Document/Exhibit Description Pages Size
1: 10-K Annual Report 48 320K
2: EX-2.1 Agreement and Plan of Reorganization 37 215K
3: EX-3.3 Certificate of Designation of Rights 14 58K
4: EX-4.2 Investors Rights Agreement 17 66K
5: EX-10.29 Master Loan Agreement 35 162K
6: EX-23.1 Consent of Ernst & Young 1 6K
7: EX-27 Financial Data Schedule 2 7K
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
KERAVISION, INC.
KVTT ACQUISITION CORPORATION
AND
TRANSCEND THERAPEUTICS, INC.
Dated as of December 22, 1998
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER................................................... 1
1.1 The Merger.................................................... 1
1.2 Effective Time; Closing....................................... 2
1.3 Effect of the Merger.......................................... 2
1.4 Certificate of Incorporation; Bylaws.......................... 2
1.5 Directors and Officers........................................ 2
1.6 Effect on Capital Stock....................................... 2
1.7 Surrender of Certificates..................................... 3
1.8 No Further Ownership Rights in Company Common Stock........... 4
1.9 Lost, Stolen or Destroyed Certificates........................ 4
1.10 Tax and Accounting Consequences............................... 5
1.11 Taking of Necessary Action; Further Action.................... 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY................... 5
2.1 Organization of Company....................................... 5
2.2 Company Capital Structure..................................... 5
2.3 Obligations With Respect to Capital Stock..................... 5
2.4 Authority..................................................... 6
2.5 SEC Filings; Company Financial Statements..................... 7
2.6 Absence of Certain Changes or Events.......................... 7
2.7 Taxes......................................................... 8
2.8 Title to Properties; Absence of Liens and Encumbrances........ 9
2.9 Intellectual Property......................................... 9
2.10 Compliance; Permits; Restrictions............................. 11
2.11 Litigation.................................................... 11
2.12 Brokers' and Finders' Fees.................................... 12
2.13 Employee Benefit Plans........................................ 12
2.14 Environmental Matters......................................... 15
2.15 Agreements, Contracts and Commitments......................... 15
2.16 Change of Control Payments.................................... 16
2.17 Statements; proxy statement/prospectus........................ 16
2.19 Board Approval................................................ 17
2.20 Fairness Opinion.............................................. 17
2.21 Section 203 of the Delaware General Corporation Law Not
Applicable.................................................... 17
2.22 Customs....................................................... 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.... 17
3.1 Organization of Parent and Merger Sub......................... 17
3.2 Parent and Merger Sub Capital Structure....................... 18
3.3 Authority..................................................... 18
3.4 SEC Filings; Parent Financial Statements...................... 19
3.5 Absence of Certain Changes or Events.......................... 19
3.6 Statements; proxy statement/prospectus........................ 19
3.7 Valid Issuance................................................ 20
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................... 20
4.1 Conduct of Business by Company................................ 20
4.2 Conduct of Business by Parent................................. 21
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TABLE OF CONTENTS--(Continued)
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ARTICLE V ADDITIONAL AGREEMENTS........................................ 22
5.1 Proxy statement/prospectus; Registration Statement; Other
Filings....................................................... 22
5.2 Meeting of Company Stockholders............................... 23
5.3 Confidentiality; Access to Information........................ 23
5.4 No Solicitation............................................... 24
5.5 Public Disclosure............................................. 24
5.6 Reasonable Efforts Notification............................... 24
5.7 Third-Party Consents.......................................... 25
5.8 Indemnification............................................... 25
5.9 Nasdaq Listing................................................ 26
5.10 Affiliate Agreements.......................................... 26
5.11 Regulatory Filings; Reasonable Efforts........................ 26
5.12 Updates to Net Cash........................................... 26
ARTICLE VI CONDITIONS TO THE MERGER.................................... 27
6.1 Conditions to Obligations of Each Party to Effect the Merger.. 27
6.2 Additional Conditions to Obligations of Company............... 27
6.3 Additional Conditions to the Obligations of Parent and Merger
Sub........................................................... 28
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.......................... 28
7.1 Termination................................................... 28
7.2 Notice of Termination Effect of Termination................... 30
7.3 Fees and Expenses............................................. 30
7.4 Amendment..................................................... 30
7.5 Extension; Waiver............................................. 30
ARTICLE VIII GENERAL PROVISIONS........................................ 31
8.1 Non-Survival of Representations and Warranties................ 31
8.2 Notices....................................................... 31
8.3 Interpretation of Knowledge................................... 32
8.4 Counterparts.................................................. 32
8.5 Entire Agreement; Third-Party Beneficiaries................... 32
8.6 Severability.................................................. 32
8.7 Other Remedies; Specific Performance.......................... 33
8.8 Governing Law................................................. 33
8.9 Rules of Construction......................................... 33
8.10 Assignment.................................................... 33
INDEX OF EXHIBITS
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Exhibit A Form of Voting Agreement
Exhibit B Form of Affiliate Agreement
Exhibit C Form of Escrow Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
December 22, 1998, among KeraVision, Inc., a Delaware corporation ("Parent"),
KVTT Acquisition Corporation., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and Transcend Therapeutics, Inc., a
Delaware corporation ("Company").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("Delaware Law"), Parent and Company intend to enter into a
business combination transaction.
B. The board of directors of Company (i) has determined that the Merger (as
defined in Section 1.1) is advisable, fair to, and in the best interests of,
Company and its stockholders, (ii) has approved this Agreement, the Merger and
the other transactions contemplated by this Agreement and (iii) has determined
to recommend that the stockholders of Company adopt and approve this Agreement
and approve the Merger.
C. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, certain
affiliates of Company constituting holders of a majority of the outstanding
shares of Company Common Stock (the "Affiliates") are entering into Voting
Agreements in substantially the form attached hereto as Exhibit A (the "Voting
Agreements").
D. As a condition to the Merger, each Company Affiliate (as defined in
Section 5.10) shall enter into an Affiliate Agreement in substantially the form
attached hereto as Exhibit B (the "Affiliate Agreements").
E. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, Company,
Parent and Chase Manhattan Bank and Trust Company are entering into an Escrow
Agreement in substantially the form attached hereto a Exhibit C (the "Escrow
Agreement").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation. Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing (or such later time as may be agreed in
writing by Company and Parent and specified in the Certificate of Merger) being
the "Effective Time") as soon as practicable on or after the Closing Date (as
herein defined). Unless the context otherwise requires, the term "Agreement" as
used herein refers collectively to this Agreement and Plan of Reorganization
and the Certificate of Merger. The closing of the
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Merger (the "Closing") shall take place at the offices of Venture Law Group, A
Professional Corporation, at a time and date to be specified by the parties,
which shall be no later than the second business day after the satisfaction or
waiver of the conditions set forth in Article VI, or at such other time, date
and location as the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended
so that the name of the Surviving Corporation shall be "Transcend
Therapeutics, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Company or the holders of any
of the following securities:
(a) Conversion of Company Common Stock. Each share of Common Stock, $0.01
par value per share, of Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares
of Company Common Stock to be canceled pursuant to Section 1.6(b), will be
canceled and extinguished and automatically converted (subject to Sections
1.6(e) and (f)) into the right to receive a number (the "Exchange Ratio")
of shares of Common Stock of Parent (the "Parent Common Stock") calculated
as described in Section 1.6(e) upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate,
upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 1.9).
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
Stock held by Company or owned by Merger Sub, Parent or any direct or
indirect wholly owned subsidiary of Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options and Warrants. At the Effective Time, all options to
purchase Company Common Stock then outstanding under Company's Amended and
Restated 1994 Equity Incentive Plan (the "Plan") and all warrants to
purchase Company Common Stock shall be canceled.
(d) Capital Stock of Merger Sub. Each share of Common Stock, $0.00l par
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of Common Stock,
$0.01 par value per share, of the Surviving Corporation. Each certificate
evidencing ownership of shares of Merger Sub Common Stock shall evidence
ownership of such shares of capital stock of the Surviving Corporation.
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(e) Calculation of Exchange Ratio. The Exchange Ratio shall equal the
quotient obtained by dividing (i) the quotient obtained by dividing (A)
Company's Net Cash (as defined in Section 2.5(c)) plus the Premium (defined
below) by (B) the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time by (ii) the average
closing price of Parent's Common Stock as reported on the Nasdaq National
Market System ("Nasdaq") for the ten trading days prior to (but not
including) the third trading day before the Closing Date (the "Parent
Closing Price"). The Premium shall equal twenty percent (20%) of Net Cash;
provided, however, that if the Parent Closing Price is greater than $9
1/16, then the Premium shall equal the percentage of Net Cash equal to the
lesser of (i) twenty percent (20%) plus one-third of the percentage
increase of the KeraVision Closing Price above $9 1/16 or (ii) thirty
percent (30%). For example, if the KeraVision Closing Price is $10 1/2,
then the Premium shall equal 25.29%, calculated as follows:
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(1) $10.5 - $9.0625 = $1.4375 (difference between Parent Closing
Price and $9 1/16)
(2) ($1.4375 / $9.0625) * 100 = 15.862% (percentage increase of Parent
Closing Price above $9 1/16)
(3) 15.862% / 3 = 5.29% (one-third of percentage increase
calculated in (2))
(4) 20% + 5.29% = 25.29% (twenty percent plus (3))
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change
with respect to Parent Common Stock or Company Common Stock occurring on or
after the date hereof and prior to the Effective Time.
(g) Fractional Shares. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock that otherwise would be received
by such holder) shall receive from Parent an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied
by (ii) the Parent Closing Price.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select a bank or trust company
reasonably acceptable to Company to act as the exchange agent (the
"Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company
Common Stock, and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.6(g) and any dividends or
distributions to which holders of shares of Company Common Stock may be
entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record (as of the
Effective Time) of a certificate or certificates (the "Certificates"),
which immediately prior to the Effective Time represented outstanding
shares of Company Common Stock whose shares were converted into shares of
Parent Common Stock pursuant to Section 1.6, cash in lieu of any fractional
shares pursuant to Section 1.6(g) and any dividends or other distributions
pursuant to Section 1.7(d), (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall contain such other provisions
as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock, cash in lieu of any fractional
shares pursuant to Section 1.6(g) and any dividends or other distributions
pursuant to Section 1.7(d). Upon surrender of Certificates for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed
by Parent, together with such letter of transmittal, duly completed and
validly executed in accordance with
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the instructions thereto, the holders of such Certificates shall be
entitled to receive in exchange therefor certificates representing the
number of whole shares of Parent Common Stock into which their shares of
Company Common Stock were converted at the Effective Time, payment in lieu
of fractional shares which such holders have the right to receive pursuant
to Section 1.6(g) and any dividends or distributions payable pursuant to
Section 1.7(d), and the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, outstanding Certificates will be deemed
from and after the Effective Time, for all corporate purposes, subject to
Section 1.7(d) as to the payment of dividends, to evidence only the
ownership of the number of full shares of Parent Common Stock into which
such shares of Company Common Stock shall have been so converted and the
right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.6(g) and any dividends or
distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time
will be paid to the holders of any unsurrendered Certificates with respect
to the shares of Parent Common Stock represented thereby until the holders
of record of such Certificates shall surrender such Certificates. Subject
to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without
interest, certificates representing whole shares of Parent Common Stock
issued in exchange therefor along with payment in lieu of fractional shares
pursuant to Section 1.6(g) hereof and the amount of any such dividends or
other distributions with a record date after the Effective Time payable
with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of certificates representing shares of Parent Common Stock in any
name other than that of the registered holder of the Certificates
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to
Section 1.6, cash for fractional shares, if any, as may be required pursuant to
Section 1.6(g) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance of such certificates representing shares of
Parent Common Stock, cash and other distributions, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may
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be made against Parent, the Surviving Corporation or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall not constitute a reorganization within the meaning of
Section 368 of the Code, provided that no party makes any representation to any
other party or its Shareholders as to the tax consequences of the Merger or
commits to take any action to effect the foregoing intent except as may be
expressly provided herein.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated thereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter and
referencing a specific representation supplied by Company to Parent dated as of
the date hereof (the "Company Disclosure Letter"), as follows:
2.1 Organization of Company.
(a) Company (i) is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized; (ii) has the corporate or other power and authority
to own, lease and operate its assets and property and to carry on its
business as now being conducted; and (iii), except as would not be material
to Company, is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary.
(b) Company has no subsidiaries and has never had any subsidiaries.
(c) Company has delivered or made available to Parent a true and correct
copy of the Certificate of Incorporation and Bylaws of Company, each as
amended to date, and each such instrument is in full force and effect.
Company is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
2.2 Company Capital Structure. The authorized capital stock of Company
consists of 25,000,000 shares of Common Stock, $0.01 par value per share, of
which there were 5,763,091 shares issued and outstanding as of November 30,
1998, and 5,000,000 shares of Preferred Stock, $0.01 par value per share, of
which no shares are issued or outstanding. All outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid and nonassessable,
are not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Company or any agreement or document to which
Company is a party or by which it is bound and were issued in compliance with
applicable federal and state securities laws. As of November 30, 1998, Company
had reserved an aggregate of 665,745 shares of Company Common Stock, net of
exercises, for issuance pursuant to the Plan. As of November 30, 1998, there
were options outstanding to purchase an aggregate of 201,800 shares of Company
Common Stock pursuant to the Plan.
2.3 Obligations With Respect to Capital Stock. There are no equity
securities, partnership interests or similar ownership interests of any class
of Company equity security, or any securities exchangeable or convertible into
or exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as
set forth in Section 2.2 of the Company Disclosure
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Letter, there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Company
is a party or by which it is bound obligating Company to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests
of Company or obligating Company to grant, extend, accelerate the vesting of or
enter into any such subscription, option, warrant, equity security, call,
right, commitment or agreement. As of the date of this Agreement, except as
contemplated by this Agreement, there are no registration rights and there is
no voting trust, proxy, rights plan, antitakeover plan or other agreement or
understanding to which Company is a party or by which it is bound with respect
to any equity security of any class of Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of
any of its subsidiaries. Stockholders of Company will not be entitled to
dissenters' rights under applicable state law in connection with the Merger.
2.4 Authority.
(a) Company has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Company's
stockholders and the filing of the Certificate of Merger pursuant to
Delaware Law. A vote of the holders of a majority of the outstanding shares
of the Company Common Stock is sufficient for Company's stockholders to
approve and adopt this Agreement and approve the Merger. This Agreement has
been duly executed and delivered by Company and, upon execution and
delivery by Parent and Merger Sub, shall constitute a valid and binding
obligation of Company, enforceable against Company in accordance with its
terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. The execution and delivery
of this Agreement by Company does not, and the performance of this
Agreement by Company will not, (i) conflict with or violate the Certificate
of Incorporation or Bylaws of Company or the equivalent organizational
documents of any of its subsidiaries, (ii) subject to obtaining the
approval and adoption of this Agreement and the approval of the Merger by
Company's stockholders as contemplated in Section 5.2 and compliance with
the requirements set forth in Section 2.4(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Company or by which Company or any of its properties is bound or affected,
or (iii) result in any material breach of or constitute a material default
(or an event that with notice or lapse of time or both would become a
material default) under, or impair Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or encumbrance on any of the material
properties or assets of Company pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which Company
is a party or by which Company or its or any of their respective assets are
bound or affected. The Company Disclosure Letter list all consents, waivers
and approvals under any of Company's agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, which, if individually or in the
aggregate not obtained, would result in a material loss of benefits to
Company, Parent or the Surviving Corporation as a result of the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission
or other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required to be obtained or made by Company in
connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) the
filing of the proxy statement/prospectus (as defined in Section 2.17) with
the Securities and Exchange Commission ("SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii)
such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under
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applicable federal, foreign and state securities (or related) laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the securities or antitrust laws of any foreign country, and
(iv) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to
Company or Parent or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.
2.5 SEC Filings; Company Financial Statements.
(a) Company has filed all forms, reports and documents required to be
filed by Company with the SEC since July 2, 1997. All such required forms,
reports and documents (including those that Company may file subsequent to
the date hereof) are referred to herein as the "Company SEC Reports." As of
their respective dates, the Company SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. None of Company's subsidiaries
is required to file any forms, reports or other documents with the SEC.
(b) Each of the financial statements (including, in each case, any
related notes thereto) contained in the Company SEC Reports (the "Company
Financials"), including each Company SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto,
(ii) was prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in
the case of unaudited interim financial statements, as may be permitted by
the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented the
financial position of Company and its subsidiaries as at the respective
dates thereof and the results of Company's operations and cash flows for
the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal and
recurring year-end adjustments. The unaudited balance sheet of Company
contained in the Company Disclosure Letter as of November 30, 1998 is
hereinafter referred to as the "Company Balance Sheet." Company has no
material obligations or liabilities of any nature (matured or unmatured,
fixed or contingent) other than (i) those set forth or adequately provided
for in the Company Balance Sheet, (ii) those not required under GAAP to be
set forth in the Company Balance Sheet, (iii) those incurred in the
ordinary course of business since the date of the Company Balance Sheet and
consistent with past practice and (iv) those incurred in connection with
the execution and delivery of this Agreement.
(c) Section 2.5(c) of the Company Disclosure Letter contains an itemized
calculation of Company's Net Cash position as of November 30, 1998 (as
updated through the Closing Date, "Net Cash"). Net Cash is calculated by
subtracting from Company's cash balances (as shown on the Company Balance
Sheet) all restricted cash, current liabilities and other such liabilities
as set forth in the Section 2.5(c) of the Company Disclosure Letter. Except
as set forth on Section 2.5(c) of the Company Disclosure Letter, to
Company's reasonable knowledge, there are no actual or potential
obligations by Company to pay any cash to any third party.
(d) Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with
the SEC but which will be required to be filed, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect (as defined
in Section 8.3(c)) on Company, (ii) any declaration, setting aside or payment
of any dividend on, or other distribution (whether in cash, stock or property)
in respect of,
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any of Company's capital stock, or any purchase, redemption or other
acquisition by Company of any of Company's capital stock or any other
securities of Company or any options, warrants, calls or rights to acquire any
such shares or other securities, (iii) any split, combination or
reclassification of any of Company's capital stock, (iv) any granting by
Company of any increase in compensation or fringe benefits, or any payment by
Company of any bonus, or any granting by Company of any increase in severance
or termination pay or any entry by Company into any currently effective
employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Company of
the nature contemplated hereby, (v) entry by Company into any licensing or
other agreement with regard to the acquisition or disposition of any material
Company Intellectual Property (as defined in Section 2.9) or any amendment or
consent with respect to any licensing agreement filed or required to be filed
by Company with the SEC, (vi) any material change by Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (vii) any revaluation by Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value
added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits.
(i) Company has timely filed all federal, state, local and foreign
returns, estimates, information statements and reports ("Returns")
relating to Taxes required to be filed by Company with any Tax
authority, except such Returns which are not material to Company, and
have paid all Taxes shown to be due on such Returns.
(ii) Company as of the Effective Time will have withheld with respect
to its employees all federal and state income taxes, Taxes pursuant to
the Federal Insurance Contribution Act ("FICA"), Taxes pursuant to the
Federal Unemployment Tax Act ("FUTA") and other Taxes required to be
withheld.
(iii) Company has not been delinquent in the payment of any Tax nor
is there any Tax deficiency outstanding, proposed or assessed against
Company or any of its subsidiaries, nor has Company executed any
unexpired waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Company by any
Tax authority is presently in progress, nor has Company been notified
of any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by Company has been
proposed in writing formally or informally by any Tax authority to
Company or any representative thereof.
(vi) Company has no liability for unpaid Taxes which has not been
accrued for or reserved on the Company Balance Sheet, whether asserted
or unasserted, contingent or otherwise, which is material to Company,
other than any liability for unpaid Taxes that may have accrued since
the date of the Company Balance Sheet in connection with the operation
of the business of Company in the ordinary course.
(vii) There is no contract, agreement, plan or arrangement to which
Company is a party as of the date of this Agreement, including but not
limited to the provisions of this Agreement, covering
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any employee or former employee of Company, individually or
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Company.
(ix) Company is not a party to or has any obligation under any tax-
sharing, tax indemnity or tax allocation agreement or arrangement.
(x) Except as may be required as a result of the Merger, Company has
not been and will not be required to include any adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to Section 481
or Section 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting
methods employed prior to the Closing T.
(xi) Company's assets are not tax exempt use property within the
meaning of Section 168(h) of the Code.
(xii) The Company Disclosure Letter lists (A) any foreign Tax
holidays, (B) any intercompany transfer pricing agreements, or other
arrangements that have been established by Company or any of its
subsidiaries with any Tax authority and (C) any expatriate programs or
policies affecting Company.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) Company owns no real property and has never owned any real property.
The Company Disclosure Letter lists all real property leases to which
Company is a party as of the date of this Agreement and each amendment
thereto that is in effect as of the date of this Agreement. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) that would
give rise to a claim in an amount greater than $15,000.
(b) Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in
its business, free and clear of any liens, pledges, charges, claims,
security interests or other encumbrances of any sort ("Liens"), except as
reflected in the Company Financials and except for liens for taxes not yet
due and payable and such Liens or other imperfections of title and
encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
2.9 Intellectual Property. For the purposes of this Agreement, the following
terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyright registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs and
any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world;
(vi) all databases and data collections and all rights therein throughout
the world; (vii) all moral and
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economic rights of authors and inventors, however denominated, throughout
the world, and (viii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Company.
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; and (iv) any other Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded by any
state, government or other public legal authority.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Company.
(a) No material Company Intellectual Property or product or service of
Company is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Company, or which may affect the
validity, use or enforceability of such Company Intellectual Property.
(b) To Company's knowledge, each material item of Company Registered
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees currently due in connection with such
Registered Intellectual Property have been made and all necessary
documents, recordations and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property.
(c) Company owns and has good and exclusive title to, or has license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to, each material item of Company Intellectual
Property free and clear of any lien or encumbrance (excluding licenses and
related restrictions); and Company is the exclusive owner of all trademarks
and trade names used in connection with the operation or conduct of the
business of Company, including the sale of any products or the provision of
any services by Company.
(d) Company owns exclusively, and has good title to, all copyrighted
works that are Company products or which Company otherwise expressly
purports to own.
(e) To the extent that any material Intellectual Property has been
developed or created by a third party for Company, Company has a written
agreement with such third party with respect thereto and Company thereby
either (i) has obtained ownership of, and is the exclusive owner of, or
(ii) has obtained a license (sufficient for the conduct of its business as
currently conducted and as proposed to be conducted) to all such third
party's Intellectual Property in such work, material or invention by
operation of law or by valid assignment, to the fullest extent it is
legally possible to do so.
(f) Company has not transferred ownership of, or granted any exclusive
license with respect to, any Intellectual Property that is or was material
Company Intellectual Property, to any third party.
(g) The Company Disclosure Letter lists all material contracts, licenses
and agreements to which Company is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course), or (ii) pursuant to which a
third party has licensed or transferred any material Intellectual Property
to Company.
(h) All material contracts, licenses and agreements relating to the
Company Intellectual Property are in full force and effect. The
consummation of the transactions contemplated by this Agreement will
neither violate nor result in the breach, modification, cancellation,
termination, or suspension of such contracts, licenses and agreements.
Company is in material compliance with, and has not materially breached any
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term any of, such contracts, licenses and agreements and, to the knowledge
of Company, all other parties to such contracts, licenses and agreements
are in compliance with, and have not materially breached any term of, such
contracts, licenses and agreements. Following the Closing Date, the
Surviving Corporation will be permitted to exercise all of Company's rights
under such contracts, licenses and agreements to the same extent Company
would have been able to had the transactions contemplated by this Agreement
not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which Company
would otherwise be required to pay.
(i) The operation of the business of Company as such business has been
conducted, including Company's design, development, manufacture, marketing
and sale of the products or services of Company (including with respect to
products currently under development) has not, does not and will not
infringe or misappropriate the Intellectual Property of any third party or,
to its knowledge, constitute unfair competition or trade practices under
the laws of any jurisdiction.
(j) Company has not received notice from any third party that the
operation of the business of Company or any act, product or service of
Company, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the
laws of any jurisdiction.
(k) To the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property.
(l) Company has taken reasonable steps to protect Company's rights in
Company's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to Company, and, without limiting the foregoing, Company has and
enforces a policy requiring each employee and contractor to execute a
proprietary information/confidentiality agreement substantially in the form
provided to Parent and all current and former employees and contractors of
Company have executed such an agreement, except where the failure to do so
is not reasonably expected to be material to Company.
2.10 Compliance; Permits; Restrictions.
(a) Company is not in conflict with, or in default or in violation of (i)
any law, rule, regulation, order, judgment or decree applicable to Company
or by which Company or any of its subsidiaries or any of their respective
properties is bound or affected, or (ii) any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Company is a party or by which Company or
any of its properties is bound or affected, except for conflicts,
violations and defaults that (individually or in the aggregate) would not
cause Company to lose any material benefit or incur any material liability.
No investigation or review by any Governmental Entity is pending or, to
Company's knowledge, has been threatened. Company is not aware of any facts
or circumstances concerning Company that could reasonably be expected to
give rise to any investigation of Company by any Government Entity. There
is no material agreement, judgment, injunction, order or decree binding
upon Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any
business practice of Company or any of its subsidiaries, any acquisition of
material property by Company or any of its subsidiaries or the conduct of
business by Company as currently conducted.
(b) Company holds, to the extent legally required, all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities
that are material to and required for the operation of the business of
Company as currently conducted (collectively, the "Company Permits").
Company is in compliance in all material respects with the terms of the
Company Permits, except where the failure to be in compliance with the
terms of the Company Permits would not be material to Company.
2.11 Litigation. There are no claims, suits, actions or proceedings pending
or, to the knowledge of the Company, threatened against, relating to or
affecting Company, before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seeks to restrain
or enjoin the
A-11
consummation of the transactions contemplated by this Agreement or which could
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a material effect. Company is not aware
of any facts or circumstances concerning Company that could reasonably be
expected to give rise to any claim, suit, action or proceeding against Company
by any third party. Except for the United States Food and Drug Administration
and similar agencies of foreign governments, no Governmental Entity has at any
time challenged or questioned in a writing delivered to Company the legal right
of Company to design, manufacture, offer or sell any of its products in the
present manner or style thereof.
Company has never been subject to an audit, compliance review, investigation
or like contract review by the GSA Office of the Inspector General or other
Governmental Entity or agent thereof in connection with any government contract
(a "Government Audit"). To Company's knowledge, no Government Audit is
threatened, and in the event of such Government Audit, to the knowledge of
Company no basis exists for a finding of noncompliance with any material
provision of any government contract or a refund of any amounts paid or owed by
any Governmental Entity pursuant to such government contract. Company is not
aware of any facts or circumstances concerning Company that could reasonably be
expected to give rise to any Government Audit. For each item disclosed in the
Company Schedule pursuant to this Section 2.11 a true and complete copy of all
correspondence and documentation with respect thereto has been provided to
Parent.
2.12 Brokers' and Finders' Fees. Except for fees payable to EVEREN
Securities, Inc. pursuant to an engagement letter dated August 20, 1998, a copy
of which has been provided to Parent, Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.13 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 2.13(a)(i) below (which definition shall apply only to
this Section 2.13), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or
has been maintained, contributed to, or required to be contributed to,
by Company or any Affiliate for the benefit of any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or retired employee,
officer, or director of Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas,
work permit or similar agreement or contract between Company or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "IRS" shall mean the Internal Revenue Service;
A-12
(x) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xi) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xii) "Pension Plan" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. The Company Disclosure Letter contains an accurate and
complete list of each Company Employee Plan and each material Employee
Agreement. Company does not have any plan or commitment to establish any
new Company Employee Plan, to modify any Company Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing,
or as required by this Agreement), or to enter into any Company Employee
Plan or material Employee Agreement, nor does it have any intention or
commitment to do any of the foregoing.
(c) Documents. Company has provided or made available to Parent: (i)
correct and complete copies of all documents embodying to each Company
Employee Plan and each Employee Agreement including all amendments thereto
and written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the
three (3) most recent annual reports (Form Series 5500 and all schedules
and financial statements attached thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust;
(iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent
summary plan description together with the summary of material
modifications thereto, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination, opinion, notification
and advisory letters, and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the DOL
with respect to any Company Employee Plan; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including,
but not limited to, administrative service agreements, group annuity
contracts and group insurance contracts; (viii) all communications material
to any Employee or Employees relating to any Company Employee Plan and any
proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material liability to Company; (ix) all COBRA forms and
related notices; and (x) all registration statements and prospectuses
prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. (i) Company has performed in all material
respects all obligations required to be performed by it under, is not in
any material respect in default or violation of, and has no knowledge of
any default or violation by any other party to, each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable
determination letter from the IRS with respect to each such Plan as to its
qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make
any amendments necessary to obtain a favorable determination, or is
maintained pursuant to a standardized prototype plan; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections
406 and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA,
has occurred with respect to any Company Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of Company,
threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any
Company Employee Plan; (v) each Company
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Employee Plan can be amended, terminated or otherwise discontinued
immediately prior to the Effective Time in accordance with its terms,
without liability to Parent, Company or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event
or benefits accrued through the date of such amendment, termination or
discontinuance); (vi) there are no audits, inquiries or proceedings pending
or, to the knowledge of Company or any Affiliates, threatened by the IRS or
DOL with respect to any Company Employee Plan; and (vii) neither Company
nor any Affiliate is subject to any material penalty or tax with respect to
any Company Employee Plan under Section 402(i) of ERISA or Sections 4975
through 4980 of the Code.
(e) Pension Plans. Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension
Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Company contributed to or been
required to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or
other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and Company
has never represented, promised or contracted (whether in oral or written
form) to any Employee (either individually or to Employees as a group) or
any other person that such Employee(s) or other person would be provided
with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute. Except for
obligations set forth on Schedule 2.5(c), Parent shall incur no liability
with respect to or on account of any Company Employee Plan, including
without limitation liabilities Company may have to employees or former
employees under all Company Employee Plans, or to any employee as a result
of termination of employment by Company.
(h) Neither Company nor any Affiliate has, prior to the Effective Time,
and in any material respect, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA or any similar provisions
of state law applicable to its Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(ii) No payment or benefit which will or may be made by Company or
its Affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of
the Code.
(j) Employment Matters. Company: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to
be withheld from the wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees
(other than routine payments to be made in the normal course of business
and consistent with past practice). There are no pending, threatened or
reasonably anticipated claims or actions against Company under any worker's
compensation policy or long-term disability policy. To Company's knowledge,
no employee of Company has violated any employment contract, nondisclosure
agreement or noncompetition agreement by which
A-14
such employee is bound due to such employee being employed by Company and
disclosing to Company or using trade secrets or proprietary information of
any other person or entity.
(k) Labor. No work stoppage or labor strike against Company is pending,
threatened or reasonably anticipated. Company does not know of any
activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending,
or, to the knowledge of Company, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices
or discrimination complaints. Neither Company nor any of its subsidiaries
has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. Company is not presently, nor has it been in
the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining
agreement is being negotiated by Company.
2.14 Environmental Matters.
(a) Hazardous Material. Except as would not result in material liability
to Company, no underground storage tanks and no amount of any substance
that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined
as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated
pursuant to said laws, but excluding office and janitorial supplies, (a
"Hazardous Material") are present, as a result of the actions of Company or
any affiliate of Company, or, to Company's knowledge, as a result of any
actions of any third party involving Company or its properties, in, on or
under any property, including the land and the improvements, ground water
and surface water thereof that Company has at any time owned, operated,
occupied or leased.
(b) Hazardous Materials Activities. Except as would not result in a
material liability to Company (in any individual case or in the aggregate)
(i) Company has not transported, stored, used, manufactured, disposed of
released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, and (ii)
Company has not disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "Hazardous Materials Activities") in violation of
any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Company Environmental
Permits") necessary for the conduct of Company's Hazardous Material
Activities (if any) and other businesses of Company as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to
Company's knowledge, no action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any
Governmental Entity against Company in a writing delivered to Company
concerning any Company Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of Company. To Company's knowledge, there is
no fact or circumstance which is reasonably likely to involve Company in
any environmental litigation or impose upon Company any material
environmental liability.
2.15 Agreements, Contracts and Commitments. Company is not a party to or is
bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or director or higher level employee or member of Company's
board of directors, other than those that are terminable by Company or any
of its subsidiaries on no more than thirty (30) days notice without
liability or financial
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obligation, except to the extent general principles of wrongful termination
law may limit Company's or any of its subsidiaries' ability to terminate
employees at will;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with Phase III
clinical trials of Procysteine;
(d) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Company to engage in any line of
business or to compete with any person or granting any exclusive
distribution rights;
(e) ny agreement, contract or commitment currently in force relating to
the disposition or acquisition by Company after the date of this Agreement
of a material amount of assets or pursuant to which Company has any
material ownership interest in any corporation, partnership, joint venture
or other business enterprise;
(f) ny joint marketing or development agreement currently in force under
which Company has continuing material obligations to jointly market any
product, technology or service and which may not be canceled without
penalty upon notice of thirty (30) days or less, or any material agreement
pursuant to which Company has continuing material obligations to jointly
develop any intellectual property that will not be owned, in whole or in
part, by Company and which may not be canceled without penalty upon notice
of thirty (30) days or less;
(g) any agreement, contract or commitment currently in force under which
Company is required to pay any fees, costs or expenses related to the
preparation, filing, prosecution or maintenance of any patent applications
in the United States or elsewhere;
(h) any agreement, contract or commitment currently in force to license
any third party to manufacture or reproduce any Company product, service or
technology;
(i) any agreement, contract or commitment currently in force under which
Company is required to pay any amount in connection with the completion,
continuation or termination of any clinical studies or trials; or
(j) any agreement, contract or commitment currently in force under which
Company is required to pay any third party any amount in connection with
any financing, merger, acquisition, joint development, or other strategic
partnering activity.
Neither Company, nor to Company's knowledge any other party to a Company
Contract (as defined below), is in breach, violation or default under, and
Company has not received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments listed in Section 2.16 of the Company
Disclosure Letter (any such agreement, contract or commitment, a "Company
Contract") in such a manner as would permit any other party to seek material
damages or other remedies (for any or all of such breaches, violations or
defaults, in the aggregate).
2.16 Change of Control Payments. The Company Disclosure Letter sets forth
each plan or agreement pursuant to which any amounts may become payable
(whether currently or in the future) to current or former officers and
directors of Company as a result of or in connection with the Merger.
2.17 Statements; proxy statement/prospectus. The information supplied by
Company for inclusion in the Registration Statement (as defined in Section
3.3(b)) shall not, at the time the Registration Statement is filed with the SEC
or at the time it becomes effective under the Securities Act, contain any
untrue statement of a
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material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by Company for inclusion in the proxy statement/prospectus
to be sent to (a) the stockholders of Company in connection with the meeting of
Company's stockholders to consider the approval and adoption of this Agreement
and the approval of the Merger (the "Company Stockholders' Meeting") (such
proxy statement/prospectus as amended or supplemented is referred to herein as
the "proxy statement/prospectus") shall not, on the date the proxy
statement/prospectus is first mailed to Company's stockholders or at the time
of the Company Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The proxy
statement/prospectus will comply as to form in all material respects with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations thereunder. If at any time prior to the Effective Time any event
relating to Company or any of its affiliates, officers or directors should be
discovered by Company which is required to be set forth in an amendment to the
Registration Statement or a supplement to the proxy statement/prospectus,
Company shall promptly inform Parent. Notwithstanding the foregoing, Company
makes no representation or warranty with respect to any information supplied by
Parent or Merger Sub which is contained in any of the foregoing documents.
2.19 Board Approval. The board of directors of Company has, as of the date
of this Agreement, unanimously (i) approved the Merger and the execution and
delivery of this Agreement, (ii) declared that the Merger is advisable and
(iii) recommended that the stockholders of Company approve and adopt this
Agreement and approve the Merger.
2.20 Fairness Opinion. Company's board of directors has received a written
opinion from EVEREN Securities, Inc. dated as of the date hereof, to the effect
that as of the date hereof, the Merger and the Exchange Ratio are fair to
Company's stockholders from a financial point of view and has delivered to
Parent a copy of such opinion.
2.21 Section 203 of the Delaware General Corporation Law Not Applicable. The
board of directors of Company has taken all actions so that the restrictions
contained in Section 203 of the Delaware General Corporation Law applicable to
a "business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or the other transactions contemplated by this Agreement.
2.22 Customs. Company has acted with reasonable care to properly value and
classify, in accordance with applicable tariff laws, rules and regulations, all
goods that Company imports into the United States or into any other country
(the "Imported Goods"). To Company's knowledge, there are currently no material
claims pending against Company by the U.S. Customs Service (or other foreign
customs authorities) relating to the valuation, classification or marking of
the Imported Goods.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to
Company, subject to the exceptions specifically disclosed in writing in the
disclosure letter and referencing a specific representation supplied by Parent
to Company dated as of the date hereof and certified by a duly authorized
officer of Parent (the "Parent Disclosure Letter"), as follows:
3.1 Organization of Parent and Merger Sub.
(a) Each of Parent and Merger Sub (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized; (ii) has the corporate or other power and authority
to own, lease and operate its assets and property and to carry on its
business as now being
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conducted; and (iii), except as would not be material to Parent, is duly
qualified or licensed to do business in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature
of its activities makes such qualification or licensing necessary.
(b) Parent has delivered or made available to Company a true and correct
copy of the Certificate of Incorporation, Certificate of Designation of
Rights Preferences and Privileges of Series B Convertible Preferred Stock
(the "Certificate of Designation") and Bylaws of Parent, each as amended to
date, and each such instrument is in full force and effect. Neither Parent
nor any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation, Certificate of Designation or Bylaws or
equivalent governing instruments.
3.2 Parent and Merger Sub Capital Structure. The authorized capital stock of
Parent consists of 30,000,000 shares of Common Stock, of which there were
12,748,179 shares issued and outstanding as of November 6, 1998 and 2,000,000
shares of Preferred Stock, 30,000 of which have been designated Series A
Preferred Stock, none of which are issued and outstanding, and 662,500 of which
have been designated Series B Convertible Preferred Stock, 562,000 of which are
issued and outstanding. As of November 6, 1998, there were outstanding options
to purchase 1,425,565 shares of Parent Common Stock. Except as described herein
and as set forth in Section 3.2 of the Parent Disclosure Letter, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Parent is a party or by
which it is bound obligating Parent to issue, deliver or sell, or cause to be
issued delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock,
partnerships interests or similar ownership interest of Parent. All outstanding
shares of Parent Common Stock and Series B Convertible Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Certificate of Incorporation,
Certificate of Designation or Bylaws of Parent or any agreement or document to
which Parent is a party or by which it is bound. The authorized capital stock
of Merger Sub consists of 1000 shares of Common Stock, $0.001 par value, all of
which, as of the date hereof, are issued and outstanding and are held by
Parent. Merger Sub was formed on or about December 17, 1998 for the purpose of
consummating the Merger and has no material assets or liabilities except as
necessary for such purpose.
3.3 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into, as applicable, this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Parent and Merger Sub, subject only to the filing of the Certificate of
Merger pursuant to Delaware Law. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery by Company, constitutes the valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of
equity. The execution and delivery of this Agreement by each of Parent and
Merger Sub does not, and the performance of this Agreement by each of
Parent and Merger Sub will not, (i) conflict with or violate the
Certificate of Incorporation, Certificate of Designation or Bylaws of
Parent or Merger Sub, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or Merger Sub or
by which any of their respective properties is bound or affected or (iii)
result in any material breach of or constitute a material default (or an
event that with notice or lapse of time or both would become a material
default) under, or impair Parent's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or encumbrance on any of the material
properties or assets of Parent or Merger Sub pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument
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or obligation to which Parent or Merger Sub is a party or by which Parent
or Merger Sub or any of their respective properties are bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be
obtained or made by Parent or Merger Sub in connection with the execution
and delivery of this Agreement or the consummation of the Merger, except
for (i) the filing of a Form S-4 (or any similar successor form thereto)
Registration Statement (the "Registration Statement") with the SEC in
accordance with the Securities Act, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (iii) such
consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal, foreign and state
securities (or related) laws and the HSR Act and the securities or
antitrust laws of any foreign country, (iv) such filings as are required by
the Nasdaq National Market or other exchange to permit the trading of
shares of Parent Company stock issued in connection with the Merger
(subject to the terms of the Affiliate Agreements) and (v) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent or Company or have a
material adverse effect on the ability of the parties hereto to consummate
the Merger.
3.4 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since January 1, 1997. All such required
forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "Parent SEC
Reports." As of their respective dates, the Parent SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financials"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto,
(ii) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may
be permitted by the SEC on Form 1O-Q under the Exchange Act) and (iii)
fairly presented the consolidated financial position of Parent as at the
respective dates thereof and the consolidated results of Parent's
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were
or are subject to normal and recurring year-end adjustments. The balance
sheet of Parent contained in Parent SEC Reports as of December 31, 1997, is
hereinafter referred to as the "Parent Balance Sheet."
3.5 Absence of Certain Changes or Events. Since the date of the Parent
Balance Sheet there has not been any Material Adverse Effect on Parent. Parent
has no material obligations or liabilities of any nature (matured or unmatured,
fixed or contingent) other than (i) those set forth or adequately provided for
in the Parent Balance Sheet, (ii) those not required under GAAP to be set forth
in the Parent Balance Sheet, (iii) those incurred in the ordinary course of
business since the date of the Parent Balance Sheet and consistent with past
practice, and (iv) those incurred in connection with the execution and delivery
of this Agreement.
3.6 Statements; proxy statement/prospectus. The information supplied by
Parent for inclusion in the Registration Statement shall not at, the time the
Registration Statement is filed with the SEC or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by Parent for inclusion in the proxy statement/prospectus
shall not, on the date the
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proxy statement/prospectus is first mailed to Company's stockholders or at the
time of the Company Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The proxy
statement/prospectus will comply as to form in all material respects with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations thereunder. If at any time prior to the Effective Time, any event
relating to Parent or any of its affiliates, officers or directors should be
discovered by Parent which is required to be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement Prospectus,
Parent shall promptly inform Company. Notwithstanding the foregoing, Parent
makes no representation or warranty with respect to any information supplied by
Company which is contained in any of the foregoing documents.
3.7 Valid Issuance. The Parent Common Stock to be issued in the Merger, when
issued in accordance with the provisions of this Agreement: (a) will be validly
issued, fully paid and nonassessable, and (b) will not be subject to any
restrictions on resale under the Securities Act, other than restrictions
imposed by Rule 145 promulgated under the Securities Act.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company shall, except to the
extent that Parent shall otherwise consent in writing, carry on its business,
in all material respects, in a manner consistent with the winding down of
Company and in compliance with all applicable laws and regulations, pay its
debts and taxes when due subject to good faith disputes over such debts or
taxes and pay or perform other material obligations when due. In addition,
Company will promptly notify Parent of any material event involving its
business or operations.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Article 4 of the Company Disclosure Letter, without the prior
written consent of Parent, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on
the date hereof and as previously disclosed in writing or made available to
Parent, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Company
Intellectual Property, or enter into grants to future patent rights;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of; in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
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(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing of any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into shares of capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or convertible securities, other than the issuance delivery and/or
sale of shares of Company Common Stock pursuant to the exercise of stock
options therefor outstanding as of the date of this Agreement;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof; or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Company or enter into any material joint
ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any properties
or assets which are material, individually or in the aggregate, to the
business of Company, except for the destruction of Procysteine according to
terms or agreements disclosed to Parent prior to such destruction;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing;
(k) Adopt or amend any employee benefit plan or employee stock purchase
or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter
agreements entered into in the ordinary course of business consistent with
past practice with employees who are terminable "at will,"), pay any
special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates or fringe benefits (including rights to
severance or indemnification) of its directors, officers, employees or
consultants other than in the ordinary course of business, consistent with
past practice, or change in any material respect any management policies or
procedures;
(1) Except for payments listed on Schedule 2.5(c) of the Company
Disclosure Letter, make any payments individually in excess of $25,000 or
in the aggregate in excess of $50,000;
(m) except in the ordinary course of business, modify, amend or terminate
any Company Contract or waive, release or assign any material rights or
claims thereunder;
(n) enter into any contracts, agreements, or obligations that would be
required to be included in Section 2.15 of the Company Disclosure Letter as
a Company Contract;
(o) materially revalue any of its assets or, except as required by GAAP,
make any change in accounting methods, principles or practices;
(p) engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement; or
(q) make or change any Tax or accounting election, change any annual
accounting period, adopt or change any accounting method, file any amended
Return, enter into any closing agreement, settle any Tax claim or
assessment relating to Company, surrender any right to claim refund of
Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to Company, or take any
other action or omit to take any action if any such other action or
omission would have the effect of increasing the Tax liability of Company
or Parent; or
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(r) agree in writing or otherwise to take any of the actions described in
Article 4 (a) through (r) above.
4.2 Conduct of Business by Parent. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, except as permitted by the terms
of this Agreement and except as provided in Article 4 of the Parent Disclosure
Letter, without the prior written consent of Company (which consent shall not
be unreasonably withheld), during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Parent shall not, except for the payment of
dividends to the holders of Parent's Series B Convertible Preferred Stock
pursuant to the Certificate of Designation, declare, set aside or pay any
dividends on or make any other distributions (whether in cash, stock, equity
securities or property) in respect of any capital stock or split, combine or
reclassify any capital stock or issue or authorize the issuance of any other
securities in respect of in lieu of or in substitution for any capital stock.
4.3 No Right to Continued Employment or Benefits. Parent does not intend to
offer employment to any employees of Company. No provision in this Agreement
shall create any third party beneficiary or other right in any person
(including any beneficiary or dependent thereof) for any reason, including,
without limitation, in respect of continued employment with Company (or any
affiliate of Company) or in respect of any benefits that may be provided,
directly or indirectly, under any plan or arrangement maintained by Parent or
any affiliate of Company or Parent. Except for costs and liabilities that are
included in the calculation of Net Cash, there are no costs and liabilities
arising as a result of the termination and/or transfer of Company's employees,
including without limitation, with respect to any employee benefits, the
Company Employee Plans, vacation and sick pay accruals, salaries and bonuses,
and any severance or termination arrangements.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings.
(a) As promptly as practicable after the execution of this Agreement,
Company and Parent will prepare, and file with the SEC, the proxy
statement/prospectus and Parent will prepare and file with the SEC the
Registration Statement in which the proxy statement/prospectus will be
included as a prospectus; provided, however, that the proxy
statement/prospectus shall not be filed with the SEC until Company has
received a final report from its auditors for Company's financial
statements for the period ended November 30, 1998 and any contingencies
regarding such financial statements have been finally resolved. Each of
Company and Parent will respond to any comments of the SEC, will use its
respective commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing, and Company will cause the proxy
statement/prospectus to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by
the SEC. As promptly as practicable after the date of this Agreement, each
of Company and Parent will prepare and file any other filings required to
be filed by it under the Exchange Act, the Securities Act or any other
Federal, foreign or Blue Sky or related laws relating to the Merger and the
transactions contemplated by this Agreement (the "Other Filings"). Each of
Company and Parent will notify the other promptly upon the receipt of any
comments from the SEC or its staff or any other government officials and of
any request by the SEC or its staff or any other government officials for
amendments or supplements to the Registration Statement, the proxy
statement/prospectus or any Other Filing or for additional information and
will supply the other with copies of all correspondence between such party
or any of its representatives, on the one hand, and the SEC, or its staff
or any other government officials, on the other hand, with respect to the
Registration Statement, the proxy statement/prospectus, the Merger or any
Other Filing. Each of Company and Parent will cause all documents that it
is responsible for filing with the SEC or other regulatory authorities
under this Section 5.1(a) to comply in all material
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respects with all applicable requirements of law and the rules and
regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the proxy
statement/prospectus, the Registration Statement or any Other Filing,
Company or Parent, as the case may be, will promptly inform the other of
such occurrence and cooperate in filing with the SEC or its staff or any
other government officials, and/or mailing to stockholders of Company, such
amendment or supplement.
(b) Notwithstanding Section 5.1(a) of this Agreement, in the event that
the Registration Statement has not been declared effective by the SEC and
the proxy statement/prospectus mailed to Company's stockholders by February
12, 1999, Parent, in its sole discretion, may delay the effectiveness of
the Registration Statement until the earlier of (i) the date Parent files
its Form 10-k for the year ended December 31, 1998, with the SEC or (ii)
April 15, 1999, provided, that Parent shall have filed a Form 12b-25 with
the SEC pursuant to the Exchange Act and such From 12b-25 shall be
effective in order for Parent to delay effectiveness of the Registration
Statement beyond March 31, 1999. Company shall mail the proxy
statement/prospectus to Company stockholders as soon as practicable after
the effective date of the Registration Statement.
5.2 Meeting of Company Stockholders.
(a) Promptly after the date hereof, Company will take all action
necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders' Meeting to be
held as promptly as practicable, and in any event (to the extent
permissible under applicable law) within 35 days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon
this Agreement and the Merger. Company will use its commercially reasonable
efforts to solicit from its stockholders proxies. Notwithstanding anything
to the contrary contained in this Agreement, Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to
ensure that any necessary supplement or amendment to the proxy
statement/prospectus is provided to Company's stockholders in advance of a
vote on the Merger and this Agreement or if, as of the time for which
Company Stockholders' Meeting is originally scheduled (as set forth in the
proxy statement/prospectus), there are insufficient shares of Company
Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company Stockholders'
Meeting. Company shall ensure that the Company Stockholders' Meeting is
called, noticed, convened, held and conducted, and that all proxies
solicited by the Company in connection with the Company Stockholders'
Meeting are solicited, in compliance with the Delaware Law, its Certificate
of Incorporation and Bylaws, the rules of Nasdaq and all other applicable
legal requirements. Company's obligation to call, give notice of, convene
and hold the Company Stockholders' Meeting in accordance with this Section
5.2(a) shall not be limited to or otherwise affected by the commencement,
disclosure, announcement or submission to Company of any Acquisition
Proposal (as defined in Section 5.4(c)), or by any withdrawal, amendment or
modification of the recommendation of the board of directors of Company
with respect to the Merger.
(b) The board of directors of Company shall unanimously recommend that
Company's stockholders vote in favor of and adopt and approve this
Agreement and the Merger at the Company Stockholders' Meeting. The
Prospectus/Proxy Statement shall include a statement to the effect that the
board of directors of the Company has unanimously recommended that
Company's stockholders vote in favor of and adopt and approve this
Agreement and the Merger at the Company Stockholders' Meeting.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement, dated as of November 30, 1998 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms.
(b) Access to Information. Company will afford Parent and its
accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records and
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personnel of Company during the period prior to the Effective Time to
obtain all information concerning the business, properties, results of
operations and personnel of Company, as Parent may reasonably request. No
information or knowledge obtained by Parent in any investigation pursuant
to this Section 5.3 will affect or be deemed to modify any representation
or warranty contained herein or the conditions to the obligations of the
parties to consummate the Merger.
5.4 No Solicitation.
(a) Company and its officers, directors, employees or other agents of
Company (i) shall not, directly or indirectly, take any action to solicit,
initiate or encourage any inquiries or proposals that constitute, or which
could reasonably be expected to lead to, an Acquisition Proposal (as
defined in Section 5.4(c)), (ii) shall not, directly or indirectly, subject
to the terms of the immediately following sentence, engage in negotiations
or discussions with, or disclose any nonpublic information relating to
Company to, or afford access to the properties, books or records of Company
to, any person with regard to an Acquisition Proposal and (iii) shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person, firm or entity conducted
heretofore with respect to any of the foregoing; provided, however, that
nothing herein shall prohibit the Company board of directors from taking
and disclosing to Company's stockholders a position with respect to a
tender offer as required under Rules 14d-9 and 14e-2 promulgated under the
Exchange Act.
(b) Company shall notify Parent promptly (and, in any event, no later
than 48 hours), orally and in writing, after receipt by Company (or its
advisors) of any Acquisition Proposal or obtaining actual knowledge that
any person is submitting an Acquisition Proposal or any request for non-
public information relating to Company or for access to the properties,
books or records of Company by any person that has advised Company that it
may be considering making, or that has made, an Acquisition Proposal and
will keep Parent informed of the status and details of any such Acquisition
Proposal, notice, request or any correspondence or communications related
thereto and shall provide Parent with a written summary in reasonable
detail of such Acquisition Proposal, notice or request or correspondence or
communications related thereto (including the identity of the offeror and a
summary of the terms and conditions of such Acquisition Proposal).
(c) For purposes of this Agreement, "Acquisition Proposal" means any
written offer or proposal for, or any written indication of interest in, a
merger or other business combination involving Company or the acquisition
of 35% or more of the outstanding shares of capital stock of Company, or
the sale or transfer of all or substantially all of the assets (excluding
the sale or disposition of assets in the ordinary course of business) of
Company, other than the transactions contemplated by this Agreement.
5.5 Public Disclosure. Parent and Company will consult with each other, and
to the extent practicable, agree, before issuing any press release or otherwise
making any public statement with respect to the Merger, this Agreement or an
Acquisition Proposal and will not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law
or any listing agreement with a national securities exchange. The parties have
agreed to the text of the joint press release announcing the signing of this
Agreement.
5.6 Reasonable Efforts Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using reasonable efforts to
accomplish the following: (i) the taking of all reasonable action necessary
to cause the conditions precedent set forth in Article VI to be satisfied,
(ii) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities
and the making of all necessary
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registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking
of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third
parties, (iv) the defending of any suits, claims, actions, investigations
or proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed and (v) the
execution or delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of,
this Agreement. In connection with and without limiting the foregoing,
Company and its board of directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use
all reasonable efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this
Agreement and the transactions contemplated hereby. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be deemed
to require Parent or Company or any subsidiary or affiliate thereof to
agree to any divestiture by itself or any of its affiliates of shares of
capital stock or of any business, assets or property, or the imposition of
any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and
stock.
(b) Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate in any material respect, or any failure of Company to comply
with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in
each case, such that the conditions set forth in Section 6.3(a) or 6.3(b)
would not be satisfied; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
(c) Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming
untrue or inaccurate in any material respect, or any failure of Parent or
Merger Sub to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section
6.2(a) or 6.2(b) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
5.7 Third-Party Consents. As soon as practicable following the date hereof,
Parent and Company will each use its commercially reasonable efforts to obtain
any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.8 Indemnification.
(a) From and after the Effective Time, Parent will, and will cause the
Surviving Corporation to, fulfill and honor in all respects the obligations
of Company pursuant to any indemnification agreements between Company and
its directors and officers as of the Effective Time (the "Indemnified
Parties") and any indemnification provisions under Company's Certificate of
Incorporation or Bylaws as in effect on the date hereof. The Certificate of
Incorporation and Bylaws of the Surviving Corporation will contain
provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
Certificate of Incorporation and Bylaws of Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise
modified for a period of five years from the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who,
immediately prior to the Effective Time, were directors, officers,
employees or agents of Company, unless such modification is required by
law.
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(b) For a period of five years after the Effective Time, Parent will, and
will cause the Surviving Corporation to use its commercially reasonable
efforts to, maintain in effect, directors' and officers' liability
insurance covering those persons who are currently covered by Company's
directors' and officers' liability insurance policy on terms comparable to
those applicable to the current directors and officers of Company;
provided, however, that in no event will Parent or the Surviving
Corporation be required to expend in excess of 125% of the annual premium
currently paid by Company for such coverage (or such coverage as is
available for such 125% of such annual premium).
5.9 Nasdaq Listing. Parent agrees to authorize, prior to the Effective Time,
for listing on Nasdaq the shares of Parent Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger, upon
official notice of issuance.
5.10 Affiliate Agreements. Set forth on the Company Disclosure Letter is a
list of the Affiliates (each a "Company Affiliate"). Company will provide
Parent with such information and documents as Parent reasonably requests for
purposes of reviewing such list. Company will use its commercially reasonable
efforts to deliver or cause to be delivered to Parent, as promptly as
practicable on or following the date hereof, from each Company Affiliate an
executed Affiliate Agreement, each of which will be in full force and effect as
of the Effective Time. Parent will be entitled to place appropriate legends on
the certificates evidencing any Parent Common Stock to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Company Affiliate Agreement.
5.11 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by
the parties. Company and Parent each shall promptly (a) supply the other with
any information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by the
FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate. Company
shall file a final clinical report with the United States Food and Drug
Administration ("FDA") and shall provide Parent a copy of such report. Company
shall take all such actions as are required to terminate any obligations to
file any reports with the FDA or equivalent foreign agencies.
5.12 Updates to Net Cash. Within fifteen (15) days of the end of each month
following the date of this Agreement until the earlier of the Closing Date or
the termination of this Agreement, Company shall provide Parent a Statement of
Net Cash in the form of Section 2.5(c) of the Company Disclosure Letter,
stating Company's Net Cash as of the last day of the month just ended. Company
shall provide Parent a final statement of Net Cash in the same form as used in
Section 2.5(c) of the Company Disclosure Letter on the Closing Date, showing
Company's Net Cash as of such date. Each statement of Net Cash provided under
this Section 5.12 shall be accompanied by a certificate signed by the President
of Company certifying that such statement is true and correct and accurately
reflects Company's Net Cash as of such date. Parent has the right to have its
auditors review such updates, and Company shall reasonably cooperate with such
review.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement shall have been approved
and adopted, and the Merger shall have been duly approved, by the requisite
vote under applicable law, by the stockholders of Company.
(b) Registration Statement Effective; Proxy Statement. The SEC shall have
declared the Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding
in respect of the proxy statement/prospectus, shall have been initiated or
threatened in writing by the SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger. All waiting
periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been
obtained.
(d) Listing of Shares. The shares of Parent Common Stock issuable, and
reserved for issuance, in connection with the Merger shall have been
authorized for listing on Nasdaq upon official notice of insurance.
6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and warranty of
Parent and Merger Sub contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall be true and
correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except (A) in each case, or in the aggregate, as
does not constitute a Material Adverse Effect on Parent and Merger Sub, (B)
for changes contemplated by this Agreement and (C) for those
representations and warranties which address matters only as of a
particular date (it being understood that, for purposes of determining the
accuracy of such representations and warranties, (i) all "Material Adverse
Effect" qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to
the Parent Disclosure Letter made or purported to have been made after the
date of this Agreement shall be disregarded). Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by an
authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have performed
or complied with all agreements and covenants required by this Agreement to
be performed or complied with by them on or prior to the Closing Date,
except where the failure to do so would not (individually or in the
aggregate) have a Material Adverse Effect on Parent and Merger Sub, and
Company shall have received a certificate to such effect signed on behalf
of Parent by an authorized officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Parent shall have occurred since the date of this Agreement.
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6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as
of the date of this Agreement and (ii) shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of
the Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Company, (B) for changes
contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect"
qualifications and other qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Company
Disclosure Letter made or purported to have been made after the date of
this Agreement shall be disregarded). Parent shall have received a
certificate with respect to the foregoing signed on behalf of Company by
the President of Company.
(b) Agreements and Covenants. Company shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date, except
where the failure to do so would not (individually or in the aggregate)
have a Material Adverse Effect on Company, and Parent shall have received a
certificate to such effect signed on behalf of Company by the President of
Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Company and its subsidiaries shall have occurred since the date of this
Agreement.
(d) Affiliate Agreements. Each of the persons set forth on Section 5.10
of the Company Disclosure Letter shall have entered into an Affiliate
Agreement and each of such agreements will be in full force and effect as
of the Effective Time.
(e) Consents. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses
or leases set forth on Schedule 6.3(e).
(f) Termination. Company shall have obtained notices of termination in
form acceptable to Parent of the agreements, contracts, licenses or leases
set forth on Schedule 6.3(f).
(g) Company shall provide a certificate of destruction or a bill of sale
in form satisfactory to Parent for all Procysteine owned or controlled by
Company, in bulk form or otherwise.
(h) Company shall provide evidence of abandonment or a bill of sale of
all Company Registered Intellectual Property in form satisfactory to
Parent.
(i) Company shall have entered into severance agreements acceptable to
Parent with any and all employees.
(j) The costs associated or incurred in connection with any actions or
inactions required by this Agreement shall be included in the calculation
of Net Cash.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approvals of the
stockholders of Company or Parent:
(a) by mutual written consent duly authorized by the Boards of Directors
of both Parent and Company;
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(b) by either Company or Parent if the Merger shall not have been
consummated by March 31, 1999 (the "Closing Deadline"); provided, however,
that if the Registration Statement shall not have been declared effective,
or the proxy statement/prospectus shall not have been mailed to Company
stockholders, by February 12, 1999, then the Closing Deadline shall be May
31, 1999, and provided further that the right to terminate this Agreement
under this Section 7.1(b) shall not be available to any party whose action
or failure to act has been a principal cause of or resulted in the failure
of the Merger to occur on or before such date and such action or failure to
act constitutes a breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is
final and nonappealable;
(d) by Parent if the required approval of the stockholders of Company
contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a meeting of Company
stockholders duly convened therefor or at any adjournment thereof;
(e) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of
Company) if a Triggering Event (as defined below) shall have occurred;
(f) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of
Company) if a Termination Event (as defined below) shall have occurred;
(g) by Company if the conditions set forth in Section 6.2(a) or Section
6.2(b) are not satisfied as of the date of this Agreement or the earlier of
(i) the Closing Date, provided that if such failure is curable by Parent,
then Company may not terminate this Agreement under this Section 7.1(g)(i)
for thirty days after delivery of written notice from Company to Parent of
such failure setting forth a description of such failure in reasonable
detail, provided Parent continues to exercise commercially reasonable
efforts to cure such failure (it being understood that Company may not
terminate this Agreement pursuant to this paragraph (g) if Company shall
have violated the conditions of Section 6.3(a) or Section 6.3(b) of this
Agreement, materially breached this Agreement or if such failure by Parent
is cured during such thirty day period), or (ii) the Closing Deadline; or
(h) by Parent if the conditions set forth in Section 6.3(a) or Section
6.3(b) are not satisfied as of the date of this Agreement or the earlier of
(i) the Closing Date, provided that if such failure is curable by Company,
then Parent may not terminate this Agreement under this Section 7.1(h)(i)
for thirty days after delivery of written notice from Parent to Company of
such failure setting forth a description of such failure in reasonable
detail, provided Company continues to exercise commercially reasonable
efforts to cure such failure (it being understood that Parent may not
terminate this Agreement pursuant to this paragraph (h) if Parent shall
have violated the conditions of Section 6.2(a) or Section 6.2(b) of this
Agreement, materially breached this Agreement or if such failure by Company
is cured during such thirty day period), or (ii) the Closing Deadline.
For the purposes of this Agreement, a "Termination Event" shall be deemed to
occur if Company shall not have held the Company Stockholder's Meeting by the
Closing Deadline.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) the board of directors of Company or any committee
thereof shall for any reason have withdrawn or shall have amended or modified
in a manner adverse to Parent its unanimous recommendation in favor of the
adoption and approval of the Agreement or the approval of the Merger; (ii)
Company shall have failed to include in the proxy statement/prospectus the
unanimous recommendation of the board of directors of Company in favor of the
adoption and approval of the Agreement and the approval of the Merger; (iii)
the board of directors of Company fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Merger within five (5) business days after Parent requests in
writing that
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such recommendation be reaffirmed at any time following the public announcement
of an Acquisition Proposal; (iv) the board of directors of Company or any
committee thereof shall have approved or publicly recommended any Acquisition
Proposal; (v) Company shall have entered into any letter of intent or similar
document or any agreement, contract or commitment accepting any Acquisition
Proposal; (vi) a tender or exchange offer relating to securities of Company
shall have been commenced by a Person unaffiliated with Parent and Company
shall not have sent to its securityholders pursuant to Rule 14e-2 promulgated
under the Securities Act, within ten (10) business days after such tender or
exchange offer is first published sent or given, a statement disclosing that
Company recommends rejection of such tender or exchange offer; or (vii) Company
shall have otherwise breached its obligations under Sections 5.2 and/or 5.4
hereof.
7.2 Notice of Termination Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in
Section 7.1, this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8 (miscellaneous),
each of which shall survive the termination of this Agreement, and (ii) nothing
herein shall relieve any party from liability for any willful breach of this
Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses
whether or not the Merger is consummated; provided, however, that Parent
and Company shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in relation to the
printing and filing (with the SEC) of the proxy statement/prospectus
(including any preliminary materials related thereto) and the Registration
Statement (including financial statements and exhibits) and any amendments
or supplements thereto.
(b) Company Payments. In the event that this Agreement is terminated by
Parent or Company, as applicable, pursuant to Section 7.1(d), (e), (f),
provided that the Registration Statement shall have been declared effective
by April 15, 1999, or (h), Company shall promptly, but in no event later
than two days after the date of such termination, pay Parent a fee equal to
$500,000 in immediately available funds (the "Termination Fee"); provided,
however, that such payment shall not be due if in the case of termination
under Section 7.1(d), the failure to obtain the required stockholder
approval is primarily the result of a Material Adverse Effect on Parent.
Company acknowledges that the agreements contained in this Section 7.3(b)
are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if Company fails promptly to pay the amounts due
pursuant to this Section 7.3(b), and, in order to obtain such payment,
Parent commences a suit which results in a judgment against Company for the
amounts set forth in this Section 7.3(b), Company shall pay to Parent its
reasonable costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amounts set forth
in this Section 7.3(b) at the prime rate of The Chase Manhattan Bank in
effect on the date such payment was required to be made. Except as provided
by law, payments pursuant to this Section 7.3(b) are the sole remedy for
termination or breach of this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or
A-30
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. Delay in
exercising any right under this Agreement shall not constitute a waiver of such
right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at
the following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
KeraVision, Inc.
48630 Milmont Drive
Fremont, California 94538
Attention: Mark Fischer-Colbrie
Telephone No.: (510) 353-3008
Telecopy No.: (510) 353-3030
with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Attention: Michael W. Hall
Telephone No.: (650) 854-4488
Telecopy No.: (650) 233-8386
(b) if to Company, to:
Transcend Therapeutics, Inc.
640 Memorial Drive
Cambridge, Massachusetts 02139
Attention: B. Nicholas Harvey
Telephone No.: (617) 374-1211
Telecopy No.: (617) 374-1202
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Steven D. Singer
Telephone No.: (617) 526-6439
Telecopy No.: (617) 526-5000
Notices by personal delivery or via nationally recognized overnight delivery
service shall be effective on receipt. Telecopied notices shall be effective on
the date of receipt if received by 5:00 p.m. local time where received, and on
the next business day if received thereafter.
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8.3 Interpretation of Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitations." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When reference is made
herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such
entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any
of the Chief Executive Officer, Chief Financial Officer or Controller of
such party, has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is materially adverse to the
business, assets (including intangible assets), capitalization, financial
condition or results of operations of such entity and its subsidiaries
taken as a whole, except for those changes, events, violations,
inaccuracies, circumstances and effects that (i) are caused by conditions
affecting the United States economy as a whole, which conditions do not
affect such entity in a disproportionate manner, or (ii) are related to or
result from announcement or pendency of the Merger. With respect to
Company, a Material Adverse Effect shall have occurred if Net Cash as of
the Closing Date is less than $7 million, regardless of how caused.
Notwithstanding anything to the contrary herein, no change, event,
violation, inaccuracy, circumstance or effect arising from or relating to
Company's clinical trials shall constitute a Material Adverse Effect with
respect to Company, except to the extent such change, event violation,
inaccuracy, circumstance or effect is based on events taking place after,
or based on information materially different from that given to Parent by
Company on or before, the date of this Agreement.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third-Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Parent Disclosure Letter (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.8.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in lull force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
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agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
of any state or federal court within the State of Delaware, in connection with
any matter based upon or arising out of this Agreement or the matters
contemplated herein, other than issues involving the corporate governance of
any of the parties hereto, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
KERAVISION, INC.
/s/ Thomas M. Loarie
By: _________________________________
Thomas M. Loarie
Name: _______________________________
Chairman & CEO
Title: ______________________________
KVTT ACQUISITION CORPORATION
/s/ Thomas M. Loarie
By: _________________________________
Thomas M. Loarie
Name: _______________________________
Chairman & CEO
Title: ______________________________
TRANSCEND THERAPEUTICS, INC.
/s/ B. Nicholas Harvey
By: _________________________________
B. Nicholas Harvey
Name: _______________________________
President
Title: ______________________________
SIGNATURE PAGE TO REORGANIZATION AGREEMENT
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Dates Referenced Herein and Documents Incorporated by Reference
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