thirty (30) days after giving notice of termination
without resulting in any material cost or penalty to the Company or any
Subsidiary.
(b) Each Contract required to be disclosed in SECTION 2.19(a) OF THE
DISCLOSURE SCHEDULE is in full force and effect and constitutes a legal, valid
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in SECTION 2.19(b) OF THE DISCLOSURE SCHEDULE
neither the Company, any Subsidiary nor, to the Knowledge of Love, any other
party to such Contract is, or has received notice that it is, in violation or
breach of or default under any such Contract (or with notice or lapse of time or
both, would be in violation or breach of or default under any such Contract) in
any material respect.
(c) Except as disclosed in SECTION 2.19(c) OF THE DISCLOSURE
SCHEDULE, neither the Company nor any Subsidiary is a party to or bound by any
Contract that has been or could reasonably be expected to be, individually or in
the aggregate with any other such Contracts, materially adverse to the Business
or Condition of the Company.
2.20 LICENSES. SECTION 2.20 OF THE DISCLOSURE SCHEDULE contains a
true and complete list of all Licenses used in and material, individually or in
the aggregate, to the business or operations of the Company or any Subsidiary
(and all pending applications for any such Licenses), setting forth the grantor,
the grantee, the function and the expiration and renewal date of each. Prior to
the execution of this Agreement, Love has delivered to Purchaser true and
complete copies of all such Licenses. Except as disclosed in SECTION 2.20 OF
THE DISCLOSURE SCHEDULE:
(i) the Company and each Subsidiary owns or validly holds all
Licenses that are material, individually or in the aggregate, to its
business or operations;
(ii) each License listed in SECTION 2.20 OF THE DISCLOSURE SCHEDULE is
valid, binding and in full force and effect; and
(iii) neither the Company nor any Subsidiary is, or has received
any notice that it is, in default (or with the giving of notice or lapse of
time or both, would be in default) under any such License.
2.21 INSURANCE. SECTION 2.21 OF THE DISCLOSURE SCHEDULE contains a
true and complete list (including the names and addresses of the insurers, the
names of the Persons to whom such Policies have been issued, the expiration
dates thereof, the annual premiums and payment terms thereof, whether it is a
"claims made" or an "occurrence" policy and a brief description of the interests
insured thereby) of all liability, property, workers' compensation, directors'
and officers' liability and other insurance policies
currently in effect that insure the business, operations or employees of the
Company or any Subsidiary or affect or relate to the ownership, use or
operation of any of the Assets and Properties of the Company or any
Subsidiary and that (i) have been issued to the Company or any Subsidiary or
(ii) have been issued to any Person (other than the Company or any
Subsidiary) for the benefit of the Company or any Subsidiary. The insurance
coverage provided by any of the policies described in clause (i) above will
not terminate or lapse by reason of the transactions contemplated by this
Agreement. Each policy listed in SECTION 2.21 OF THE DISCLOSURE SCHEDULE is
valid and binding and in full force and effect, no premiums due thereunder
have not been paid and neither the Company, any Subsidiary nor the Person to
whom such policy has been issued has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder. The
insurance policies listed in SECTION 2.21 OF THE DISCLOSURE SCHEDULE are
placed with insurers that are, to the Knowledge of Love, financially sound
and reputable and, in light of the respective business, operations and Assets
and Properties of the Company and the Subsidiaries, are in amounts and have
coverages that are reasonable and customary for Persons engaged in such
businesses and operations and having such Assets and Properties. Neither the
Company, any Subsidiary nor the Person to whom such policy has been issued
has received notice that any insurer under any policy referred to in this
Section is denying liability with respect to a claim thereunder or defending
under a reservation of rights clause.
2.22 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION
2.19(a)(vii) OR SECTION 2.22(a) OF THE DISCLOSURE SCHEDULE, (i) there are no
intercompany Liabilities between the Company or any Subsidiary, on one part,
and Love, any officer, director, Affiliate (other than the Company or any
Subsidiary) or Associate of Love or any Associate of any such officer,
director or Affiliate, on another part; (ii) Love, nor such officer,
director, Affiliate or Associate provides or causes to be provided any
assets, services or facilities to the Company or any Subsidiary, (iii)
neither the Company nor any Subsidiary provides or causes to be provided any
assets, services or facilities to Love or any such officer, director,
Affiliate or Associate and (iv) neither the Company nor any Subsidiary
beneficially owns, directly or indirectly, any Investment Assets issued by
Love or any such officer, director, Affiliate or Associate. Except as
disclosed in SECTION 2.22(b) OF THE DISCLOSURE SCHEDULE, each of the
Liabilities and transactions listed in SECTION 2.22(a) OF THE DISCLOSURE
SCHEDULE was incurred or engaged in, as the case may be, on an arm's-length
basis. Except as disclosed in SECTION 2.22(c) OF THE DISCLOSURE SCHEDULE,
since the Audited Financial Statement Date, all settlements of intercompany
Liabilities between the Company or any Subsidiary, on one part, and Love or
any such officer, director, Affiliate or Associate, on another part, have
been made, and all allocations of intercompany expenses have been applied, in
the ordinary course of business consistent with past practice.
2.23 EMPLOYEES; LABOR RELATIONS.
(a) SECTION 2.23 OF THE DISCLOSURE SCHEDULE contains a list of the
name of each officer and employee of the Company and the Subsidiaries at the
date hereof, together with each such person's position or function, annual base
salary or wages and any incentive or bonus arrangement with respect to such
person in effect on such date. To the Knowledge of Love, the Company has not
received and Love has not received any information that would lead it to believe
that a material number of such person will or may cease to be employees, or
will refuse offers of employment from Purchaser, because of the consummation of
the transactions contemplated by this Agreement.
(b) Except as disclosed in SECTION 2.23 OF THE DISCLOSURE SCHEDULE,
(i) no employee of the Company or any Subsidiary is presently a member of a
collective bargaining unit and, to the Knowledge of Love, there are no
threatened or contemplated attempts to organize for collective bargaining
purposes any of the employees of the Company or any Subsidiary, and (ii) no
unfair labor practice complaint or sex, age, race or other discrimination claim
has been brought during the last five (5) years against the Company or any of
the Subsidiaries before the National Labor Relations Board, the
Equal Employment Opportunity Commission or any other Governmental or
Regulatory Authority. Since _____________, there has been no work stoppage,
strike or other concerted action by employees of the Company or any
Subsidiary. During that period, the Company and the Subsidiaries have
complied in all material respects with all applicable Laws relating to the
employment of labor, including those relating to wages, hours and collective
bargaining. Except as disclosed in SECTION 2.23 OF THE DISCLOSURE SCHEDULE,
no loan is outstanding between the Company or any Subsidiary and any employee.
2.24 ENVIRONMENTAL MATTERS. Each of the Company and the Subsidiaries
has obtained all Licenses which are required under applicable Environmental Laws
in connection with the conduct of the business or operations of the Company or
such Subsidiary. Each of such Licenses is in full force and effect and each of
the Company and the Subsidiaries is in compliance in all material respects with
the terms and conditions of all such Licenses and with any applicable
Environmental Law. In addition, except as set forth in SECTION 2.24 OF THE
DISCLOSURE SCHEDULE (with paragraph references corresponding to those set forth
below):
(a) No Order has been issued, no Environmental Claim has been filed,
no penalty has been assessed and no investigation or review is pending or, to
the Knowledge of Love, threatened by any Governmental or Regulatory Authority
with respect to any alleged failure by the Company or any Subsidiary to have any
License required under applicable Environmental Laws in connection with the
conduct of the business or operations of the Company or any of the Subsidiaries
or with respect to any generation, treatment, storage, recycling,
transportation, discharge, disposal or Release of any Hazardous Material
generated by the Company or any Subsidiary, and to the Knowledge of Love, there
are no facts or circumstances in existence which could reasonably be expected to
form the basis for any such Order, Environmental Claim, penalty or
investigation.
(b) Neither the Company nor any Subsidiary owns, operates or leases a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, as amended, or under any other comparable state
or local Law; and, without limiting the foregoing, (i) no polychlorinated
biphenyl is or has been present, (ii) no asbestos or asbestos-containing
material is or has been present, (iii) there are no underground storage tanks or
surface impoundments for Hazardous Materials, active or abandoned, and (iv) no
Hazardous Material has been Released in a quantity reportable under, or in
violation of, any Environmental Law or otherwise Released, in the cases of
clauses (i) through (iv), at, on or under any site or facility now or previously
owned, operated or leased by the Company or any Subsidiary.
(c) Neither the Company nor any Subsidiary has transported or
arranged for the transportation of any Hazardous Material to any location that
is (i) listed on the NPL under CERCLA, (ii) listed for possible inclusion on the
NPL by the Environmental Protection Agency in CERCLIS or on any similar state or
local list or (iii) the subject of enforcement actions by federal, state or
local Governmental or Regulatory Authorities that may lead to Environmental
Claims against the Company or any Subsidiary.
(d) No Hazardous Material generated by the Company or any Subsidiary
has been recycled, treated, stored, disposed of or Released by the Company or
any Subsidiary at any location.
(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any Subsidiary and, to
the Knowledge of Love, no site or facility now or previously owned, operated or
leased by the Company or any Subsidiary is listed or proposed for listing on the
NPL, CERCLIS or any similar state or local list of sites requiring investigation
or clean-up.
(f) No Liens have arisen under or pursuant to any Environmental Law
on any site or facility owned, operated or leased by the Company or any
Subsidiary, and no federal, state or local
Governmental or Regulatory Authority action has been taken or, to the Knowledge
of Love, is in process that could subject any such site or facility to such
Liens, and neither the Company nor any Subsidiary would be required to place
any notice or restriction relating to the presence of Hazardous Materials at
any site or facility owned by it in any deed to the real property on which such
site or facility is located.
(g) Except as disclosed in SECTION 2.24(g) OF THE DISCLOSURE
SCHEDULE, there have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, or that are in the possession of,
Love, the Company or any Subsidiary in relation to any site or facility now or
previously owned, operated or leased by the Company or any Subsidiary which have
not been delivered to Purchaser prior to the execution of this Agreement.
2.25 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 2.25(a) OF THE
DISCLOSURE SCHEDULE lists the five (5) largest customers of the Company and the
Subsidiaries, on the basis of revenues for goods sold or services provided for
the most recently-completed fiscal year. SECTION 2.25(b) OF THE DISCLOSURE
SCHEDULE lists the five (5) largest suppliers of the Company and the
Subsidiaries, on the basis of cost of goods or services purchased for the most
recently-completed fiscal year. Except as disclosed in SECTION 2.25(c) OF THE
DISCLOSURE SCHEDULE, no such customer or supplier has ceased or materially
reduced its purchases from, use of the services of, sales to or provision of
services to the Company and the Subsidiaries since the Audited Financial
Statement Date, or to the Knowledge of Love, has threatened to cease or
materially reduce such purchases, use, sales or provision of services after the
date hereof. Except as disclosed in SECTION 2.25(d) OF THE DISCLOSURE SCHEDULE,
to the Knowledge of Love, no such customer or supplier is threatened with
bankruptcy or insolvency.
2.26 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS. SECTION 2.26 OF
THE DISCLOSURE SCHEDULE sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company or any Subsidiary has an account or safe
deposit box or maintains a banking, custodial, trading or other similar
relationship; (b) a true and complete list and description of each such account,
box and relationship, indicating in each case the account number and the names
of the respective officers, employees, agents or other similar representatives
of the Company or any Subsidiary having signatory power with respect thereto;
and (c) a list of each Investment Asset, the name of the record and beneficial
owner thereof, the location of the certificates, if any, therefor, the maturity
date, if any, and any stock or bond powers or other authority for transfer
granted with respect thereto.
2.27 NO POWERS OF ATTORNEY. Except as set forth in SECTION 2.27 OF
THE DISCLOSURE SCHEDULE, neither the Company nor any Subsidiary has any powers
of attorney or comparable delegations of authority outstanding.
2.28 ACCOUNTS RECEIVABLE. Except as set forth in SECTION 2.28 OF THE
DISCLOSURE SCHEDULE, the accounts and notes receivable of the Company and the
Subsidiaries reflected on the balance sheet included in the Unaudited Financial
Statements, and all accounts and notes receivable arising subsequent to the
Unaudited Financial Statement Date, (i) arose from BONA FIDE sales transactions
in the ordinary course of business and are payable on ordinary trade terms, (ii)
are legal, valid and binding obligations of the respective debtors enforceable
in accordance with their terms, (iii) are not subject to any valid set-off or
counterclaim, (iv) do not represent obligations for goods sold on consignment,
on approval or on a sale-or-return basis or subject to any other repurchase or
return arrangement and (v) are not the subject of any Actions or Proceedings
brought by or on behalf of the Company or any Subsidiary. SECTION 2.28 OF THE
DISCLOSURE SCHEDULE sets forth a description of any security arrangements and
collateral securing the repayment or other satisfaction of receivables of the
Company and the Subsidiaries. To the Knowledge of Love, all steps necessary to
render all such security arrangements legal, valid, binding and enforceable, and
to give and maintain for the Company or a
Subsidiary, as the case may be, a perfected security interest in the related
collateral, have been taken.
2.29 BROKERS. Except for the HAI Financial agreement, whose
obligation is to be assumed by Love as to this transaction, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by Love directly with Purchaser without the intervention of any
Person on behalf of Love in such manner as to give rise to any valid claim by
any Person against Purchaser, the Company or any Subsidiary for a finder's fee,
brokerage commission or similar payment.
2.30 DISCLOSURE. All material facts relating to the Business or
Condition of the Company have been disclosed to Purchaser in or in connection
with this Agreement. No representation or warranty contained in this Agreement,
and no statement contained in the Disclosure Schedule or in any certificate,
list or other writing furnished to Purchaser pursuant to any provision of this
Agreement (including the Financial Statements), contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading.
2.31 INCORPORATION BY REFERENCE. Love hereby incorporates by
reference all representations and warranties of the Company made in the
Investment Agreement as if set forth in this Agreement in full and made by Love
as of the date hereof and as of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.01 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware.
Purchaser has full corporate power and authority to execute and deliver this
Agreement and the Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
3.02 AUTHORITY. The execution and delivery by Purchaser of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Purchaser, no other
corporate action on the part of Purchaser or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes, and upon the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, such Operative Agreements will constitute,
legal, valid and binding obligations of Purchaser enforceable against Purchaser
in accordance with their terms.
3.03 NO CONFLICTS. The execution and delivery by Purchaser of this
Agreement do not, and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or by-laws
(or other comparable corporate charter document) of Purchaser;
(b) subject to obtaining the consents, approvals and actions, making
the filings and
giving the notices disclosed in SCHEDULE 3.04 hereto, conflict with or result
in a violation or breach of any term or provision of any Law or Order
applicable to Purchaser or any of its Assets and Properties; or
(c) except as disclosed in SCHEDULE 3.03 hereto, (i) conflict with or
result in a violation or breach of, (ii) constitute (with or without notice or
lapse of time or both) a default under, (iii) require Purchaser to obtain any
consent, approval or action of, make any filing with or give any notice to any
Person as a result or under the terms of, (iv) result in or give to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (vi) result in the creation or imposition of any Lien upon Purchaser or any
of its Assets or Properties under, any Contract or License to which Purchaser is
a party or by which any of its Assets and Properties is bound.
3.04 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in
SCHEDULE 3.04 hereto, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Purchaser is required
in connection with the execution, delivery and performance of this Agreement or
the Operative Agreements to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
3.05 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements.
3.06 PURCHASE FOR INVESTMENT. The Shares will be acquired by
Purchaser (or, if applicable, its assignee pursuant to SECTION 13.10(b)(i)) for
its own account for the purpose of investment, it being understood that the
right to dispose of such Shares shall be entirely within the discretion of
Purchaser (or such assignee, as the case may be). Purchaser (or such assignee,
as the case may be) will refrain from transferring or otherwise disposing of any
of the Shares, or any interest therein, in such manner as to cause Seller to be
in violation of the registration requirements of the Securities Act of 1933, as
amended, or applicable state securities or blue sky laws.
3.07 ACCREDITED INVESTOR. At the Closing, Purchaser will be an
"accredited investor" within the meaning of SEC Rule 501 of Regulation D, as
presently in effect.
3.08 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
Purchaser in reliance upon Purchaser's representations to the Company, which by
Purchaser's execution of this Agreement hereby confirms that the Shares will be
acquired for investment for Purchaser's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, Purchaser further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Shares.
3.09 INVESTMENT EXPERIENCE. Purchaser is able to fend for itself, can
bear the economic risk of its investment and has such knowledge and experience
in financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Shares.
3.10 PDT SHARES. The PDT Shares to be delivered by Purchaser at the
Closing will be duly authorized, validly issued and outstanding, fully paid and
non-assessable. All necessary
corporate action on the part of PDT has been taken in order to issue the PDT
Shares.
ARTICLE IV
COVENANTS OF SELLERS
The Company and Love jointly and severally, and Sellers severally,
where specifically indicated, covenant and agree with Purchaser that, at all
times from and after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified herein, the Company and Love will comply with
all covenants and provisions of this ARTICLE IV, except to the extent Purchaser
may otherwise consent in writing.
4.01 REGULATORY AND OTHER APPROVALS. Love will, and will cause the
Company and the Subsidiaries to, (a) take all commercially reasonable steps
necessary or desirable, and proceed diligently and in good faith and use all
commercially reasonable efforts, as promptly as practicable to obtain all
consents, approvals or actions of, to make all filings with and to give all
notices to Governmental or Regulatory Authorities or any other Person required
of Love, the Company or any Subsidiary to consummate the transactions
contemplated hereby and by the Operative Agreements, including those described
in SECTIONS 2.06 AND 2.07 OF THE DISCLOSURE SCHEDULE, (b) provide such other
information and communications to such Governmental or Regulatory Authorities or
other Persons as Purchaser or such Governmental or Regulatory Authorities or
other Persons may reasonably request in connection therewith and (c) cooperate
with Purchaser as promptly as practicable in obtaining all consents, approvals
or actions of, making all filings with and giving all notices to Governmental or
Regulatory Authorities or other Persons required of Purchaser to consummate the
transactions contemplated hereby and by the Operative Agreements. Love will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
4.02 HSR FILINGS. In addition to and not in limitation of Love's
covenants contained in SECTION 4.01, if required under applicable Law, the
Company and Love will (a) take promptly all actions necessary to make the
filings required of Love or his Affiliates under the HSR Act, (b) comply at the
earliest practicable date with any request for additional information received
by the Company, Love or their Affiliates from the Federal Trade Commission or
the Antitrust Division of the Department of Justice pursuant to the HSR Act and
(c) cooperate with Purchaser in connection with Purchaser's filing under the HSR
Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by either
the Federal Trade Commission or the Antitrust Division of the Department of
Justice or state attorneys general.
4.03 INVESTIGATION BY PURCHASER. The Company will, and will cause the
Subsidiaries to, (a) provide Purchaser and its respective officers, directors,
employees, agents, counsel, accountants, financial advisors, consultants and
other representatives (together "REPRESENTATIVES") with full access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of the Company and the Subsidiaries and their
Assets and Properties and Books and Records, and (b) furnish Purchaser and such
other Persons with all such information and data (including copies of Contracts,
Benefit Plans and other Books and Records) concerning the business and
operations of the Company and the Subsidiaries as Purchaser or any of such other
Persons may reasonably request in connection with such investigation.
4.04 NO SOLICITATIONS. Love will not take, nor will he permit the
Company, the Subsidiaries or any Affiliate of Love (or authorize or permit any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Love, the Company, the Subsidiaries or
any such Affiliate) to take, directly or indirectly, any action to solicit,
encourage, receive, negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the Company or any
Subsidiary or permitting access to the Assets and Properties and Books and
Records of the Company or any Subsidiary) any offer or inquiry from any Person
concerning an Acquisition Proposal. If Love, the Company, any Subsidiary or any
such Affiliate (or any such Person acting for or on their behalf) receives from
any Person any offer, inquiry or informational request referred to above, Love
will promptly advise such Person, by written notice, of the terms of this
SECTION 4.04 and will promptly, orally and in writing, advise Purchaser of such
offer, inquiry or request and deliver a copy of such notice to Purchaser.
4.05 CONDUCT OF BUSINESS. Love will cause the Company and the
Subsidiaries to conduct business only in the ordinary course consistent with
past practice. Without limiting the generality of the foregoing, Love will:
(a) cause the Company and the Subsidiaries to use commercially
reasonable efforts to (i) preserve intact the present business organization and
reputation of the Company and the Subsidiaries, (ii) take no action (subject to
dismissals and retirements in the ordinary course of business consistent with
past practice) to cause the services of the present officers, employees and
consultants of the Company and the Subsidiaries not to be available to the
Company after the Closing, (iii) maintain the Assets and Properties of the
Company and the Subsidiaries in good working order and condition, ordinary wear
and tear excepted, (iv) maintain the good will of customers, suppliers, lenders
and other Persons to whom the Company or any Subsidiary sells goods or provides
services or with whom the Company or any Subsidiary otherwise has significant
business relationships and (v) continue all current sales, marketing and
promotional activities relating to the business and operations of the Company
and the Subsidiaries;
(b) except to the extent required by applicable Law, (i) cause the
Books and Records to be maintained in the usual, regular and ordinary manner,
(ii) not permit any material change in (A) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or policy of
the Company or any Subsidiary, or (B) any method of calculating any bad debt,
contingency or other reserve of the Company or any Subsidiary for accounting,
financial reporting or Tax purposes and (iii) not permit any change in the
fiscal year of the Company or any Subsidiary;
(c) (i) use, and will cause the Company and the Subsidiaries to use,
commercially reasonable efforts to maintain in full force and effect until the
Closing substantially the same levels of coverage as the insurance afforded
under the Contracts listed in SECTION 2.21 OF THE DISCLOSURE SCHEDULE, (ii) to
the extent requested by Purchaser prior to the Closing Date, use all
commercially reasonable efforts to cause such insurance coverage held by any
Person (other than the Company or any Subsidiary) for the benefit of the Company
or any Subsidiary to continue to be provided at the expense of the Company and
the Subsidiaries for at least 90 days after the Closing on substantially the
same terms and conditions as provided on the date of this Agreement and (iii)
cause any and all benefits under such Contracts paid or payable (whether before
or after the date of this Agreement) with respect to the business, operations,
employees or Assets and Properties of the Company and the Subsidiaries to be
paid to the Company and the Subsidiaries; and
(d) cause the Company and the Subsidiaries to comply, in all material
respects, with all Laws and Orders applicable to the business and operations of
the Company and the Subsidiaries, and promptly following receipt thereof to give
Purchaser copies of any notice received from any
Governmental or Regulatory Authority or other Person alleging any violation
of any such Law or Order.
4.06 EMPLOYEE MATTERS. Except as may be required by Law, Love will
refrain, and will cause the Company and the Subsidiaries to refrain, from
directly or indirectly:
(a) making any representation or promise, oral or written, to any
officer, employee or consultant of the Company or any Subsidiary concerning any
Benefit Plan, except for statements as to the rights or accrued benefits of any
officer, employee or consultant under the terms of any Benefit Plan;
(b) materially increasing the annual level of compensation of any
employee, and not increasing, except in amounts in keeping with past practices,
the annual level of compensation of any person whose compensation from the
Company in the last preceding fiscal year exceeded $100,000, and not granting
any unusual or extraordinary bonuses, benefits or other forms of direct or
indirect compensation to any employee, officer, director or consultant, except
in amounts in keeping with past practices by formulas or otherwise.
(c) adopting, entering into or becoming bound by any Benefit Plan,
employment-related Contract or collective bargaining agreement, or amending,
modifying or terminating (partially or completely) any Benefit Plan, employment-
related Contract or collective bargaining agreement, except to the extent
required by applicable Law and, in the event compliance with legal requirements
presents options, only to the extent that the option which the Company or
Subsidiary reasonably believes to be the least costly is chosen; or
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan,
employment-related Contract or other employee compensation arrangement or (ii)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plan, employment-related Contract or other employee compensation
arrangement.
Love will cause the Company and the Subsidiaries to administer each
Benefit Plan, or cause the same to be so administered, in all material respects
in accordance with the applicable provisions of the Code, ERISA and all other
applicable Laws. Love will promptly notify Purchaser in writing of each receipt
by Love, the Company or any Subsidiary (and furnish Purchaser with copies) of
any notice of investigation or administrative proceeding by the IRS, Department
of Labor, PBGC or other Person involving any Benefit Plan.
4.07 CERTAIN RESTRICTIONS. Love will cause the Company and the
Subsidiaries to refrain from:
(a) amending their certificates or articles of incorporation or by-
laws (or other comparable corporate charter documents) or taking any action with
respect to any such amendment or any recapitalization, reorganization,
liquidation or dissolution of any such corporation;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any Option with respect to the Company or any
Subsidiary, or modifying or amending any right of any holder of outstanding
shares of capital stock of or Option with respect to the Company or any
Subsidiary, other than the issuance of options under the Company's option plan;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of the Company or any Subsidiary
not wholly owned by the Company, or directly or indirectly redeeming, purchasing
or otherwise acquiring any capital stock of or any Option with respect to the
Company or any Subsidiary not wholly owned by the Company;
(d) acquiring or disposing of, or incurring any Lien (other than a
Permitted Lien) on, any Assets and Properties, other than in the ordinary course
of business consistent with past practice;
(e) (i) except in the ordinary course of business, consistent with
past practice, entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to (A)
any Contract that would, if in existence on the date of this Agreement, be
required to be disclosed in the Disclosure Schedule pursuant to SECTION 2.19(a)
or (B) any material License or (ii) granting any irrevocable powers of attorney;
(f) violating, breaching or defaulting under in any material respect,
or taking or failing to take any action that (with or without notice or lapse of
time or both) would constitute a material violation or breach of, or default
under, any term or provision of any material License held or used by the
Company or any Subsidiary or any material Contract to which the Company or any
Subsidiary is a party or by which any of their respective Assets and Properties
is bound;
(g) (i) incurring Indebtedness in an aggregate principal amount
exceeding $100,000 (net of any amounts of Indebtedness discharged during such
period), except as reasonably necessary for the ordinary operation of the
Company's or its Subsidiaries' business in a manner, and in amounts, consistent
with historical practice, or (ii) voluntarily purchasing, canceling, prepaying
or otherwise providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right of the Company or
any Subsidiary under, any Indebtedness of or owing to the Company or any
Subsidiary;
(h) engaging with any Person in any merger or other business
combination;
(i) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an aggregate amount
exceeding $50,000, without Purchaser's consent which shall not be unreasonably
withheld;
(j) making any change in the lines of business in which they
participate or are engaged;
(k) writing off or writing down any of their Assets and Properties
outside the ordinary course of business consistent with past practice; or
(l) entering into any Contract to do or engage in any of the
foregoing.
4.08 AFFILIATE TRANSACTIONS. Except as set forth in SECTION 4.08 OF
THE DISCLOSURE SCHEDULE, immediately prior to the Closing, all Indebtedness and
other amounts owing under Contracts between Love, any officer, director,
Affiliate (other than the Company or any Subsidiary) or Associate of Love or any
Associate of any such officer, director or Affiliate, on one part, and the
Company or any of the Subsidiaries, on another part, will be paid in full, and
Love will terminate and will cause any such officer, director, Affiliate or
Associate to terminate each Contract with the Company or any Subsidiary, without
expense or liability to the Company. Prior to the Closing, neither the Company
nor any Subsidiary will enter into any Contract or amend or modify any existing
Contract, and will not engage in any transaction outside the ordinary course of
business consistent with past practice or not on an arm's-length basis (other
than pursuant to Contracts disclosed pursuant to SECTION 2.19(a)(vii) OF THE
DISCLOSURE SCHEDULE), with Love or any such officer, director, Affiliate or
Associate.
4.09 BOOKS AND RECORDS. On the Closing Date, Love will deliver or
make available to Purchaser at the offices of the Company and the Subsidiaries
all of the Books and Records, and if at any
time after the Closing Love discovers in its possession or under its control
any other Books and Records, it will forthwith deliver such Books and Records
to Purchaser. Love shall also cooperate with Purchaser in including
financial statements of the Company and its Subsidiaries for the fiscal years
ending in ________________ via the Purchaser's parent corporation's filings
with the Securities and Exchange Commission.
4.10 NONCOMPETITION.
(a) Each Seller who owns at least three percent (3%) of the
outstanding capital stock of the Company will, for a period of five (5) years
from the Closing Date, refrain from, either alone or in conjunction with any
other Person, or directly or indirectly through its present or future
Affiliates:
(i) employing, engaging or seeking to employ or engage any Person who
within the prior twenty-four (24) months had been an officer or employee of
the Company or a Subsidiary, unless such officer or employee (A) resigns
voluntarily (without any solicitation from any Seller or any of their
Affiliates) or (B) is terminated by the Company or any Subsidiary or
Purchaser other than for cause after the Closing Date;
(ii) causing or attempting to cause (A) any client, customer or
supplier of the Company or any Subsidiary to terminate or materially reduce
its business with the Company and the Subsidiaries or (B) any officer,
employee or consultant of the Company or any Subsidiary to resign or sever
a relationship with the Company or a Subsidiary;
(iii) disclosing (unless compelled by judicial or administrative
process) or using any confidential or secret information relating to the
Company or any of the Subsidiaries or any of their respective clients,
customers or suppliers; or
(iv) participating or engaging in (other than through the ownership of
five percent (5%) or less of any class of securities registered under the
Securities Exchange Act of 1934, as amended), or otherwise lending
assistance (financial or otherwise) to any Person participating or engaged
in, any of the lines of business in which the Company or any of the
Subsidiaries is participating or engaged on the Closing Date in any
jurisdiction.
(b) The parties hereto recognize that the Laws and public policies of
the various states of the United States and foreign jurisdictions may differ as
to the validity and enforceability of covenants similar to those set forth in
this Section. It is the intention of the parties that the provisions of this
Section be enforced to the fullest extent permissible under the Laws and
policies of each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such Laws or policies) of
any provisions of this Section shall not render unenforceable, or impair, the
remainder of the provisions of this Section. Accordingly, if any provision of
this Section shall be determined to be invalid or unenforceable, such invalidity
or unenforceability shall be deemed to apply only with respect to the operation
of such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.
(c) The parties hereto acknowledge and agree that any remedy at Law
for any breach of the provisions of this Section would be inadequate, and each
Seller hereby consents to the granting by any court of an injunction or other
equitable relief, without the necessity of actual monetary loss being proved, in
order that the breach or threatened breach of such provisions may be effectively
restrained.
4.11 NOTICE AND CURE. Love will notify Purchaser in writing (where
appropriate,
through updates to the Disclosure Schedule) of, and contemporaneously will
provide Purchaser with true and complete copies of any and all information or
documents relating to, and will use all commercially reasonable efforts to
cure before the Closing, any event, transaction or circumstance, as soon as
practicable after it becomes Known to Love, occurring after the date of this
Agreement that causes or will cause any covenant or agreement of any Seller
under this Agreement to be breached or that renders or will render untrue any
representation or warranty of any Seller contained in this Agreement as if
the same were made on or as of the date of such event, transaction or
circumstance. Love also will notify Purchaser in writing (where appropriate,
through updates to the Disclosure Schedule) of, and will use all commercially
reasonable efforts to cure, before the Closing, any violation or breach, as
soon as practicable after it becomes Known to Love, of any representation,
warranty, covenant or agreement made by any Seller in this Agreement, whether
occurring or arising before, on or after the date of this Agreement. No
notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein or shall in any way limit Purchaser's right to seek indemnity under
ARTICLE XI.
4.12 FULFILLMENT OF CONDITIONS. Love will each execute and deliver at
the Closing each Operative Agreement that such Seller is required hereby to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Purchaser contained in
this Agreement and will not, and will not permit the Company or any Subsidiary
to, take or fail to take any action that could reasonably be expected to result
in the nonfulfillment of any such condition.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Sellers that, at all times from
and after the date hereof until the Closing, Purchaser will comply with all
covenants and provisions of this ARTICLE V, except to the extent any Seller may
otherwise consent in writing.
5.01 REGULATORY AND OTHER APPROVALS. Purchaser will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Purchaser to consummate the transactions contemplated
hereby and by the Operative Agreements, including those described in SECTIONS
3.03 AND 3.04 OF THE DISCLOSURE SCHEDULE hereto, (b) provide such other
information and communications to such Governmental or Regulatory Authorities or
other Persons as Sellers or such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) cooperate with
Sellers, the Company and the Subsidiaries as promptly as practicable in
obtaining all consents, approvals or actions of, making all filings with and
giving all notices to Governmental or Regulatory Authorities or other Persons
required of Sellers, the Company or any Subsidiary to consummate the
transactions contemplated hereby and by the Operative Agreements. Purchaser
will provide prompt notification to Sellers when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Sellers of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
5.02 HSR FILINGS. In addition to and without limiting Purchaser's
covenants
contained in SECTION 5.01, if required under applicable Law, Purchaser will
(a) take promptly all actions necessary to make the filings required of
Purchaser or its Affiliates under the HSR Act, (b) comply at the earliest
practicable date with any request for additional information received by
Purchaser or its Affiliates from the Federal Trade Commission or the
Antitrust Division of the Department of Justice pursuant to the HSR Act and
(c) cooperate with Sellers in connection with Sellers' filing under the HSR
Act and in connection with resolving any investigation or other regulatory
inquiry concerning the transactions contemplated by this Agreement commenced
by either the Federal Trade Commission or the Antitrust Division of the
Department of Justice or state attorneys general.
5.03 NOTICE AND CURE. Purchaser will notify Sellers in writing of,
and contemporaneously will provide Sellers with true and complete copies of any
and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes known to Purchaser,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Purchaser under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Purchaser
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. Purchaser also will notify Sellers in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach, as soon as practicable after it becomes known
to Purchaser, of any representation, warranty, covenant or agreement made by
Purchaser in this Agreement, whether occurring or arising before, on or after
the date of this Agreement. No notice given pursuant to this Section shall have
any effect on the representations, warranties, covenants or agreements contained
in this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit Seller's right to seek indemnity
under ARTICLE XI.
5.04 FULFILLMENT OF CONDITIONS. Purchaser will execute and deliver at
the Closing each Operative Agreement that Purchaser is hereby required to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Seller contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
5.05 REGISTRATION OF PDT SHARES. Purchaser will cause the resale of
the PDT Shares by the Sellers to be registered with the Securities and Exchange
Commission and listed on the NASDAQ National Market System, or the then-
applicable exchange, prior to the Closing.
5.06 ADVANCE BY PURCHASER TO THE COMPANY. After execution of this
Agreement, Purchaser agrees to advance to the Company sufficient funds for its
working capital needs for the period preceding the Closing. The advance will be
reflected in a Promissory Note at the Purchaser's bank borrowing rate, plus one
percent (1%). If this transaction does not close through the fault of the
Sellers, the Promissory Note will be due and payable within ninety (90) days of
the termination of this Agreement. If this transaction does not close through
the fault of the Purchaser, the Promissory Note will be due and payable one
hundred eighty (180) days of the date of Closing.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Shares are
subject to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Purchaser
in its sole discretion):
6.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Company and Sellers in this Agreement (other than those
made as of a specified date earlier than the Closing Date) shall be true and
correct in all material respects on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall have been true and correct in all material respects on and as of such
earlier date.
6.02 PERFORMANCE; NO DEFAULT. The Company and Sellers shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
the Company and any Seller at or before the Closing and no Default shall have
occurred and be continuing.
6.03 OFFICERS' CERTIFICATES. Each Seller shall have delivered to
Purchaser a certificate, dated the Closing Date (and executed by the Chairman of
the Board or the President of any corporate Seller and by all trustees of any
trust with respect to any trustee Seller), substantially in the form and to the
effect of EXHIBIT B hereto.
6.04 ORDERS AND LAWS. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Purchaser, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding or any other action in, before or by any Governmental
or Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Purchaser, the Company, any Subsidiary or the transactions
contemplated by this Agreement or any of the Operative Agreements of any such
Law.
6.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Sellers to perform their obligations under
this Agreement and the Operative Agreements and to consummate the transactions
contemplated hereby and thereby (a) shall have been duly obtained, made or
given, (b) shall be in form and substance reasonably satisfactory to Purchaser,
(c) shall not be subject to the satisfaction of any condition that has not been
satisfied or waived and (d) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements, including under the
HSR Act, if applicable, shall have occurred.
6.06 THIRD PARTY CONSENTS. The consents (or in lieu thereof waivers)
listed in SECTION 6.06 OF THE DISCLOSURE SCHEDULE and all other consents (or in
lieu thereof waivers) to the performance by Purchaser and Sellers of their
obligations under this Agreement and the Operative Agreements or to the
consummation of the transactions contemplated hereby and thereby as are required
under any Contract to which Purchaser, any Seller, the Company or any Subsidiary
is a party or by which any of their respective Assets and Properties are bound
(a) shall have been obtained, (b) shall be in form and substance reasonably
satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect, except where the failure to obtain any such consent (or in lieu
thereof waiver) could not reasonably be expected, individually or in the
aggregate with other such failures, to materially adversely affect Purchaser or
the Business or Condition of the Company or otherwise result in a material
diminution of the benefits of the transactions contemplated by this Agreement
and the Operative Agreements to Purchaser.
6.07 OPINION OF COUNSEL. Purchaser shall have received the opinion of
Stradling, Yocca, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, counsel to Sellers and the Company, dated
the Closing Date, substantially in the form and to the effect of EXHIBIT C
hereto, and to such further effect as Purchaser may reasonably request.
6.08 GOOD STANDING CERTIFICATES. Sellers shall have delivered to
Purchaser (a) copies of the certificates or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto, of
the Company and each Subsidiary certified by the Secretary of State or other
appropriate official of the jurisdiction of incorporation, (b) certificates from
the Secretary of State or other appropriate official of the respective
jurisdictions of incorporation to the effect that each of the Company and the
Subsidiaries is in good standing or subsisting in such jurisdiction, listing all
charter documents of the Company and such Subsidiaries on file and attesting to
its payment of all franchise or similar Taxes, and (c) a certificate from the
Secretary of State or other appropriate official in each jurisdiction in which
the Company and the Subsidiaries are qualified or admitted to do business to the
effect that the Company or the applicable Subsidiary is duly qualified or
admitted and in good standing in such jurisdiction.
6.09 SPECIAL PROCEDURES REPORT. Purchaser shall have received the
Audited Financial Statements of the Company as of ________________ and for the
year then ended, together with the unqualified opinion of ____________________
thereon (but with explanatory language with respect to the Company's ability to
continue as a going concern), and the Company shall have received, and shall
deliver to the Purchaser a copy of, a special procedures report, dated the
Closing Date, of ______________________________, substantially in the form and
to the effect of EXHIBIT D hereto.
6.10 RESIGNATIONS OF DIRECTORS AND OFFICERS. Such members of the
boards of directors and such officers of the Company and the Subsidiaries as are
designated in a written notice delivered at least two (2) Business Days prior to
the Closing Date by Purchaser to Seller shall have tendered, effective at the
Closing, their resignations as such directors and officers.
6.11 ENVIRONMENTAL SURVEY. Purchaser shall have received an
environmental survey and assessment in form and substance reasonably
satisfactory to Purchaser prepared by a firm of licensed engineers (familiar
with the identification of Hazardous Materials) reasonably satisfactory to
Purchaser, such environmental survey and assessment to be based upon physical
on-site inspections by such firm of each of the existing sites and facilities
owned, operated and leased by the Company and the Subsidiaries, as well as a
historical review of the uses of such sites and facilities and of the business
and operations of the Company and the Subsidiaries (including any former
Subsidiaries or divisions of the Company or any Subsidiary which have been
disposed of prior to the date of such survey and assessment and with respect to
which the Company or any Subsidiary may have retained liability for
environmental matters).
6.12 PROCEEDINGS. All proceedings to be taken on the part of Sellers
in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of
all such documents and other evidences as Purchaser may reasonably request in
order to establish the consummation of such transactions and the taking of
all proceedings in connection therewith.
6.13 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. Purchaser shall have
received the Employment Agreements and the noncompetition agreements listed in
SECTION 6.13 OF THE DISCLOSURE SCHEDULE in form and content acceptable to
Purchaser, duly signed by the respective parties thereto.
6.14 EQUITY RIGHTS. Purchaser shall have received satisfactory
evidence of the exercise, termination or cancellation of all Options identified
in SECTION 2.04 OF THE DISCLOSURE SCHEDULE.
6.15 RELEASES. Purchaser shall have received satisfactory evidence of
the termination of all Contracts identified in SECTION 4.09 OF THE DISCLOSURE
SCHEDULE, including releases in favor of the Company and its Subsidiaries in
form and substance and from such Person as is satisfactory to Purchaser.
6.16 COMPLETION OF DUE DILIGENCE; FINANCIAL STATEMENTS. Purchaser
shall have completed its due diligence investigation of the Company, the
Business or Condition of the Company, the Audited Financial Statements and
Sellers to its satisfaction.
6.17 JOINDER. All holders of Options relating to the Company's
securities shall have executed and delivered such documents joining in and
becoming a party to this Agreement as Purchaser shall reasonably request.
6.18 AUDITED FINANCIAL STATEMENTS. Purchaser shall have received a
satisfactory undertaking of ______________________ to the effect that they shall
provide manually signed Audited Financial Statements of the Company for the
years ended _________________________________ when reasonably requested by
Purchaser.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder to sell the Shares are subject to
the fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Sellers in their sole
discretion):
7.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Purchaser in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall have
been true and correct in all material respects on and as of such earlier date.
7.02 PERFORMANCE. Purchaser shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 OFFICERS' CERTIFICATES. Purchaser shall have delivered to Seller
a certificate, dated the Closing Date and executed by the Chairman of the Board,
the President, the Chief Financial Officer or any Vice President of Purchaser,
substantially in the form and to the effect of EXHIBIT E hereto, and a
certificate, dated the Closing Date and executed by the Secretary or any
Assistant Secretary of
Purchaser, substantially in the form and to the effect of EXHIBIT F hereto.
7.04 ORDERS AND LAWS. There shall not be in effect on the Closing
Date any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
7.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Sellers and Purchaser to perform their obligations under
this Agreement and the Operative Agreements to which they are a party and to
consummate the transactions contemplated hereby and thereby (a) shall have been
duly obtained, made or given, (b) shall be in form and substance reasonably
satisfactory to the Agent, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect, and all terminations or expirations of waiting periods imposed by
any Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements,
including, if applicable, under the HSR Act, shall have occurred.
7.06 THIRD PARTY CONSENTS. All consents (or in lieu thereof waivers)
to the performance by Sellers of their obligations hereunder and to the
consummation of the transactions contemplated hereby as are required under the
Contracts listed in SECTION 7.06 OF THE DISCLOSURE SCHEDULE (a) shall have been
obtained, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect.
7.07 OPINION OF COUNSEL. Sellers shall have received the opinion of
counsel, Nida & ▇▇▇▇▇▇▇, to Purchaser, dated the Closing Date, substantially in
the form and to the effect of EXHIBIT G hereto.
7.08 PROCEEDINGS. All proceedings to be taken on the part of
Purchaser in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Sellers, and Sellers shall have received copies of all such
documents and other evidences as Sellers may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
7.09 GOOD STANDING CERTIFICATES. Purchaser shall have delivered to
Sellers (a) copies of the certificates or articles of incorporation (or other
comparable corporate charter documents), including all amendments thereto, of
Purchaser certified by the Secretary of State or other appropriate official of
the jurisdiction of incorporation, (b) certificates from the Secretary of State
or other appropriate official of the respective jurisdictions of incorporation
to the effect that Purchaser is in good standing or subsisting in such
jurisdiction, listing all charter documents of Purchaser on file and attesting
to its payment of all franchise or similar Taxes, and (c) a certificate from the
Secretary of State or other appropriate official in each jurisdiction in which
Purchaser is qualified or admitted to do business to the effect that Purchaser
is duly qualified or admitted and in good standing in such jurisdiction.
7.10 EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENTS. The Company
shall have entered into Employment Agreements and Consulting Agreements to the
satisfaction of the Company. Employment Agreements would be required for *****
if they are still employed by the Company at the time that this Agreement is
executed, together with any other managers that Purchaser wishes to retain.
*****Confidential Treatment Requested
The Employment Agreements will provide for customary provisions and shall
include six (6) months' severance for termination without cause, and no
severance if termination is for cause. *****. Any of the foregoing agreements
will be terminable in the event of a breach of the covenants not to compete.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 INDEMNIFICATION. Love jointly and severally indemnifies, defends
and holds harmless Purchaser Indemnified Parties in accordance with Section
10.01.
8.02 CONTROL OF CONTEST. Each party shall have the right, at its own
expense, to control any audit or determination by any authority, initiate any
claim for refund or amended return, and contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed adjustment of
Taxes for any taxable period for which that party (or any of its Affiliates) is
charged with responsibility for filing a Tax Return and paying Taxes under this
Agreement; provided, however, that neither party shall have the right to agree
to any assessment, deficiency, settlement or other adjustment or proposed
adjustment of Taxes that would adversely affect the interests of the other party
without such other party's written consent, which consent shall not be
unreasonably withheld, and provided, further, that in the event that a party not
charged with the responsibility for filing a Tax Return under this Agreement is
paid a refund, such party shall pay such refund to the party so charged within
seven (7) days of receipt of such refund by the first party. Purchaser shall
promptly forward to Sellers all written notifications and other written
communications from any taxing authority received by the Company relating to any
liability for Taxes for any taxable period for which Sellers are charged with
payment responsibility under this Agreement and Purchaser shall execute or cause
to be executed any powers of attorney or other documents reasonably requested by
Sellers to enable Sellers to take any and all necessary actions with respect to
any proceedings for any such period.
8.03 ACCESS TO INFORMATION. Each of Purchaser and Sellers will
provide the other, and Purchaser shall cause the Company to provide Sellers,
with the right, at reasonable times and upon reasonable notice, to have access
to, and to copy and use, any records or information and personnel which may be
relevant in connection with the preparation of any Tax Returns, any audit or
other examination by any authority, or any judicial or administrative
proceedings relating to liability for Taxes. The party requesting assistance
hereunder shall reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this SECTION
8.03 shall be held in strict confidence and shall be used solely in connection
with the reason for which it was requested.
8.04 RETENTION OF RECORDS. For a period of four (4) years from the
Closing Date, Sellers shall not dispose of or destroy any of the business
records and files of Sellers or the Company relating to Taxes in existence on
the Closing Date without first offering to turn over possession thereof to
Purchaser by written notice to Purchaser at least thirty (30) days prior to the
proposed date of such disposition or destruction.
8.05 RESOLUTION OF DISAGREEMENTS AMONG PARTIES. If Sellers and
Purchaser disagree as to the matters governed by this ARTICLE VIII, Sellers and
Purchaser shall promptly consult with each other in an effort to resolve such
dispute. If any such disagreement cannot be resolved within fifteen (15) days,
either party shall assert in writing that such dispute cannot be resolved by
arbitration as set forth in SECTION 10.03(d) hereof.
*****Confidential Treatment Requested
8.06 TAX RETURNS. Without limiting the foregoing, Sellers shall be
fully responsible for the filing of all Tax Returns, including delinquent Tax
Returns with respect to any period ending on or before the Closing Date, and
will pay all fines and penalties due in connection with such Tax Returns.
8.07 PRE-FILING APPROVAL OF TAX RETURNS AND REPORTS. For any period
that includes days on or before the Closing, Tax Returns and reports prepared or
caused to be prepared by Purchaser for the Company or the Subsidiaries, shall be
prepared in accordance with generally accepted tax accounting principles and in
a manner consistent with past tax filing practices of the Company and the
subsidiaries, to the extent not inconsistent with the Code, state and local tax
statutes, and the applicable regulations. Purchaser shall supply copies of the
Tax Returns to Agent within ten (10) days of filing. Any Tax Return or report
which relates to any period that includes days on or before the Closing prepared
or caused to be prepared by Purchaser for Company or the Subsidiaries, shall
also be subject to pre-filing approval by Agent, for and on behalf of Seller.
Unless otherwise agreed to by the parties, Tax Returns and reports subject to
pre-filing approval shall be submitted by Purchaser to Agent at least forty-five
(45) days prior to the due date (including extensions) of the Tax Return or
report, and Seller shall either approve or provide written comment on the Tax
Return or report within fifteen (15) days of receipt of the Tax Return or
report. In the event Sellers shall dispute any determination by the accountants,
Sellers shall notify (through the Agent) Purchaser within a reasonable time not
to exceed 10 days (taking into account the deadline for filing the Tax Return or
report) of such dispute. In such event, such dispute shall be submitted by
Purchaser to an independent certified public accountant of recognized national
standing not performing services for Purchaser, Sellers, the Company or any of
their respective Affiliates. Such accountant's determination shall be final and
binding. In the event the tax liability for the periods on or before the
Closing, as determined by such accountants, are materially different than that
determined by Purchaser's auditors (plus or minus more than five percent), then
the costs and expenses of such accountants shall be borne by Purchaser. In the
event the tax liability for the periods on or before the Closing as determined
by such accountants are not materially different than that determined by
Purchaser's auditors, then the costs and expenses of such accountants shall be
borne by Sellers.
8.08 COMPANY'S FINAL RETURNS. Purchaser files consolidated returns
with its subsidiaries and as of the date of closing, the Company will become
part of Purchaser's consolidated group. The Company and its Subsidiaries will
be required to file returns for the fiscal year ending the day before the
Closing. Notwithstanding the provisions of SECTION 8.06, it is Sellers'
responsibility to prepare such returns and the Company will pay the costs
therefor. The Company will make its personnel reasonably available, after the
Closing, for such return preparation.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
9.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding any right of Purchaser (whether or not exercised)
to investigate the affairs of the Company and the Subsidiaries or any right of
any party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement,
Sellers and Purchaser have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
The representations, warranties, covenants and agreements of Sellers and
Purchaser contained in this Agreement will survive the Closing for two (2)
years.
ARTICLE X
INDEMNIFICATION
10.01 TAX INDEMNIFICATION. Love shall, jointly and severally,
indemnify, defend and hold harmless the Purchaser Indemnified Parties from and
against any and all Losses arising from or incurred as a result of Taxes owed by
the Company (or any Subsidiary) with respect to any taxable period ending on or
prior to the Closing Date in excess of the amount accrued for taxes on the
Company's Audited Financial Statements, provided that the Sellers shall have
received an Indemnity Notice from Purchaser in a timely manner enabling Sellers
to investigate and defend any alleged Tax Losses, or if they so elect, assume
control of the defense of any claim, action or proceeding with respect thereto.
10.02 OTHER INDEMNIFICATION.
(a) Subject to the other Sections of this ARTICLE X and excluding the
indemnity under SECTION 10.01 above, Love shall jointly and severally, and the
remaining Sellers on an individual basis shall severally, indemnify the
Purchaser Indemnified Parties in respect of, and hold each of them harmless from
and against, any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement made by such Seller contained in
this Agreement.
(b) Subject to the other Sections of this ARTICLE X, Purchaser shall
indemnify the Seller Indemnified Parties in respect of, and hold each of them
harmless from and against, any and all Losses suffered, incurred or sustained by
any of them or to which any of them becomes subject, resulting from, arising out
of or relating to any misrepresentation, breach of warranty or nonfulfillment of
or failure to perform any covenant or agreement on the part of Purchaser
contained in this Agreement.
10.03 METHOD OF ASSERTING CLAIMS. All claims for indemnification
by any Indemnified Party under SECTION 10.02 will be asserted and resolved as
follows:
(a) No claims will be made hereunder unless the total amount of such
claims exceeds $100,000 at which time claims in excess of such amount will be
subject to indemnification.
(b) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under SECTION 10.02 is asserted against
or sought to be collected from such Indemnified Party by a Person other than
Sellers, the Company, any Subsidiary, Purchaser or any Affiliate of any Seller
or Purchaser (a "THIRD PARTY CLAIM"), the Indemnified Party shall deliver a
Claim Notice with reasonable promptness to the Indemnifying Party. If the
Indemnified Party fails to provide the Claim Notice with reasonable promptness
after the Indemnified Party receives notice of such Third Party Claim, the
Indemnifying Party will not be obligated to indemnify the Indemnified Party with
respect to such Third Party Claim to the extent that the Indemnifying Party's
ability to defend has been irreparably prejudiced by such failure of the
Indemnified Party. The Indemnifying Party will notify the Indemnified Party as
soon as practicable within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party under SECTION 10.02 and whether
the Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
SECTION 10.03(a), then the Indemnifying Party will have the right to
defend, with counsel reasonably satisfactory to the Indemnified Party, at
the sole cost
and expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnifying Party to a final conclusion or
will be settled at the discretion of the Indemnifying Party (but only
with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages).
The Indemnifying Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; PROVIDED,
HOWEVER, that the Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the first sentence of this clause
(i), file any motion, answer or other pleadings or take any other action
that the Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and PROVIDED FURTHER, that if
requested by the Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnifying Party in contesting any Third Party Claim
that the Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this clause
(i), and except as provided in the preceding sentence, the Indemnified
Party will bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party may
take over the control of the defense or settlement of a Third Party Claim
at any time if it irrevocably waives its right to indemnity under SECTION
10.02 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to SECTION 10.03(a), or if the Indemnifying
Party gives such notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim, or if the Indemnifying Party fails to give
any notice whatsoever within the Dispute Period, then the Indemnified Party
will have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which proceedings will be prosecuted by the Indemnified Party in a
reasonable manner and in good faith or will be settled at the discretion of
the Indemnified Party (with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The Indemnified Party will
have full control of such defense and proceedings, including any compromise
or settlement thereof; PROVIDED, HOWEVER, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this clause (ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses of
the Indemnified Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party will reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying
Party in connection with such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by
the Indemnified Party pursuant to this clause (ii), and the Indemnifying
Party will bear its own costs and expenses with respect to such
participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under SECTION 10.02 or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party with respect to such Third
Party Claim, the Loss in
the amount specified in the Claim Notice will be conclusively deemed a
liability of the Indemnifying Party under SECTION 10.02 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. In the event any payments under this Agreement are then
due by the Indemnified Party to the Indemnifying Party (whether as a
direct obligation or a joint and several obligation together with other
Persons), then the Indemnified Party may, at its election, set off
amounts payable under this ARTICLE X against such amounts as they become
due. If the Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Resolution Period, such
dispute shall be resolved by arbitration in accordance with paragraph (c)
of this SECTION 10.03.
(c) In the event any Indemnified Party should have a claim under
SECTION 10.02 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under SECTION 10.02
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. In the event any payments under this Agreement, including any
installments payable under clauses (b), (c) OR (d) OF SECTION 1.02, are then or
thereafter due by the Indemnified Party to the Indemnifying Party (whether as a
direct obligation or a joint and several obligation together with other
Persons), then the Indemnified Party may, at its election, set off amounts
payable under this ARTICLE X against such amounts as they become due. If the
Indemnifying Party has timely disputed its liability with respect to such claim,
the Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by arbitration in
accordance with paragraph (c) of this SECTION 10.03.
(d) Any dispute submitted to arbitration pursuant to this
SECTION 10.03 shall be finally and conclusively determined by the decision of a
single arbitrator through Jams Endispute (hereinafter sometimes called the
"ARBITRATOR") selected as hereinafter provided. The arbitrator shall be
selected by Jams Endispute upon application made to it for such purpose by the
Indemnified Party. The arbitrability of any dispute, claim or controversy shall
likewise be determined in such arbitration. Such arbitration proceeding shall
be conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of Jams Endispute. The Arbitrator shall
conduct its hearings in Santa Barbara, California, and shall reach and render a
decision in writing with respect to the amount, if any, which the Indemnifying
Party is required to pay to the Indemnified Party in respect of a claim filed by
the Indemnified Party. In connection with rendering its decisions, the
Arbitrator shall adopt and follow such rules and procedures as it deems
necessary or appropriate. To the extent practical, decisions of the Arbitrator
shall be rendered no more than thirty (30) days following commencement of
proceedings with respect thereto. The Arbitrator shall cause its written
decision to be delivered to the Indemnified Party and the Indemnifying Party.
Any decision made by the Arbitrator (either prior to or after the expiration of
such thirty (30) calendar day period) shall be final, binding and conclusive on
the Indemnified Party and the Indemnifying Party and entitled to be enforced to
the fullest extent permitted by law and entered in any court of competent
jurisdiction. Until any award of costs or expenses, including reasonable
attorneys' fees, by the Arbitrator, each party to any arbitration shall bear its
own expense in relation thereto, including but not limited to such party's
attorneys' fees, if any, and one-half of the expenses and fees of the Arbitrator
(which shall be a joint and several obligation of multiple
Indemnifying or Indemnified Parties, as the case may be). The parties and the
Arbitrator shall have all of the rights and duties relating to discovery
provided by Section 1283.05 of the California Code of Civil Procedure, which
is hereby made a part of this Agreement, except that the Arbitrator shall have
the right to disapprove or to limit any discovery which such Arbitrator deems
to be for purposes of delay or otherwise unnecessarily burdensome or
oppressive.
(e) The maximum amount of claims made hereunder shall not exceed the
lesser of: (i) the Purchaser's total investment in the Company (including loans
or advances), or (ii) $5,000,000, except in the case of fraud by the Sellers, in
which case there is no maximum. The maximum liability of any Seller, other than
Love, shall be the portion of the Purchase Price received by such Seller.
(f) No claim may be made more than two (2) years from the date of the
Closing.
ARTICLE XI
TERMINATION AND DEFAULT
11.01 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of
Sellers and Purchaser;
(b) at any time before the Closing, by Sellers or Purchaser, in the
event (i) of a material breach hereof by the non-terminating party if such non-
terminating party fails to cure such breach within five (5) Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party;
(c) at any time after ninety (90) days from exercise by Sellers or
Purchaser upon notification of the non-terminating party by the terminating
party if the Closing shall not have occurred on or before such date and such
failure to consummate is not caused by a breach of this Agreement by the
terminating party; or
(d) by Purchaser if there shall have occurred (i) any general
suspension of, or limitation on prices for, trading in securities on the New
York Stock Exchange, (ii) a declaration of a banking, moratorium or any
suspension of payments in respect to banks in the United States, (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any limitation
by federal or state authorities on the extension or credit by lending
institutions which materially and adversely affects Purchaser or (v) in the case
of any of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof, upon notification of the non-terminating
party by the terminating party.
11.02 EFFECT OF TERMINATION.
(a) If this Agreement is validly terminated pursuant to SECTION
11.01, this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of Sellers or Purchaser (or any of their
respective officers, directors, employees, agents or other
representatives or Affiliates), except as provided in this SECTION 11.02 and
except that the provisions with respect to expenses in SECTION 13.03 and
confidentiality in SECTION 13.05 will continue to apply following any such
termination and except that the covenants contained in SECTION 4.04 will
continue to apply until thirty (30) days following such termination.
Notwithstanding any other provision in this Agreement to the contrary, upon
termination of this Agreement pursuant to SECTION 11.01(b), (c) or (d),
Sellers will remain liable to Purchaser for any breach of this Agreement by
Sellers existing at the time of such termination, and Purchaser will remain
liable to Sellers for any breach of this Agreement by Purchaser existing at
the time of such termination, and Sellers or Purchaser may seek such remedies,
including damages and fees of attorneys, against the other with respect to any
such breach as are provided in this Agreement or as are otherwise available at
Law or in equity.
(b) In the event the Sellers or the Company breaches SECTION 4.04
and, within twelve (12) months after such breach, Sellers or the Company closes
a transaction relating to the acquisition of a material portion of the Shares,
the Company, its assets, securities or its business, in whole or in part,
whether through direct purchase, merger, consolidation or other business
combination (other than sales of inventory or immaterial portions of the
Company's assets in the ordinary course), then, immediately upon any such
closing, the Company and Sellers shall pay to Purchaser the sum of Two Million
Dollars ($2,000,000).
ARTICLE XII
DEFINITIONS
12.01 DEFINITIONS.
(a) DEFINED TERMS. As used in this Agreement, the following defined
terms have the meanings indicated below:
"ACQUISITION PROPOSAL" means any proposal for a merger or other
business combination to which the Company or any Subsidiary is a party or the
direct or indirect acquisition of any equity interest in, or a substantial
portion of the assets of, the Company or any Subsidiary, other than the
transactions contemplated by this Agreement.
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"AFFILIATE" means any Person that directly, or indirectly through one
of more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning ten
percent (10%) or more of the voting securities of another Person shall be deemed
to control that Person.
"AGENT" means ▇▇▇▇▇▇▇ ▇. Love appointed as agent of the Sellers
pursuant to SECTION 13.15.
"AGREEMENT" means this Stock Purchase Agreement and the Exhibits, the
Disclosure Schedule and the Schedules hereto and the certificates delivered in
accordance with SECTIONS 6.03 and 7.03, as the same shall be amended from time
to time.
"ARBITRATOR" has the meaning ascribed to it in SECTION 10.03(d).
"ASSETS AND PROPERTIES" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
"ASSOCIATE" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"AUDITED FINANCIAL STATEMENT DATE" means the last day of the most
recent fiscal year of the Company for which Financial Statements are delivered
to Purchaser pursuant to SECTION 2.09.
"AUDITED FINANCIAL STATEMENTS" means the Financial Statements for the
most recent fiscal year of the Company delivered to Purchaser pursuant to
SECTION 2.09.
"BENEFIT PLAN" means any Plan established by the Company or any
Subsidiary, or any predecessor or Affiliate of any of the foregoing, existing at
the Closing Date or prior thereto, to which the Company or any Subsidiary
contributes or has contributed, or under which any employee, former employee or
director of the Company or any Subsidiary or any beneficiary thereof is covered,
is eligible for coverage or has benefit rights.
"BOOKS AND RECORDS" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including financial statements, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies and plans.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day on
which banks located in the State of California are authorized or obligated to
close.
"BUSINESS OR CONDITION OF THE COMPANY" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company and the Subsidiaries taken as a whole.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
"CERCLIS" means the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. Section 300.5.
"CLAIM NOTICE" means written notification pursuant to SECTION 10.03(a)
of a Third Party Claim as to which indemnity under SECTION 10.02 is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, and specifying
the nature of and basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under SECTION 10.02, together with
the amount
or, if not then reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim.
"CLOSING" means the closing of the transactions contemplated by
SECTION 1.03.
"CLOSING DATE" means (a) the fifth Business Day after the day on which
the last of the consents, approvals, actions, filings, notices or waiting
periods described in or related to the filings described in SECTIONS 6.04
through 6.07 and SECTIONS 7.04 through 7.07 has been obtained, made or given or
has expired, as applicable, or (b) such other date as Purchaser and Seller
mutually agree upon in writing.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"COMMON STOCK" means the common stock, no par value, of the Company.
"COMPANY" has the meaning ascribed to it in the forepart of this
Agreement.
"CONTRACT" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"DEFINED BENEFIT PLAN" means each Benefit Plan which is subject to
Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"DISCLOSURE SCHEDULE" means the record delivered to Purchaser by
Seller herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Seller pursuant to this Agreement.
"DISPUTE PERIOD" means the period ending ninety (90) days following
receipt by an Indemnifying Party of either a Claim Notice or an Indemnity
Notice.
"EMPLOYMENT AGREEMENTS" shall mean the employment agreements between
the Company and the Persons identified in SECTION 6.15 OF THE DISCLOSURE
SCHEDULE, in form and substance acceptable to Purchaser.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any written
or oral notice, claim, demand or other communication (collectively, a "CLAIM")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, Governmental or Regulatory Authority
response costs, damages to natural resources or other property, personal
injuries, fines or penalties arising out of, based on or resulting from (a) the
presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The
term "Environmental Claim" shall include any claim by any Governmental or
Regulatory Authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and any
claim by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAW" means any Law or Order relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes into the
environment (including ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person who is in the same controlled group
of corporations or who is under common control with Seller or, before the
Closing, the Company or any Subsidiary (within the meaning of Section 414 of the
Code).
"ESTOPPEL CERTIFICATE" means the written certification, issued not
more than twenty (20) days prior to the Closing Date by a lessor, sublessor or
other party to a lease or occupancy agreement, stating (a) that such lease or
occupancy agreement is (i) in full force and effect and (ii) has not been
modified or amended except as described therein, (b) the date to which rental
has been paid, (c) that no default or event of default exists thereunder and (d)
that to the best of the knowledge of the issuer thereof, no event has occurred
which, with the giving of notice or lapse of time or both, would be a default or
event of default thereunder.
"FINANCIAL STATEMENTS" means the consolidated financial statements of
the Company and its consolidated Subsidiaries delivered to Purchaser pursuant to
SECTION 2.09 or 4.06.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"HAZARDOUS MATERIAL" means (A) any petroleum or petroleum products,
flammable explosives, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(C) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
"HSR ACT" means Section 7A of the ▇▇▇▇▇▇▇ Act (Title II of the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended) and the rules and
regulations promulgated thereunder.
"INDEBTEDNESS" of any Person means all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"INDEMNIFIED PARTY" means any Person claiming indemnification under
any provision of ARTICLE X, including a Person asserting a claim pursuant to
paragraph (c) of SECTION 10.03.
"INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification is being asserted under any provision of ARTICLE X, including a
Person against whom a claim is asserted pursuant to paragraph (c) of
SECTION 10.03.
"INDEMNITY NOTICE" means written notification pursuant to SECTION
10.03(b) of a claim for indemnity under ARTICLE X by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"INTELLECTUAL PROPERTY" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service ▇▇▇▇ rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"INVESTMENT ASSETS" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company or
any Subsidiary and issued by any Person other than the Company or any Subsidiary
(other than trade receivables generated in the ordinary course of business of
the Company and the Subsidiaries).
"IRS" means the United States Internal Revenue Service.
"LAWS" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"LICENSES" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"LIENS" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"LOSS" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including interest, court costs, fees of
attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment).
"NPL" means the National Priorities List under CERCLA.
"OPERATIVE AGREEMENTS" means the Option Agreement, the Investment
Agreement, the Employment Agreements and any support or other agreements to be
entered into in connection with the transaction.
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such Person, including
any rights to participate in the equity or income of such Person or to
participate in or direct the election of any directors or officers of such
Person or the manner in which any shares of capital stock of such Person are
voted.
"ORDER" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"PENSION BENEFIT PLAN" means each Benefit Plan which is a pension
benefit plan within the meaning of Section 3(2) of ERISA.
"PERMITTED LIEN" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens does not materially impair the value of the
property subject to such Lien or the use of such property in the conduct of the
business of the Company or any Subsidiary.
"PERSON" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.
"PLAN" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"PURCHASE PRICE" has the meaning ascribed to it in SECTION 1.02.
"PURCHASER" has the meaning ascribed to it in the forepart of this
Agreement.
"PURCHASER INDEMNIFIED PARTIES" means Purchaser and its officers,
directors, employees, agents and Affiliates.
"QUALIFIED PLAN" means each Benefit Plan which is intended to qualify
under Section 401 of the Code.
"RELEASE" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Hazardous Materials
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
"REPRESENTATIVES" has the meaning ascribed to it in SECTION 4.03 and
shall apply to both Purchaser's Representatives and Sellers' Representatives.
"RESOLUTION PERIOD" means the period ending thirty (30) days following
receipt by an Indemnified Party of a written notice from an Indemnifying Party
stating that it disputes all or any portion of a claim set forth in a Claim
Notice or an Indemnity Notice.
"SELLER" and "SELLERS" have the meanings ascribed to such terms in the
forepart of this Agreement.
"SELLER INDEMNIFIED PARTIES" means each Seller and its officers,
directors, trustees, employees, agents and Affiliates.
"SHARES" has the meaning ascribed to it in the forepart of this
Agreement.
"SUBJECT DEFINED BENEFIT PLAN" means each Defined Benefit Plan listed
and described in SECTION 2.15(a) OF THE DISCLOSURE SCHEDULE.
"SUBSIDIARY" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests in, or the voting control of, such
Person.
"TAX" means any foreign, federal, state, county or local income, gross
receipt, capital stock, production, business and occupation, net proceeds,
alternative or add on minimum, ad valorem, value added, turnover, sales, use,
real property, personal property (tangible and intangible), stamp, leasing,
excise, duty, disability, franchise, transfer, license, withholding, payroll,
severance, employment, fuel, excess profits, environmental, occupational,
interest equalization, windfall profits and severance taxes, and all other like
governmental charges and any deficiencies, penalties, assessments and interest
thereon.
"TAX RETURNS" means any foreign, federal, state, county or local tax
report, form, return, information return or other related document required to
be filed by any relevant Tax authority.
"THIRD PARTY CLAIM" has the meaning ascribed to it in SECTION
10.03(a).
"UNAUDITED FINANCIAL STATEMENT DATE" means the last day of the most
recent fiscal quarter of the Company for which Financial Statements are
delivered to Purchaser pursuant to SECTION 2.09.
"UNAUDITED FINANCIAL STATEMENTS" means the Financial Statements for
the most recent fiscal quarter of the Company delivered to Purchaser pursuant to
SECTION 2.09.
(b) CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of
this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) references
to Articles, Sections (or subdivisions of Sections), Exhibits, Annexes or
Schedules are to this Agreement; and (v) the phrases "ordinary course of
business" and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company or a Subsidiary; (vi) references to
agreements and other contractual instruments shall be deemed to include all
subsequent
amendments, extensions and other modifications to such instruments (without,
however, limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement); (vii) references to statutes or
regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; (viii) references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible visible form;
(ix) the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; and (x) references to Persons
include their respective permitted successors and assigns and, in the case of
Governmental or Regulatory Authorities, Governmental or Regulatory Authorities
succeeding to their respective functions and capacities. Whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless Business Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP.
ARTICLE XIII
MISCELLANEOUS
13.01 NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
PDT Cardiovascular, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ph.D.
with a copy to:
Nida & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to any Seller:
Ramus Medical Technologies
▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Love, President
with a copy to:
Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto; PROVIDED, HOWEVER, that
in no event shall Sellers have more than one address or facsimile number for the
purpose of notices to any or all Sellers.
13.02 ENTIRE AGREEMENT. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof, including the Letter of
Intent, and contain the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
13.03 EXPENSES. Except as otherwise expressly provided in this
Agreement (including as provided in SECTION 11.02), if the transactions
contemplated hereby are consummated, each party will pay its own costs and
expenses, and the Company shall pay the costs and expenses of the Company and
the Subsidiaries, incurred in connection with the negotiation, execution and
closing of this Agreement, the Operative Agreements and the transactions
contemplated hereby and thereby.
13.04 PUBLIC ANNOUNCEMENTS. At all times at or before the
Closing, Sellers will not issue or make any reports, statements or releases to
the public or generally to the employees, customers, suppliers or other Persons
to whom the Company and the Subsidiaries sell goods or provide services or with
whom the Company and the Subsidiaries otherwise have significant business
relationships with respect to this Agreement or the transactions contemplated
hereby without the consent of Purchaser, which consent shall not be unreasonably
withheld. Sellers and Purchaser will obtain the other party's prior approval of
any press release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.
13.05 CONFIDENTIALITY. Each party hereto will hold, and will use
its best efforts to cause its Affiliates, and in the case of Purchaser, any
Person who has provided, or who is considering providing, financing to Purchaser
to finance all or any portion of the Purchase Price, and their respective
Representatives to hold, in strict confidence from any Person (other than any
such Affiliate, Person who has provided, or who is considering providing,
financing or Representative), unless (i) compelled to disclose by judicial or
administrative process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; PROVIDED that following the Closing the
foregoing restrictions will not apply to Purchaser's
use of documents and information concerning the Company and the Subsidiaries
furnished by Seller hereunder. In the event the transactions contemplated
hereby are not consummated, upon the request of the other party, each party
hereto will, and will cause its Affiliates, any Person who has provided, or
who is considering providing, financing to such party and their respective
Representatives to, promptly (and in no event later than five (5) Business
Days after such request) redeliver or cause to be redelivered all copies of
documents and information furnished by the other party in connection with this
Agreement or the transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings related thereto or based thereon prepared by the party furnished such
documents and information or its Representatives.
13.06 FURTHER ASSURANCES; POST-CLOSING COOPERATION.
(a) At any time or from time to time after the Closing, Sellers shall
execute and deliver to Purchaser such other documents and instruments, provide
such materials and information and take such other actions as Purchaser may
reasonably request more effectively to vest title to the Shares in Purchaser
and, to the full extent permitted by Law, to put Purchaser in actual possession
and operating control of the Company and the Subsidiaries and their Assets and
Properties and Books and Records, and otherwise to cause Seller to fulfill its
obligations under this Agreement and the Operative Agreements to which they are
a party.
(b) Following the Closing, each party will afford the other party,
its counsel and its accountants, during normal business hours, reasonable access
to the books, records and other data relating to the Business or Condition of
the Company in its possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent that such access
may be reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority, (iv) the determination or enforcement of
the rights and obligations of any Indemnified Party or (v) in connection with
any actual or threatened Action or Proceeding. Further, each party agrees for a
period extending six (6) years after the Closing Date not to destroy or
otherwise dispose of any such books, records and other data unless such party
shall first offer in writing to surrender such books, records and other data to
the other party and such other party shall not agree in writing to take
possession thereof during the ten (10) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other documents
or reports required to be filed with Governmental or Regulatory Authorities or
its financial statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information, documents or
records relating to the Business or Condition of the Company not referred to in
paragraph (b) above, and such information, documents or records are in the
possession or control of the other party, such other party shall use its best
efforts to furnish or make available such information, documents or records (or
copies thereof) at the recipient's request, cost and expense. Any information
obtained by Sellers in accordance with this paragraph shall be held confidential
by Sellers in accordance with SECTION 13.05.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section shall be subject to applicable rules relating
to discovery.
13.07 WAIVER. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
13.08 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
13.09 NO THIRD PARTY BENEFICIARY. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under ARTICLE X.
13.10 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder (including its rights under ARTICLE X) to (i) a wholly-
owned subsidiary, provided that any such subsidiary agrees in writing to be
bound by all of the terms, conditions and provisions contained herein or (ii)
any financial institution providing purchase money or other financing to
Purchaser or the Company from time to time as collateral security for such
financing, but no such assignment referred to in clause (ii) shall relieve
Purchaser of its obligations hereunder. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
13.11 HEADINGS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
13.12 ARBITRATION. Subject to and without limitation on SECTION
10.03 hereof, in the event of any dispute, claim or controversy between the
parties arising out of or relating to this Agreement or any of the documents
executed pursuant to this Agreement, whether in contract, tort, equity or
otherwise, and whether relating to the meaning, interpretation, effect,
validity, performance or enforcement of this Agreement or any of the documents
executed pursuant to this Agreement, such dispute, claim or controversy shall be
resolved by and through an arbitration proceeding before a single arbitrator to
be conducted under the auspices and the commercial arbitration rules (formal or
informal) of ___________ (or any like organization successor thereto) at Santa
Barbara, California. The arbitrability of such dispute, claim or controversy
shall likewise be determined in such arbitration. Such arbitration proceeding
shall be conducted in as expedited a manner as is then permitted by the
commercial arbitration rules (formal or informal) of _____________. Both the
foregoing agreement of the parties to arbitrate any and all such disputes,
claims and controversies, and the results, determinations, findings, judgments
and/or awards rendered through any such arbitration shall be final and binding
on the parties hereto and may be specifically enforced by legal proceedings.
Subject to and without limitation on SECTION 10.03 hereof, such arbitration may
be initiated by written notice from either party to the other setting forth a
demand for arbitration and detailing with specificity the nature of the dispute,
claim or controversy to be arbitrated. Time is of the essence of this
arbitration procedure, and the arbitrator shall be instructed and required to
render its decision within ten (10) days following completion of the
arbitration. The parties and arbitrator shall have all of the rights and duties
relating to discovery provided by Section 1283.05 of the California Code of
Civil Procedure, which is hereby made a part of this Agreement, except that the
arbitrator shall have the right to disapprove or to limit any discovery which
such arbitrator deems to be for purposes of delay or otherwise unnecessarily
burdensome or oppressive.
13.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each Seller
hereby irrevocably appoints its lawful agent and attorney-in-fact to accept and
acknowledge service of any and all process against it in any action, suit or
proceeding arising out of or relating to this Agreement or any of the Operative
Agreements or any of the transactions contemplated hereby or thereby and upon
whom such process may be served, with the same effect as if such party were a
resident of the State of California and had been lawfully served with such
process in such jurisdiction, and waives all claims of error by reason of such
service, PROVIDED that in the case of any service upon such agent and attorney-
in-fact, the party effecting such service shall also deliver a copy thereof to
the other party at the address and in the manner specified in SECTION 13.01.
Each Seller will enter into such agreements with such agent as may be necessary
to constitute and continue the appointment of such agent hereunder. In the
event that such agent and attorney-in-fact resigns or otherwise becomes
incapable of acting as such, such party will appoint a successor agent and
attorney-in-fact in Santa Barbara, California, reasonably satisfactory to
Purchaser, with like powers. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Central
District of California or any court of the State of California located in the
City of Santa ▇▇▇▇▇▇▇, County of Santa ▇▇▇▇▇▇▇, in any action, suit or
proceeding arising out of or relating to this Agreement or any of the Operative
Agreements or any of the transactions contemplated hereby or thereby, and agrees
that any such action, suit or proceeding shall be brought only in such court,
PROVIDED, HOWEVER, that such consent to jurisdiction is solely for the purpose
referred to in this SECTION 13.13 and shall not be deemed to be a general
submission to the jurisdiction of said courts or in the State of California
other than for such purpose and PROVIDED FURTHER, that such consent to
jurisdiction and agreement shall not limit the parties' agreement to arbitrate
disputes under this Agreement pursuant to SECTIONS 10.03 OR 13.12. Each party
hereby irrevocably waives, to the fullest extent permitted by Law, any objection
that it may now or hereafter have to the laying of the venue of any such action,
suit or proceeding brought in such a court and any claim that any such action,
suit or proceeding brought in such a court has been brought in an inconvenient
forum. Nothing herein shall affect the right of any party to serve process in
any other manner permitted by Law or to commence legal proceedings or otherwise
proceed against the other in any other jurisdiction.
13.14 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
13.15 AGENT. Each Seller hereby irrevocably appoints and
authorizes the Agent to act as its agent under this Agreement and the other
Operative Documents with such powers as are specifically delegated to the Agent
by the terms of the Operative Documents, together with such other powers as are
reasonably incidental to such powers. Purchaser shall be entitled to rely upon
any certification, notice or other communication (including any made by
telephone, telecopy, telex, telegram or cable) made by Agent and believed by
Purchaser to be genuine and correct and to have been signed or sent by or on
behalf of Sellers. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement or under any Operative
Document in accordance with instructions given by Sellers holding a majority of
the Shares on the date hereof, and such instructions of such Sellers and any
action taken or failure to act pursuant to such instructions shall be binding on
all of the Sellers.
13.16 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Law of the State of California applicable to a
Contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
13.17 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
13.18 SIGNATURES. The signatures by a party constituting one of
the Sellers in their capacity as a trustee or a corporate officer will also
constitute the obligation of such party as an individual.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
SELLERS:
SHAREHOLDERS OF
RAMUS MEDICAL TECHNOLOGIES
Signatures on Schedule 1
PURCHASER
PURCHASER CARDIOVASCULAR, INC.,
a Delaware corporation
By:
---------------------------------
Title:
------------------------------
EXHIBITS
--------
Exhibit A - Escrow Agreement
Exhibit B - Officer's Certificate of Sellers
Exhibit C - Opinion of Counsel to Sellers and Company
Exhibit D - Special Procedures Report
Exhibit E - Officer's Certificate of Purchaser
Exhibit F - Secretary's Certificate of Purchaser
Exhibit G - Opinion of Counsel to Purchaser
SCHEDULES
---------
Schedule 1 - List of Sellers
SCHEDULE 1
TO STOCK PURCHASE AGREEMENT
List of Sellers
Shareholder Number of Shares Signature
----------------------------------------- ---------
EXHIBIT B
JOINDER AGREEMENT
The undersigned option holder or Shareholder of Ramus Medical Technologies,
a California corporation ("Ramus"), irrevocably and unconditionally agrees to be
bound by the terms of that certain Option Agreement between ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
Love, ***** and PDT Cardiovascular, Inc.
Date:
-------------- ----------------------------------
Signature
Name (Typed or Printed):
----------------------------------
*****Confidential Treatment Requested
SCHEDULE 1
List of Shareholders of ▇▇▇▇▇
▇▇▇▇▇▇▇ S. Love
*****
*****Confidential Treatment Requested