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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
MAXIM PHARMACEUTICALS, INC.,
a Delaware corporation;
M-80 ACQUISITION CORP.,
a Delaware corporation;
and
CYTOVIA, INC.,
a Delaware corporation.
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Dated as of June 2, 2000
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TABLE OF CONTENTS
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PAGE
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SECTION 1. DESCRIPTION OF TRANSACTION......................................................1
1.1 Merger of Merger Sub into the Company.....................................1
1.2 Effect of the Merger......................................................1
1.3 Closing; Effective Time...................................................1
1.4 Certificate of Incorporation and Bylaws; Directors and Officers...........2
1.5 Conversion of Shares......................................................2
1.6 Company Options and Warrants..............................................4
1.7 Closing of the Company's Transfer Books...................................4
1.8 Exchange of Certificates..................................................4
1.9 Dissenting Shares.........................................................6
1.10 Tax Consequences..........................................................6
1.11 Accounting Treatment......................................................6
1.12 Further Action............................................................6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................7
2.1 Due Organization; No Subsidiaries.........................................7
2.2 Certificate of Incorporation and Bylaws; Records..........................7
2.3 Capitalization............................................................8
2.4 Financial Statements......................................................9
2.5 Absence of Changes.......................................................10
2.6 Title to Assets..........................................................11
2.7 Bank Accounts; Receivables...............................................12
2.8 Equipment; Leasehold.....................................................12
2.9 Proprietary Assets.......................................................12
2.10 Contracts................................................................14
2.11 Liabilities; Fees, Costs and Expenses....................................16
2.12 Compliance with Legal Requirements.......................................16
2.13 Governmental Authorizations..............................................16
2.14 Tax Matters..............................................................17
2.15 Employee and Labor Matters; Benefit Plans................................18
2.16 Environmental Matters....................................................20
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2.17 Insurance................................................................21
2.18 Related Party Transactions...............................................21
2.19 Legal Proceedings; Orders................................................22
2.20 Authority; Binding Nature of Agreement...................................22
2.21 Non-Contravention; Consents..............................................23
2.22 Finder's Fee.............................................................23
2.23 Full Disclosure..........................................................24
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................24
3.1 Corporate Existence and Power............................................24
3.2 Authority; Binding Nature of Agreement...................................24
3.3 Capitalization...........................................................24
3.4 SEC Filings; Financial Statements........................................25
3.5 No Conflict..............................................................25
3.6 Valid Issuance...........................................................26
3.7 No Material Adverse Effect...............................................26
3.8 Legal Proceedings........................................................26
3.9 Information Supplied.....................................................26
SECTION 4. CERTAIN COVENANTS OF THE COMPANY...............................................26
4.1 Access and Investigation.................................................26
4.2 Operation of the Company's Business......................................27
4.3 Notification by Company; Updates to Company Disclosure Schedule..........29
4.4 Notification by Parent; Updates..........................................29
4.5 No Negotiation...........................................................30
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES............................................30
5.1 Filings and Consents.....................................................30
5.2 Information Statement....................................................30
5.3 Public Announcements.....................................................32
5.4 Amendment of Employment Agreements.......................................32
5.5 Diligent efforts.........................................................32
5.6 Tax Matters..............................................................32
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5.7 Termination of Agreements................................................32
5.8 Status Letter and Release................................................33
5.9 Termination of Employee Plans............................................33
5.10 FIRPTA Matters...........................................................33
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB...................33
6.1 Accuracy of Representations..............................................33
6.2 Performance of Covenants.................................................33
6.3 Stockholder Approval.....................................................33
6.4 Consents.................................................................33
6.5 Agreements and Documents.................................................34
6.6 Conversion of Preferred Stock............................................34
6.7 Listing..................................................................34
6.8 No Material Adverse Change...............................................35
6.9 No Restraints............................................................35
6.10 No Governmental Litigation...............................................35
6.11 No Other Litigation......................................................35
6.12 Termination of Employee Plans............................................35
6.13 FIRPTA Compliance........................................................35
6.14 Satisfactory Completion of Pre-Merger Review.............................35
6.15 Grant of Stock Options...................................................36
6.16 Cancellation of Stock....................................................36
6.17 Fully Diluted Company Share Amount.......................................36
6.18 Dissenting Shares........................................................36
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.............................36
7.1 Accuracy of Representations..............................................36
7.2 Performance of Covenants.................................................36
7.3 Documents................................................................36
7.4 Stockholder Approval.....................................................37
7.5 Listing..................................................................37
7.6 No Material Adverse Change...............................................37
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7.7 No Restraints............................................................37
SECTION 8. TERMINATION....................................................................37
8.1 Termination Events.......................................................37
8.2 Termination Procedures...................................................38
8.3 Effect of Termination....................................................38
SECTION 9. REGISTRATION RIGHTS............................................................39
9.1 Registration Statement...................................................39
9.2 Indemnification..........................................................40
9.3 Transferability of Registration Rights...................................41
9.4 Delay of Registration; Suspension........................................41
9.5 Amendment................................................................42
SECTION 10. MISCELLANEOUS PROVISIONS......................................................42
10.1 Further Assurances.......................................................42
10.2 Fees and Expenses........................................................42
10.3 Attorneys' Fees..........................................................42
10.4 Notices..................................................................43
10.5 Time of the Essence......................................................43
10.6 Headings.................................................................44
10.7 Counterparts.............................................................44
10.8 Governing Law............................................................44
10.9 Successors and Assigns...................................................44
10.10 Remedies Cumulative; Specific Performance................................44
10.11 Waiver...................................................................44
10.12 Amendments...............................................................44
10.13 Severability.............................................................45
10.14 Parties in Interest......................................................45
10.15 Entire Agreement.........................................................45
10.16 Survival of Representations and Warranties...............................45
10.17 Construction.............................................................45
10.18 Negotiation of Disputes..................................................45
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10.19 Arbitration..............................................................46
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AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("AGREEMENT") is
made and entered into as of June 2, 2000, by and among: MAXIM PHARMACEUTICALS,
INC., a Delaware corporation ("PARENT"); M-80 ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of Parent ("MERGER SUB") and CYTOVIA,
INC., a Delaware corporation (the "COMPANY"). Certain capitalized terms used in
this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company (the "Merger") in accordance with this Agreement and
the Delaware General Corporation Law (the "DGCL"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a purchase.
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company and has been adopted by Parent,
as the sole stockholder of Merger Sub.
D. In connection with the execution and delivery of this Agreement,
certain stockholders of the Company are executing and delivering to Parent
certain Voting Agreements of even date herewith regarding, among other things,
the voting of such stockholders' shares of Company capital stock.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "SURVIVING CORPORATION").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the DGCL.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Cooley Godward llp,
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4365 Executive Drive, Suite 1100, San Diego, California 92121 at 8:00 a.m. on
the first business day after the last of the conditions set forth in Section 6
or Section 7 is satisfied (or waived by Parent). The time and date as of which
the Closing is required to take place pursuant to this Section 1.3 is referred
to in this Agreement as the "CLOSING DATE". Subject to the provisions of this
Agreement, simultaneously with or as soon as practicable following the Closing,
a properly executed certificate an agreement of merger satisfying the applicable
requirements of the DGCL (the "CERTIFICATE OF MERGER") shall be filed with the
Secretary of State of the State of Delaware. The Merger shall become effective
upon the latest of: (a) the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, or (b) such other
date and time as may be specified in the Certificate of Merger with the consent
of Parent and the Company (such latest date being referred to as the "EFFECTIVE
TIME").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving
Corporation shall be amended and restated as of the Effective Time to conform to
EXHIBIT B;
(b) the Bylaws of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to EXHIBIT C; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
EXHIBIT D.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(a) and 1.9, at the Effective Time,
by virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) except as provided in Section 1.5(a)(ii), each
share of the common stock, par value $.001 per share of the Company (the
"COMPANY COMMON STOCK"), outstanding immediately prior to the Effective Time
shall be converted into the right to receive that fraction of a share of the
common stock, par value $.001 per share of Parent ("PARENT COMMON STOCK") equal
to the Exchange Ratio (as defined in Section 1.5(b)(i));
(ii) any shares of Company Common Stock then held by
the Company or held in the Company's treasury shall be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefore; and
(iii) each share of the common stock of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
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(b) For purposes of this Agreement:
(i) The "EXCHANGE RATIO" shall be the fraction
determined by dividing (A) the number obtained by dividing (1) $65,000,000, by
(2) the Average Trading Price (as defined below), by (B) the Fully Diluted
Company Share Amount (as defined below).
(ii) The "AVERAGE TRADING PRICE" shall be the average
of the closing sales prices for one share of Parent Common Stock as reported on
Nasdaq for the five consecutive trading days ending (and including) one day
prior to the execution date of this Agreement.
(iii) The "FULLY DILUTED COMPANY SHARE AMOUNT" is
4,536,394 shares, which the Company represents is the sum of (A) the aggregate
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time (including any such shares that are subject to a repurchase
option or risk of forfeiture under any restricted stock purchase agreement or
other agreement), (B) the aggregate number of shares of Company Common Stock
issuable upon conversion of all shares of Preferred Stock of the Company
outstanding immediately prior to the Effective Time in accordance with the
Company's certificate of incorporation as then in effect, (C) the aggregate
number of shares of Company Common Stock issuable pursuant to all options to
purchase shares of Company Common Stock outstanding immediately prior to the
Effective Time ("COMPANY OPTIONS"), (D) the aggregate number of shares of
Company Common Stock issuable pursuant to all warrants to purchase shares of
Company Common Stock outstanding immediately prior to the Effective Time
("COMPANY WARRANTS"), and (E) the aggregate number of shares of Company Common
Stock issuable pursuant to any other rights to acquire shares of Company Common
Stock outstanding immediately prior to the Effective Time.
(iv) The "MERGER CONSIDERATION" receivable by a
holder of capital stock of the Company shall consist of (i) the shares of Parent
Common Stock issuable to such holder in accordance with Section 1.5(a)(i) upon
the surrender of the certificate or certificates representing capital stock of
the Company held by such holder, and (ii) the right of such holder to receive
cash in lieu of fractional shares of Parent Common Stock in accordance with
Section 1.8(a).
(v) The "MERGER SHARES" shall mean the shares of
Parent Common Stock to be issued pursuant to Section 1.5(a)(i).
(c) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company, then
the shares of Parent Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested or subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly be marked with appropriate
legends. The Company shall take all action that may be necessary to ensure that,
from and after the Effective Time, Parent is entitled to
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exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
1.6 COMPANY OPTIONS AND WARRANTS. At the Effective Time, each then
outstanding Company Option or Company Warrant, whether vested or unvested, shall
be assumed by Parent in accordance with the terms (as in effect as of the date
of this Agreement) of the Company Stock Option Plan under which such Company
Option was issued, if any, and the stock option agreement or warrant agreement
by which such Company Option or Company Warrant is evidenced. To the extent that
any Company Options are incentive stock options, within the meaning of Section
422 of the Code, the provisions of this Section 1.6 shall be interpreted and
applied so as to comply with the requirements of Section 424(a) of the Code, so
that such Company Options shall continue to qualify as incentive stock options
after their assumption by Parent. All rights with respect to Company Common
Stock under outstanding Company Options or Company Warrants shall thereupon be
converted into rights with respect to Parent Common Stock. Accordingly, from and
after the Effective Time, (a) each Company Option or Company Warrant assumed by
Parent may be exercised solely for shares of Parent Common Stock, (b) the number
of shares of Parent Common Stock subject to each such assumed Company Option or
Company Warrant shall be equal to the number of shares of Company Common Stock
that were subject to such Company Option or Company Warrant immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, (c) the per share exercise price
for the Parent Common Stock issuable upon exercise of each such assumed Company
Option or Company Warrant shall be determined by dividing the exercise price per
share of Company Common Stock subject to such Company Option or Company Warrant,
as in effect immediately prior to the Effective Time, by the Exchange Ratio, and
rounding the resulting exercise price up to the nearest whole cent, and (d) all
restrictions on the exercise of each such assumed Company Option or Company
Warrant shall continue in full force and effect, and the term, exercisability,
vesting schedule, acceleration rights and other provisions of such Company
Option or Company Warrant shall otherwise remain unchanged. The Company and
Parent shall take all action that may be necessary (under all Company Stock
Option Plans and otherwise) to effectuate the provisions of this Section 1.6.
Parent shall file with the SEC, within 90 days after the Closing Date, a
registration statement on Form S-8 registering the exercise of the Company
Options assumed by Parent pursuant to this Section 1.6.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of capital stock of the Company that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock of the
Company outstanding immediately prior to the Effective Time. No further transfer
of any such shares of capital stock of the Company shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any shares of capital stock of the Company
(a "COMPANY STOCK CERTIFICATE") is presented to the Surviving Corporation or
Parent, such Company Stock Certificate shall be canceled and shall be exchanged
as provided in Section 1.8.
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1.8 EXCHANGE OF CERTIFICATES.
(a) As soon as practicable after the Effective Time, Parent
will send to each of the registered holders of Company Stock Certificates a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify and instructions for use in effecting the surrender of
Company Stock Certificates in exchange for the Merger Consideration. Upon
surrender of a Company Stock Certificate to Parent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by Parent, Parent shall deliver to the holder of such
Company Stock Certificate a certificate representing the number of shares of
Parent Common Stock that such holder has the right to receive pursuant to
Section 1.5, provided that the certificates representing Parent Common Stock to
be delivered to the holder of a Company Stock Certificate represent only whole
shares of Parent Common Stock and in lieu of any fractional shares to which such
holder would otherwise be entitled, the holder of such Company Stock Certificate
shall be paid in cash an amount equal to the sum of the dollar amount (rounded
to the nearest whole cent) determined by multiplying the Average Trading Price
by the fraction of a share of Parent Common Stock that would otherwise be
deliverable to such holder. In the event two or more Company Stock Certificates
represent shares of Company Common Stock by any single holder, all calculations
respecting the number of shares and amount of cash to be delivered to such
holder shall be made based on the aggregate number of shares represented by such
Company Stock Certificates. All Company Stock Certificates so surrendered shall
be canceled. Until surrendered as contemplated by this Section 1.8, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive the Merger Consideration in accordance with
this Agreement. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its reasonable discretion and as a condition precedent
to the issuance of any certificate representing Parent Common Stock or the
payment of cash in lieu of fractional shares, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(c) Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable to
any holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
5.
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(d) Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of capital stock of the Company for any
shares of Parent Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public official pursuant to
any applicable abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "dissenting shares" within the meaning of Section
1300(b) of the California Corporation Code (the "CCC") or shares seeking rights
of appraisal pursuant to Section 262 of the DGCL shall not be converted into or
represent the right to receive Parent Common Stock in accordance with Section
1.5 (or cash in lieu of fractional shares in accordance with Section 1.8(a)),
and the holder or holders of such shares shall be entitled only to such rights
as may be granted to such holder or holders in Chapter 13 of the CCC or Section
262 of the DGCL; provided, however, that if (i) the status of any such shares as
"dissenting shares" shall not be perfected, (ii) the rights of appraisal
relating to such shares shall not be perfected, or (iii) any such shares shall
lose their status as "dissenting shares," then, as of the later of the Effective
Time or the time of the failure to perfect such status or the loss of such
status, such shares shall automatically be converted into and shall represent
only the right to receive (upon the surrender of the certificate or certificates
representing such shares) the Merger Consideration in accordance with the terms
of this Agreement.
(b) The Company shall give Parent (i) prompt notice of any
written demand received by the Company prior to the Effective Time to require
the Company to purchase shares of capital stock of the Company pursuant to
Chapter 13 of the CCC or Section 262 of the DGCL and of any other demand, notice
or instrument delivered to the Company prior to the Effective Time pursuant to
the CCC or the DGCL, and (ii) the opportunity to participate in all negotiations
and proceedings with respect to any such demand, notice or instrument. The
Company shall not make any payment or settlement offer prior to the Effective
Time with respect to any such demand unless Parent shall have consented in
writing to such payment or settlement offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 ACCOUNTING TREATMENT. For accounting purposes, the Merger is
intended to be treated as a purchase.
1.12 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
6.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub,
as follows subject to such exceptions as are disclosed in the Company Disclosure
Schedule:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all corporate power and authority required: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and use
its assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the Company
Disclosure Schedule, the Company has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name.
(c) The Company is not and has not been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.1(c)(i) of the Company Disclosure Schedule. The Company is in good standing as
a foreign corporation in each of the jurisdictions identified in Part 2.1(c)(ii)
of the Company Disclosure Schedule.
(d) Part 2.1(d) of the Company Disclosure Schedule accurately
sets forth (i) the names of the members of the Company's board of directors,
(ii) the names of the members of each committee of the Company's board of
directors, and (iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any
Entity and, except for the equity interests identified in Part 2.1(e) of the
Company Disclosure Schedule, the Company has never owned, beneficially or
otherwise, any shares or other securities of, or any direct or indirect equity
interest in, any Entity. The Company has not agreed and is not obligated to make
any future investment in or capital contribution to any Entity. The Company has
not guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's
certificate of incorporation and bylaws, including all amendments thereto; (2)
the stock records of the Company; and (3) the minutes and other records of the
meetings and other proceedings (including any actions taken by written consent
or otherwise without a meeting) of the stockholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company since the inception of the Company. There have been no formal meetings
or other proceedings of the stockholders of the Company, the board of directors
of the Company or any committee of the board of directors of the Company that
are not fully reflected in such minutes or other records. There has not been any
violation of any of the provisions of the Company's certificate of incorporation
or bylaws, and the Company has not
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taken any action that is inconsistent in any material respect with any
resolution adopted by the Company's stockholders, the Company's board of
directors or any committee of the Company's board of directors. The books of
account, stock records, minute books and other records of the Company are
accurate, up-to-date and complete in all material respects, and have been
maintained in accordance with prudent business practices.
2.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of:
(i) 10,000,000 shares of Common Stock (par value $.001 per share), of which
405,445 shares have been issued and are outstanding as of the date of this
Agreement; and (ii) 2,429,856 shares of Preferred Stock (par value $.001 per
share), of which (A) 1,084,860 shares are designated Series A Preferred Stock,
all of which are issued and outstanding, (B) 450,000 shares are designated
Series A-1 Junior Preferred Stock, all of which are issued and outstanding, (C)
558,660 of the shares are designated Series A-2 Preferred Stock, all of which
are issued and outstanding, (D) 150,000 of the shares are designated Series B
Preferred Stock, all of which are issued and outstanding and (E) 186,336 of the
shares of Preferred Stock are designated Series C Preferred Stock, all of which
are issued and outstanding. As of the date hereof and as of the Effective Time,
each outstanding share of Preferred Stock of the Company is and shall be
convertible into one share of Company Common Stock. All of the outstanding
shares of Company Common Stock and Preferred Stock of the Company have been duly
authorized and validly issued, and are fully paid and nonassessable. All
outstanding shares of Company Common Stock and Preferred Stock of the Company,
and all outstanding Company Options and Company Warrants, have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts. Part 2.3(a) of the Company Disclosure Schedule provides an accurate
and complete description of the terms of each repurchase option which is held by
the Company and to which any shares of capital stock of the Company is subject.
(b) The Company has reserved 522,291 shares of Company Common
Stock for issuance under the Company Stock Option Plans, of which options to
purchase 356,609 shares are outstanding as of the date of this Agreement. Part
2.3(b) of the Company Disclosure Schedule accurately sets forth, with respect to
each Company Option outstanding as of the date hereof (whether vested or
unvested): (i) the name of the holder of such Company Option; (ii) the total
number of shares of Company Common Stock that is subject to such Company Option
and the number of shares of Company Common Stock with respect to which such
Company Option is immediately exercisable; (iii) the date on which such Company
Option was granted and the term of such Company Option; (iv) the vesting
schedule for such Company Option (including any circumstances under which such
vesting may be accelerated as a result of the Merger or otherwise); (v) the
exercise price per share of Company Common Stock purchasable under such Company
Option; and (vi) whether such Company Option has been designated an "incentive
stock option" as defined in Section 422 of the Code. Except as set forth in Part
2.3(b) of the Company Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of capital stock or other securities of the
Company; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of capital stock or other
securities of the
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Company; (iii) Contract under which the Company is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other
securities of the Company; or (iv) to the Knowledge of the Company, condition
or circumstance that may give rise to or provide a reasonable basis for the
assertion of a claim by any Person to the effect that such Person is entitled
to acquire or receive any shares of capital stock or other securities of the
Company.
(c) Except as set forth in Part 2.3(c) of the Company
Disclosure Schedule, the Company has never repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities of the Company. All
securities so reacquired by the Company were reacquired in compliance with (i)
the applicable provisions of the DGCL and all other applicable Legal
Requirements, and (ii) all requirements set forth in applicable restricted stock
purchase agreements and other applicable Contracts.
(d) No more than 35 stockholders of the Company do not qualify
as an "accredited investor" (as such term is defined in Rule 501(a) of
Regulation D promulgated under the Securities Act). Each stockholder of the
Company who is not an accredited investor either alone or with his "purchaser
representative" has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risk of the issuance of
shares of Parent Common Stock to such person in connection with the Merger.
2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following
financial statements and notes (collectively, the "COMPANY FINANCIAL
STATEMENTS"):
(i) the audited balance sheet of the Company as of
December 31, 1999, and the related audited statement of operations, statement of
stockholders' equity and statement of cash flows of the Company for the year
then ended, together with the notes thereto and the unqualified report and
opinion of Ernst & Young LLP relating thereto; and
(ii) the unaudited balance sheet of the Company as of
April 30, 2000 (the "UNAUDITED INTERIM BALANCE SHEET"), and the related
unaudited statement of operations of the Company for the four months then ended.
(b) The Company Financial Statements are accurate and complete
in all material respects and present fairly the financial position of the
Company as of the respective dates thereof and the results of operations and in
the case of the financial statements referred to in Section 2.4(a)(i), cash
flows of the Company for the periods covered thereby. The Company Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered (except that the financial statements
referred to in Section 2.4(a)(ii) do not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude). The total assets and annual net
sales (within the meaning of the HSR Act) of the Company are less than
$10,000,000 in the aggregate, and accordingly no notification form or other
document is required to be filed under the HSR Act with respect to the Merger.
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2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, since December 31, 1999:
(a) there has not been any adverse change in the Company's
business, condition, capitalization, assets, liabilities, operations, financial
performance or prospects, and, to the Knowledge of the Company, no event has
occurred that will, or could reasonably be expected to, have a Material Adverse
Effect on the Company;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the Company's
assets (whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid
any dividend or made any other distribution in respect of any shares of capital
stock of the Company, and has not repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company;
(d) the Company has not sold, issued or authorized the
issuance of (i) any capital stock or other securities of the Company (except for
Company Common Stock issued upon the exercise of outstanding Company Options),
(ii) any option or right to acquire any capital stock or any other securities of
the Company (except for Company Options described in Part 2.3 of the Company
Disclosure Schedule), or (iii) any instrument convertible into or exchangeable
for any capital stock or other securities of the Company;
(e) the Company has not amended or waived any of its rights
under, or permitted the acceleration of vesting under, (i) any provision of any
Company Stock Option Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to the Company's certificate
of incorporation or bylaws, and the Company has not effected or been a party to
any Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(g) the Company has not made any capital expenditure which,
when added to all other capital expenditures made on behalf of the Company since
December 31, 1999, exceeds $100,000;
(h) the Company has not (i) entered into or permitted any of
the assets owned or used by it to become bound by any Material Contract (as
defined in Section 2.10(a)), or (ii) amended or prematurely terminated, or
waived any material right or remedy under, any Material Contract;
(i) the Company has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise disposed of,
or leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial
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rights or other immaterial assets acquired, leased, licensed or disposed of in
the ordinary course of business and consistent with the Company's past
practices;
(j) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(k) the Company has not made any pledge of any of its assets
or otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(l) the Company has not (i) lent money to any Person (other
than pursuant to routine travel advances made to employees in the ordinary
course of business), or (ii) incurred or guaranteed any indebtedness for
borrowed money;
(m) the Company has not (i) established or adopted any
Employee Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(n) the Company has not changed any of its methods of
accounting or accounting practices in any respect, except to the extent, if any,
required by GAAP;
(o) the Company has not made any Tax election;
(p) the Company has not commenced or settled any Legal
Proceeding;
(q) the Company has not entered into any material transaction
or taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) the Company has not agreed or committed to take any of the
actions referred to in clauses (c) through (q) above.
2.6 TITLE TO ASSETS.
(a) The Company owns, and has good and valid title to, all
assets purported to be owned by it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet, and (ii) all assets referred to in Parts 2.7
and 2.8 of the Company Disclosure Schedule and all of the Company's rights under
the Material Contracts. Except as set forth in Part 2.6(a) of the Company
Disclosure Schedule, all of said assets are owned by the Company free and clear
of any liens or other Encumbrances, except for (x) any lien for current taxes
not yet due and payable, and (y) minor liens that have arisen in the ordinary
course of business and that do not (individually or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair the
operations of the Company.
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(b) Part 2.6(b) of the Company Disclosure Schedule identifies
all assets that are material to the business of the Company and that are being
leased or licensed to or by the Company. All such leases and licenses are valid
and enforceable against the parties thereto.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Company Disclosure Schedule provides
accurate information with respect to each account maintained by or for the
benefit of the Company at any bank or other financial institution. Such
information consists of the name of the bank or financial institution, the
account number and the balance as of the date hereof.
(b) Part 2.7(b) of the Company Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company as of April 30, 2000. Except as
set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
accounts receivable of the Company (including those accounts receivable
reflected on the Unaudited Interim Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since April 30, 2000
and have not yet been collected) (i) represent valid obligations of customers of
the Company arising from bona fide transactions entered into in the ordinary
course of business, and (ii) are current and are expected to be collected in
full when due, without any counterclaim or set off (net of an allowance for
doubtful accounts not to exceed $5,000 in the aggregate).
2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets
owned by or leased to the Company are adequate for the uses to which they are
being put, are in good condition and repair (ordinary wear and tear excepted)
and are adequate for the conduct of the Company's business in the manner in
which such business is currently being conducted.
(b) The Company does not own any real property or any interest
in real property, except for the leasehold created under the real property lease
identified in Part 2.8 of the Company Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets
forth, with respect to each Proprietary Asset owned by the Company and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.9(a)(ii) of the Company Disclosure Schedule identifies
and provides a brief description of all other Proprietary Assets owned by the
Company that are material to the business of the Company. Part 2.9(a)(iii) of
the Company Disclosure Schedule identifies and provides a brief description of,
and identifies any ongoing royalty or payment obligations in excess of $10,000
with respect to, each Proprietary Asset that is licensed or otherwise made
available to the Company by any Person and is material to the business of the
Company and identifies the Contract under which such Proprietary Asset is being
licensed or otherwise made available to the Company. The Company has good and
valid title to all of the
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Company Proprietary Assets identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the
Company Disclosure Schedule, free and clear of all Encumbrances, except for (i)
any lien for current taxes not yet due and payable, and (ii) minor liens that
have arisen in the ordinary course of business and that do not (individually or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Company. The Company has a
valid right to use, license and otherwise exploit all Proprietary Assets
identified in Part 2.9(a)(iii) of the Company Disclosure Schedule. Except as set
forth in Part 2.9(a)(iv) of the Company Disclosure Schedule, the Company has not
developed jointly with any other Person any Company Proprietary Asset that is
material to the business of the Company with respect to which such other Person
has any rights. Except as set forth in Part 2.9(a)(v) of the Company Disclosure
Schedule, there is no Company Contract (with the exception of end user license
agreements in the form previously delivered by the Company to Parent) pursuant
to which any Person has any right (whether or not currently exercisable) to use,
license or otherwise exploit any Company Proprietary Asset.
(b) The Company has taken reasonable measures and precautions
to protect and maintain the confidentiality, secrecy and value of all material
Company Proprietary Assets. Without limiting the generality of the foregoing,
except as set forth in Part 2.9(b) of the Company Disclosure Schedule, (i) all
current and former employees of the Company who are or were involved in, or who
have contributed to, the creation or development of any material Company
Proprietary Asset have executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Confidential Information and Invention
Assignment Agreement previously delivered by the Company to Parent, and (ii) all
current and former consultants and independent contractors to the Company who
are or were involved in, or who have contributed to, the creation or development
of any material Company Proprietary Asset have executed and delivered to the
Company an agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement for consultants and independent
contractors previously delivered to Parent. No current or former employee,
officer, director, stockholder, consultant or independent contractor of or to
the Company has any right, claim or interest in or with respect to any Company
Proprietary Asset.
(c) To the Knowledge of the Company: (i) all patents,
trademarks, service marks and copyrights held by the Company that are material
to its business are valid, enforceable and subsisting; (ii) none of the Company
Proprietary Assets and no Proprietary Asset that is currently being developed by
the Company (either by itself or with any other Person) infringes,
misappropriates or conflicts with any Proprietary Asset owned or used by any
other Person; (iii) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by the Company is
infringing, misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person, and none of such products
has at any time infringed, misappropriated or made any unlawful or unauthorized
use of, and the Company has not received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful or unauthorized use of, any
Proprietary Asset owned or used by any other Person; and (iv) no other Person is
infringing, misappropriating or making any unlawful or unauthorized use
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of, and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any material Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Company to conduct its business in
the manner in which such business has been and is being conducted. The Company
has not (i) licensed any of the material Company Proprietary Assets to any
Person on an exclusive basis, or (ii) entered into any covenant not to compete
or Contract limiting its ability to exploit fully any material Company
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Company Disclosure Schedule
identifies:
(i) each Company Contract relating to the employment
of, or the performance of services by, any current employee, consultant or
independent contractor;
(ii) each Company Contract relating to the
acquisition, transfer, use, development, sharing or license of any technology or
any Proprietary Asset;
(iii) each Company Contract imposing any restriction
on the Company's right or ability to (A) compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, sell
any product or other asset to or perform any services for any other Person or
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving any
agency relationship or distribution arrangement;
(v) each Company Contract relating to the
acquisition, issuance or transfer of any securities;
(vi) each Company Contract relating to the creation
of any Encumbrance with respect to any material asset of the Company;
(vii) each Company Contract involving or
incorporating any guaranty, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;
(viii) each Company Contract creating or relating to
any partnership or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(ix) each Company Contract relating to the purchase
or sale of any product or other asset by or to, or the performance of any
services by or for, any Related Party (as defined in Section 2.18);
(x) each Company Contract constituting or relating to
a Government Contract or Government Bid;
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(xi) any other Company Contract that was entered into
outside the ordinary course of business or was inconsistent with the Company's
past practices;
(xii) any other Company Contract that has a term of
more than 60 days and that may not be terminated by the Company (without
penalty) within 60 days after the delivery of a termination notice by the
Company; and
(xiii) any other Company Contract that contemplates
or involves (A) the payment or delivery of cash or other consideration in an
amount or having a value in excess of $10,000 in the aggregate, or (B) the
performance of services having a value in excess of $10,000 in the aggregate.
Company Contracts in the respective categories described in clauses (i) through
(xiii) above are referred to in this Agreement as "MATERIAL CONTRACTS."
(b) The Company has delivered to Parent accurate and complete
copies of all written Material Contracts, including all amendments thereto. Part
2.10(b) of the Company Disclosure Schedule provides an accurate description of
the terms of each Material Contract that is not in written form. Each Contract
identified in Part 2.10(a) and Part 2.10(b) of the Company Disclosure Schedule
is valid and in full force and effect, and, to the Knowledge of the Company, is
enforceable by the Company in accordance with its terms.
(c) Except as set forth in Part 2.10(c) of the Company
Disclosure Schedule:
(i) the Company has not violated or breached, or
committed any default under, any Material Contract, and, to the Knowledge of the
Company, no other Person has violated or breached, or committed any default
under, any Material Contract;
(ii) to the Knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (A) result in a
violation or breach of any of the provisions of any Material Contract, (B) give
any Person the right to declare a default or exercise any remedy under any
Material Contract, (C) give any Person the right to accelerate the maturity or
performance of any Material Contract, or (D) give any Person the right to
cancel, terminate or modify any Material Contract;
(iii) since the Company's inception, the Company has
not received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Material Contract; and
(iv) the Company has not waived any of its material
rights under any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Material Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
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(e) The Material Contracts collectively constitute all of the
Contracts necessary to enable the Company to conduct its business in the manner
in which its business is currently being conducted.
(f) Part 2.10(f) of the Company Disclosure Schedule identifies
and provides a brief description of each proposed Contract as to which any bid
offer, award, written proposal, term sheet or similar document has been
submitted or received by the Company since December 31, 1999 and which, when
duly executed and delivered, would constitute a Material Contract.
2.11 LIABILITIES; FEES, COSTS AND EXPENSES. The Company has no accrued,
contingent or other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in financial statements in accordance
with GAAP, and whether due or to become due), except for: (i) liabilities
identified in the Unaudited Interim Balance Sheet; (ii) accounts payable or
accrued salaries that have been incurred by the Company since April 30, 2000 in
the ordinary course of business and consistent with the Company's past
practices; (iii) liabilities under the Material Contracts, to the extent the
nature and magnitude of such liabilities can be specifically ascertained by
reference to the text of such Material Contracts; (iv) liabilities for expenses
including the fees and expenses of counsel and accountants incurred in
connection with this Agreement and the other transactions contemplated hereby,
which in the aggregate will not exceed $50,000; and (v) the liabilities
identified in Part 2.11(a) of the Company Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since its inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Material Adverse Effect on the Company. Except
as set forth in Part 2.12 of the Company Disclosure Schedule, since its
inception the Company has not received any notice or other communication from
any Governmental Body regarding any actual or possible violation of, or failure
to comply with, any material Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Company Disclosure
Schedule identifies each material Governmental Authorization held by the
Company, and the Company has delivered to Parent accurate and complete copies of
all Governmental Authorizations identified in Part 2.13 of the Company
Disclosure Schedule. The Governmental Authorizations identified in Part 2.13 of
the Company Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Material Governmental Authorizations necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted. The Company is, and at all times since its
inception has been, in substantial compliance with the terms and requirements of
the respective Governmental Authorizations identified in Part 2.13 of the
Company Disclosure Schedule. Since the date of its inception, the Company has
not received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
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2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of
the Company with any Governmental Body with respect to any taxable period ending
on or before the Closing Date (the "COMPANY RETURNS") (i) have been or will be
filed on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date. The
Company has delivered to Parent accurate and complete copies of all Company
Returns filed since the Company's inception which have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with GAAP. The Company will establish, in the
ordinary course of business and consistent with its past practices, reserves
adequate for the payment of all Taxes for the period from the inception of the
Company through the Closing Date in accordance with GAAP, and the Company will
disclose the dollar amount of such reserves to Parent on or prior to the Closing
Date.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part
2.14(c) of the Company Disclosure Schedule, there have been no examinations or
audits of any Company Return. The Company has delivered to Parent accurate and
complete copies of all audit reports and similar documents (to which the Company
has access) relating to the Company Returns. Except as set forth in Part 2.14(c)
of the Company Disclosure Schedule, no extension or waiver of the limitation
period applicable to any of the Company Returns has been granted (by the Company
or any other Person), and no such extension or waiver has been requested from
the Company.
(d) Except as set forth in Part 2.14(d) of the Company
Disclosure Schedule, no claim or Legal Proceeding is pending or has been
threatened against or with respect to the Company in respect of any Tax. There
are no unsatisfied liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by the Company with respect to
any Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Company and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of the Company
except liens for current Taxes not yet due and payable. The Company has not
entered into or become bound by any agreement or consent pursuant to Section
341(f) of the Code. The Company has not been, and the Company will not be,
required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) Except as set forth in Part 2.14(e) of the Company
Disclosure Schedule, there is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that,
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considered individually or considered collectively with any other such
Contracts, will, or could reasonably be expected to, give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code. The Company has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party. The Company is not, and has never been, a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies
each salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program or agreement (collectively,
the "PLANS") sponsored, maintained, contributed to or required to be contributed
to by the Company for the benefit of any employee of the Company ("EMPLOYEE"),
except for Plans which would not require the Company to make payments or provide
benefits having a value in excess of $25,000 in the aggregate. Part 2.15(a) of
the Company Disclosure Schedule sets forth the citizenship status of every
employee of the Company (whether such employee is a United States citizen or
otherwise) and, with respect to non-United States citizens, identifies the visa
or other similar permit under which such employee is working for the Company and
the dates of issuance and expiration of such visa or other similar permit.
(b) Except as set forth in Part 2.15(b) of the Company
Disclosure Schedule, the Company does not maintain, sponsor or contribute to,
and, to the Knowledge of the Company, has not at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Employees or former
Employees (a "PENSION PLAN").
(c) The Company maintains, sponsors or contributes only to
those employee welfare benefit plans (as defined in Section 3(1) of ERISA,
whether or not excluded from coverage under specific Titles or Merger Subtitles
of ERISA) for the benefit of Employees or former Employees which are described
in Part 2.15(c) of the Company Disclosure Schedule (the "WELFARE PLANS"), none
of which is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to
Parent:
(i) an accurate and complete copy of such Plan
(including all amendments thereto);
(ii) an accurate and complete copy of the annual
report, if required under ERISA, with respect to such Plan for the last two
years;
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(iii) an accurate and complete copy of the most
recent summary plan description, together with each Summary of Material
Modifications, if required under ERISA, with respect to such Plan, and all
material employee communications relating to such Plan;
(iv) if such Plan is funded through a trust or any
third party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts
relating to such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the Knowledge
of the Company, has never been required to be, treated as a single employer with
any other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m)
or (o) of the Code. The Company has never been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code. To the
Knowledge of the Company, the Company has never made a complete or partial
withdrawal from a multiemployer plan, as such term is defined in Section 3(37)
of ERISA, resulting in "withdrawal liability," as such term is defined in
Section 4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create
any additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable law)
in a manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Company
Disclosure Schedule, no Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former Employee after
any such Employee's termination of service (other than (i) benefit coverage
mandated by applicable law, including coverage provided pursuant to Section
4980B of the Code, (ii) deferred compensation benefits accrued as liabilities on
the Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
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(i) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and the Company is not aware of any reason why any such
determination letter should be revoked.
(k) Except as set forth in Part 2.15(k) of the Company
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any bonus,
golden parachute or severance payment) to any current or former Employee or
director of the Company (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any acceleration of the time
of payment or vesting of any such benefits.
(l) Part 2.15(l) of the Company Disclosure Schedule contains a
list of all salaried employees of the Company as of the date of this Agreement,
and correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Company Disclosure Schedule identifies
each Employee who is not fully available to perform work because of disability
or other leave and sets forth the basis of such leave and the anticipated date
of return to full service.
(n) The Company is in compliance in all material respects with
all applicable Legal Requirements and Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Company
Disclosure Schedule, the Company has good labor relations, and has no reason to
believe that (i) the consummation of the Merger or any of the other transactions
contemplated by this Agreement will have a material adverse effect on the
Company's labor relations, or (ii) any of the Company's employees intends to
terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. The Company is in compliance in all
material respects with all applicable Environmental Laws (as defined below),
which compliance includes the possession by the Company of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. The Company has not received
any notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that the
Company is not in compliance with any Environmental Law, and, to the Knowledge
of the Company, there are no circumstances that may prevent or interfere with
the Company's
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compliance in all material respects with any Environmental Law in
the future. To the Knowledge of the Company, no current or prior owner of any
property leased or controlled by the Company has received any notice or other
communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or the Company is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Company Disclosure
Schedule. For purposes of this Agreement: (i) "ENVIRONMENTAL LAW" means any
federal, state, local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "MATERIALS OF
ENVIRONMENTAL CONCERN" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.
2.17 INSURANCE. Part 2.17 of the Company Disclosure Schedule identifies
all insurance policies maintained by, at the expense of or for the benefit of
the Company and identifies any material claims made thereunder, and the Company
has delivered to Parent accurate and complete copies of the insurance policies
identified on Part 2.17 of the Company Disclosure Schedule. Each of the
insurance policies identified in Part 2.17 of the Company Disclosure Schedule is
in full force and effect. Since the Company's inception, the Company has not
received any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy.
2.18 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.18 of
the Company Disclosure Schedule: (a) no Related Party (as defined below) has,
and no Related Party has at any time since the Company's inception had, any
direct or indirect interest in any material asset used in or otherwise relating
to the business of the Company; (b) no Related Party is, or has at any time
since the Company's inception been, indebted to the Company; (c) since the
Company's inception, no Related Party has entered into, or has had any direct or
indirect financial interest in, any material Contract, transaction or business
dealing involving the Company; (d) no Related Party is competing, or has at any
time since the Company's inception competed, directly or indirectly, with the
Company; and (e) no Related Party has any claim or right against the Company
(other than rights under Company Options and rights to receive compensation for
services performed as an employee of the Company). For purposes of this
Agreement each of the following shall be deemed to be a "RELATED PARTY": (i)
each individual who is, or who has at any time since the Company's inception
been, an officer of the Company; (ii) each member of the immediate family of
each of the individuals referred to in clause (i) above; and (iii) any trust or
other Entity (other than the Company) in which any one of the individuals
referred to in clauses (i) and (ii) above holds (or in which more than one of
such
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individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.)
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19 of the Company Disclosure
Schedule, there is no pending Legal Proceeding, and to the Knowledge of the
Company, no Person has threatened to commence any Legal Proceeding: (i) that
involves the Company or any of the assets owned or used by the Company or any
Person whose liability the Company has or may have retained or assumed, either
contractually or by operation of law; or (ii) that challenges, or that may have
the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by this
Agreement. To the Knowledge of the Company, except as set forth in Part 2.19(a)
of the Company Disclosure Schedule, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that will, or that could reasonably
be expected to, give rise to or serve as a basis for the commencement of any
such Legal Proceeding.
(b) Except as set forth in Part 2.19(b) of the Company
Disclosure Schedule, no Legal Proceeding has ever been commenced by or has ever
been pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. To the Knowledge of the Company, no officer or other employee of the
Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement (subject to the approvals
referred to in the immediately following sentence); and the execution,
delivery and performance by the Company of this Agreement have been duly
authorized by all necessary action on the part of the Company and its board
of directors and this Agreement and the Merger have been Unanimously approved
by the board of directors of the Company (subject to the approvals referred
to in the immediately following sentence). The affirmative vote of (i) a
majority of the shares of Company Common Stock and Preferred Stock of the
Company, voting together as a single class (on an as-converted-basis), (ii) a
majority of the shares of Company Common Stock, voting together as a single
class and (iii) a sixty-six and two-thirds percent (66 2/3%) of the shares of
Preferred Stock of the Company, voting as a separate class (on an
as-converted-basis) are the only votes of the stockholders of the Company
needed to approve the principal terms of this Agreement and approve the
Merger and the transactions contemplated hereby (the "REQUIRED COMPANY
STOCKHOLDER VOTE"). This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies.
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2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
the Company Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the Company's certificate of incorporation or bylaws,
or (ii) any resolution adopted by the Company's stockholders, the Company's
board of directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by the Company or that otherwise relates
to the Company's business or to any of the assets owned or used by the Company;
(d) result in a violation or breach of, or result in a default
under, any provision of any Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Material Contract,
(ii) accelerate the maturity or performance of any such Material Contract, or
(iii) cancel, terminate or modify any such Material Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as set forth in Part 2.21 of the Company Disclosure Schedule, the Company
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.22 FINDER'S FEE. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or any of the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company.
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2.23 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule)
does not, (i) contain any representation, warranty or information that is false
or misleading with respect to any material fact, or (ii) omit to state any
material fact or necessary in order to make the representations, warranties and
information contained and to be contained herein and therein (in the light of
the circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
(b) The information supplied by the Company for inclusion in
the Information Statement (as defined in Section 5.2) will not, as of the date
the Required Company Stockholder Vote is obtained, (i) contain any statement
that is inaccurate or misleading with respect to any material fact, or (ii) omit
to state any material fact necessary in order to make such information (in the
light of the circumstances under which it is provided) not false or misleading.
SECTION 3. EPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, has all corporate power and authority required to
conduct its business in the manner in which its business is currently being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership or leasing of
its properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on Parent. Merger Sub has
been formed for the purpose of consummating the Merger and has had no
significant operations.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to enter into and
perform their obligations under this Agreement; and the execution, delivery and
performance by Parent and Merger Sub of this Agreement (including the
contemplated issuance of Parent Common Stock in the Merger in accordance with
this Agreement) have been duly authorized by all necessary action on the part of
Parent and Merger Sub and their respective boards of directors and by Parent as
the sole stockholder of Merger Sub. No vote of Parent's stockholders is needed
to approve this Agreement or the Merger. This Agreement constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against them
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
3.3 CAPITALIZATION. The authorized capital stock of Parent consists of:
(i) 40,000,000 shares of Parent Common Stock ($.001 par value per share), of
which 21,055,709 shares have been issued and are outstanding as of the date of
this Agreement; and (ii) 5,000,000 shares of Preferred Stock ($.001 par value
per share), none of which have been issued and are outstanding as of the date of
this Agreement. As of the date of this Agreement, 1,749,444 shares of Parent
Common Stock are reserved for issuance under Parent's Long Term Incentive Plan
and other
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employee benefit plans, of which options to purchase 1,490,800 shares are
outstanding as of the date of this Agreement, 40,130 shares of Parent Common
Stock are reserved for issuance under Parent's 401(k) Plan, and 1,487,938 shares
of Parent Common Stock are reserved for issuance pursuant to the terms of
outstanding warrants. Except as set forth above, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
Parent; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock or
other securities of Parent; or (iii) Contract under which Parent is or may
become obligated to sell or otherwise issue any shares of capital stock or any
other securities of Parent. Prior to the Effective Time, Parent shall have duly
reserved out of its authorized and unissued capital stock that number of shares
of Parent Common Stock sufficient to satisfy Parent's obligations to issue
Parent Common Stock upon the exercise of Company Options and Company Warrants
assumed by Parent pursuant to Section 1.6.
3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to the Company accurate and
complete copies (including exhibits thereto) of (i) its annual report on Form
10-K for the year ended September 30, 1999, (ii) its Notice of Annual Meeting
and Proxy Statement for its 2000 Annual Meeting of Stockholders, (iii) its
quarterly report on Form 10-Q for the period ending March 31, 2000, (iv) its
quarterly report on Form 10-Q for the period ending December 31, 1999, and (iv)
its current report on Form 8-K as filed February 5, 2000 (collectively, with
such exhibits, the "PARENT SEC DOCUMENTS.") As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied (or if amended or superseded by a filing after the date of
this Agreement, will comply) in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be); and
(ii) none of the Parent SEC Documents contained (or if amended or superseded by
a filing after the date of this Agreement, will contain) any untrue statement of
a material fact or omitted 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) The consolidated financial statements contained in the
Parent SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered, except as may be indicated in the notes to such consolidated
financial statements and (in the case of unaudited statements) as permitted by
Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to normal year-end audit adjustments which
adjustments are not expected to be material in nature; and (iii) fairly present
the consolidated financial position of Parent as of the respective dates thereof
and the consolidated results of operations of Parent for the periods covered
thereby.
3.5 NO CONFLICT. Neither the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor the
consummation of the Merger
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or any of the other transactions contemplated by this Agreement, will directly
or indirectly, (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any provisions of Parent's or Merger Sub's respective certificate of
incorporation or bylaws, or (ii) any resolution adopted by Parent's stockholders
or board of directors or any committee of Parent's or Merger Sub's respective
boards of directors; or
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which Parent or Merger Sub, or any of the Assets owned or used by
Parent or Merger Sub, is subject.
3.6 VALID ISSUANCE. Subject to Section 1.5(c) and subject to the
Company's compliance with Section 5.2, the shares of Parent Common Stock to be
issued pursuant to Section 1.5(a)(i) will, when issued in accordance with the
provisions of this Agreement, be duly authorized, validly issued, fully paid and
nonassessable.
3.7 NO MATERIAL ADVERSE EFFECT. Between March 31, 2000, and the date of
this Agreement, there has been no change in the business, condition,
capitalization, assets, liabilities, operations or financial performance of
Parent that has had or would reasonably be expected to have a Material Adverse
Effect on Parent.
3.8 LEGAL PROCEEDINGS. There is no pending Legal Proceeding, and to the
Knowledge of Parent, no Person has threatened to commence any Legal Proceeding
that challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement.
3.9 INFORMATION SUPPLIED. The information supplied by Parent for
inclusion in the Information Statement will not, as of the date the Required
Company Stockholder Vote is obtained, (i) contain any statement that is
inaccurate or misleading with respect to any material fact, or (ii) omit to
state any material fact necessary in order to make such information (in the
light of the circumstances under which it is provided) not false or misleading.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "PRE-CLOSING PERIOD"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access upon reasonable notice and during normal
business hours to the Company's Representatives, personnel and assets and to all
existing books, records, Contracts, Tax Returns, work papers and other documents
and information relating to the Company; and (b) provide Parent and Parent's
Representatives with copies of such existing books, records, Contracts, Tax
Returns, work papers and other documents and information relating to the
Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request.
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4.2 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in
the ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use its commercially reasonable efforts
to preserve intact its current business organization, keep available the
services of its current officers and employees and maintain its relations and
good will with all suppliers, customers, landlords, creditors, employees and
other Persons having business relationships with the Company;
(c) the Company shall use its commercially reasonable efforts
to keep in full force and effect all insurance policies identified in Part 2.17
of the Company Disclosure Schedule;
(d) the Company shall cause its officers to report regularly
(but in no event less frequently than weekly) to Parent concerning the status of
the Company's business;
(e) except as set forth in Part 4.2(e) of the Company
Disclosure Schedule, the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock of the Company, and shall not repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities of the Company (except that the
Company may repurchase Company Common Stock from former employees pursuant to
the terms of existing restricted stock purchase agreements);
(f) the Company shall not sell, issue or authorize the
issuance of (i) any capital stock or other securities of the Company, (ii) any
option or right to acquire any capital stock or other securities of the Company,
or (iii) any instrument convertible into or exchangeable for any capital stock
or other securities of the Company (except that the Company shall be permitted
to issue shares of Company Common Stock (x) to employees and directors upon the
exercise of Company Options outstanding as of the date of this Agreement, and
(y) upon the conversion of shares of Preferred Stock of the Company outstanding
as of the date of this Agreement);
(g) except as set forth in Part 4.2(g) of the Company
Disclosure Schedule, the Company shall not amend or waive any of its rights
under, or permit the acceleration of vesting under, (i) any provision of any
Company Stock Option Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any provision of any restricted stock
purchase agreement (unless acceleration of vesting is required under any Company
Stock Option Plan, Company Option or other agreement in effect or outstanding as
of the date of this Agreement);
(h) except as expressly permitted by this Agreement, the
Company shall not amend or permit the adoption of any amendment to the Company's
certificate of incorporation or bylaws, or effect or permit the Company to
become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction
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(except that the Company may issue shares of Company Common Stock upon the
conversion of shares of outstanding Preferred Stock of the Company);
(i) the Company shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except
for capital expenditures that, when added to all other capital expenditures made
on behalf of the Company during the Pre-Closing Period, do not exceed $10,000 in
the aggregate;
(k) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or would
constitute a Material Contract, or (ii) amend or prematurely terminate, or waive
any material right or remedy under, any Material Contract;
(l) the Company shall not (i) except in the ordinary course of
business, acquire, lease or license any right or other asset from any other
Person, (ii) except in the ordinary course of business, sell or otherwise
dispose of, or lease or license, any right or other asset to any other Person,
or (iii) waive or relinquish any right, except for rights or assets acquired,
leased, licensed, disposed of or relinquished by the Company pursuant to
Contracts that are not Material Contracts;
(m) the Company shall not (i) lend money to any Person (except
that the Company may make routine travel advances to employees in the ordinary
course of business), or (ii) incur or guarantee any indebtedness for borrowed
money;
(n) the Company shall not (i) establish, adopt or amend any
Employee Benefit Plan, (ii) pay any bonus or make any profit-sharing payment,
cash incentive payment or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees except
under pre-existing agreements, or (iii) hire any new employee;
(o) the Company shall not change any of its methods of
accounting or accounting practices in any material respect;
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material
Legal Proceeding;
(r) the Company shall not agree or commit to take any of the
actions described in clauses (e) through (q) above.
Notwithstanding the foregoing, the Company may take any action described in
clauses (a) through (r) above if Parent gives its prior written consent to the
taking of such action by the Company, which consent will not be unreasonably
withheld.
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4.3 NOTIFICATION BY COMPANY; UPDATES TO COMPANY DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly
notify Parent in writing of:
(i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes an inaccuracy in or breach of
any representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would cause
or constitute an inaccuracy in or breach of any representation or warranty made
by the Company in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of the
Company; and
(iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any condition set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Company Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming the Company Disclosure
Schedule were dated as of the date of the occurrence, existence or discovery of
such event, condition, fact or circumstance, then the Company shall promptly
deliver to Parent an update to the Company Disclosure Schedule specifying such
change. No such update shall be deemed to supplement or amend the Company
Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by the Company in this Agreement, or
(ii) determining whether any condition set forth in Section 6 has been
satisfied.
4.4 NOTIFICATION BY PARENT; UPDATES.
(a) During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of:
(i) the discovery by Parent of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would cause
or constitute an inaccuracy in or breach of any representation or warranty made
by Parent in this Agreement if (A) such representation or warranty had been made
as of the time of the occurrence, existence or
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discovery of such event, condition, fact or circumstance, or (B) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior to
the date of this Agreement;
(iii) any breach of any covenant or obligation of
Parent; and
(iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any condition set forth in Section 6 or
Section 7 impossible or unlikely.
4.5 NO NEGOTIATION. Except as set forth in Part 4.5 of the Company
Disclosure Schedule, during the Pre-Closing Period, the Company shall not, and
shall not authorize or permit any Representative of the Company to, directly or
indirectly:
(a) solicit or encourage the initiation or submission of any
expression of interest, inquiry, proposal or offer from any Person (other than
Parent) relating to a possible Acquisition Transaction;
(b) participate in any discussions or negotiations or enter
into any agreement with, or provide any information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(c) entertain, consider, or accept any proposal or offer from
any Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Transaction.
The Company shall promptly notify Parent in writing of any inquiry, proposal or
offer relating to a possible Acquisition Transaction that is received by the
Company during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Merger and the other transactions contemplated
by this Agreement, and (b) shall use all commercially reasonable efforts to
obtain all Consents (if any) required to be obtained (pursuant to any applicable
Legal Requirement or Contract, or otherwise) by such party in connection with
the Merger and the other transactions contemplated by this Agreement. The
Company shall (upon request) promptly deliver to Parent a copy of each such
filing made, each such notice given and each such Consent obtained by the
Company during the Pre-Closing Period.
5.2 INFORMATION STATEMENT.
(a) As promptly as practicable, but in any event within seven
days, after the date of this Agreement, both Parent and the Company shall
prepare an information statement describing the Merger and the transactions
contemplated thereby (the "INFORMATION STATEMENT"), and the Company shall mail
or otherwise deliver to the Company stockholders such Information Statement
along with a written consent of the Company stockholders requesting that the
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Company stockholders approve the principal terms of this Agreement and the
Merger. Both Parent and the Company shall use diligent efforts to cause the
Information Statement to comply with the information requirements of Rule 502 of
Regulation D promulgated under the Securities Act ("RULE 502"). Parent shall
promptly furnish information concerning Parent that may be required to satisfy
the information requirements of Rule 502 in connection with any action
contemplated by this Section 5.2. If any event relating to the Company or Parent
occurs, or if the Company or Parent becomes aware of any information, in either
case that should be disclosed in an amendment or supplement to the Information
Statement, then the Company or Parent, as the case may be, shall promptly
prepare such amendment or supplement, and the Company shall promptly distribute
the same to the stockholders of the Company. Each party shall take all actions
reasonably necessary or advisable to exempt the issuance of the Parent Common
Stock to be issued in the Merger under Rule 506 of Regulation D promulgated
under the Securities Act. In connection with the distribution of the Information
Statement to the Company stockholders, the Company shall include, and shall use
its diligent efforts to cause each Company stockholder to complete and return,
an investor status questionnaire in a form provided by Parent (the "STATUS
LETTER"). To the extent that Parent reasonably determines that a Company
stockholder is not an "accredited investor" (as such term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act), the Company agrees
that it shall use its diligent efforts to cause all such Company stockholders to
use a "purchaser representative" (as defined in Rule 501(h)) to assist such
Company stockholders in evaluating the Information Statement and the investment
decisions represented by this Agreement, the Merger and the transactions
contemplated hereby.
(b) Prior to the Effective Time, Parent and the Company shall
use reasonable efforts to obtain all regulatory approvals and other information
(including obtaining properly completed Status Letters from each Company
stockholder) needed to ensure that the Parent Common Stock to be issued in the
Merger will be registered or qualified under the securities law of every
jurisdiction of the United States in which any registered holder of capital
stock of the Company has an address of record on the record date for determining
the stockholders entitled to notice of and to vote on the principal terms of
this Agreement and the Merger; provided however, that Parent shall not be
required (i) to qualify to do business as a foreign corporation in any
jurisdiction in which it is not now qualified, or (ii) to file a general consent
to service of process in any jurisdiction.
(c) The Company shall take all action reasonably necessary
under all applicable Legal Requirements to solicit the written consent of the
stockholders of the Company entitled to vote upon the principal terms of this
Agreement and the Merger and will, within seven days after the date of this
Agreement, mail to each holder of capital stock of the Company a copy of the
Information Statement, a form of written consent, a Status Letter and such other
documents as Parent deems are necessary to comply with applicable law or are
otherwise reasonably appropriate. The Company shall use its commercially
reasonable efforts to ensure that the Required Company Stockholder Vote will be
obtained as promptly as practicable (and in any event within fifteen days) after
the Information Statement is first sent to the stockholders of the Company. The
Company shall use its diligent efforts to ensure that the Required Company
Stockholder Vote is obtained in compliance with all applicable Legal
Requirements.
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(d) The board of directors of the Company shall Unanimously
recommend that the Company's stockholders approve the principal terms of this
Agreement and the Merger. The Information Statement shall include a statement to
such effect. Neither the board of directors of the Company nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify, in a manner adverse to Parent, the Unanimous recommendation of
the board of directors of the Company that the Company's stockholders approve
the principal terms of this Agreement and the Merger. For purposes of this
Agreement, said recommendation of the board of directors of the Company shall be
deemed to have been modified in a manner adverse to Parent if said
recommendation shall no longer be Unanimous.
5.3 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) the
Company shall not (and the Company shall not permit any of its Representatives
to) issue any press release or make any public statement regarding this
Agreement or the Merger, or regarding any of the other transactions contemplated
by this Agreement, without Parent's prior written consent, and (b) Parent will
use reasonable efforts to consult with the Company prior to issuing any press
release or making any public statement regarding the Merger, provided that
nothing herein shall be deemed to prohibit Parent from making any public
disclosure Parent deems necessary or appropriate under applicable Legal
Requirements.
5.4 AMENDMENT OF EMPLOYMENT AGREEMENTS. The Company shall use all
reasonable efforts to cause the individuals listed in Section 6.5(f) of this
Agreement, to execute and deliver to Parent, as promptly as practicable after
the execution of this Agreement, an Amendment to Employment Agreement in the
form of EXHIBIT J.
5.5 DILIGENT EFFORTS. During the Pre-Closing Period, (a) the Company
shall use its diligent efforts to cause the conditions set forth in Section 6 to
be satisfied on a timely basis, and (b) Parent and Merger Sub shall use their
diligent efforts to cause the conditions set forth in Section 7 to be satisfied
on a timely basis.
5.6 TAX MATTERS. Prior to the Closing, Parent and the Company shall
execute and deliver to Cooley Godward LLP and to Gray Cary Ware & Freidenrich
LLP tax representation letters in substantially the form of EXHIBIT F (which
will be used in connection with the legal opinions contemplated by Sections
6.5(f) and 7.3(b)). Neither Parent, Merger Sub, nor the Company will take any
action, or will fail to take any action, either before or after the Closing of
the Merger, which could reasonably be expected to cause the Merger to fail to
qualify as a reorganization under Section 368(a) of the Code.
5.7 TERMINATION OF AGREEMENTS. Prior to the Closing, the Company shall
enter into an agreement, reasonably satisfactory in form and content to Parent
(and conditioned and effective upon the Closing), terminating all agreements
relating to stockholders' rights (including but not limited to (i) the Investor
Rights Agreement dated March 27, 1998, as amended on May 18, 1999 and December
23, 1999, (ii) the Amended and Restated Voting Agreement dated May 18, 1999,
(iii) the Stockholder Rights and Restriction Agreement dated August 6, 1998
between Cytovia and Aurora BioSciences Corporation and (iv) the Stockholder
Rights and Restriction Agreement dated March, 2000 between Cytovia and Axys
Pharmaceuticals Corporation, unless otherwise agreed to by Parent.
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5.8 STATUS LETTER AND RELEASE. At the Closing, each of the Company
stockholders shall execute and deliver to the Company a Status Letter and
Release in the form of EXHIBIT G.
5.9 TERMINATION OF EMPLOYEE PLANS. At the Closing, the Company shall
terminate the Company Stock Option Plans. All other employee benefit plans of
the Company shall either (i) remain in place and be assumed by Parent, or (ii)
be terminated to the extent Parent has established reasonably comparable
replacement plans. For each such plan that is terminated, the Company shall take
reasonable steps to ensure that no employee or former employee of the Company
has any rights under any of such plans and that any liabilities of the Company
under such plans (including any such liabilities relating to services performed
prior to the Closing) are fully extinguished.
5.10 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Section 1.897 - 2(h)(2)
of the United States Treasury Regulations.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction or waiver, at or prior to the Closing, of each of the
following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in this Agreement (as modified by the Company
Disclosure Schedule as delivered to Parent as of the date of this Agreement) and
in each of the other agreements and instruments delivered to Parent in
connection with the transactions contemplated by this Agreement shall have been
accurate in all respects as of the date of this Agreement, and as of the Closing
Date as if made on the Closing Date, it being understood that for purposes of
determining the accuracy of the representations and warranties, the following
shall be disregarded: (i) any "Material Adverse Effect" qualification or other
materiality qualifications contained in such representations and warranties, and
(ii) any inaccuracy, that, when considered together with all other inaccuracies
of such representations and warranties, does not have and would not reasonably
be expected to have a Material Adverse Effect on the Company.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted
by the Required Company Stockholder Vote.
6.4 CONSENTS. All Consents set forth on Part 2.21 of the Company
Disclosure Schedule shall have been obtained and shall be in full force and
effect.
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6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Lock-up Agreements in the form of EXHIBIT H executed by
all of the Company's stockholders;
(b) a properly completed and executed Status Letter and
Release from each stockholder of the Company in the form of EXHIBIT G;
(c) the confidential invention and assignment agreements,
which have previously been delivered by the Company to Parent, as executed by
all employees and former employees of the Company and by all consultants and
independent contractors and former consultants and former independent
contractors to the Company who have not already signed such agreements;
(d) an estoppel certificate from the Company's landlord, dated
as of a recent date prior to the Closing Date and satisfactory in form and
content to Parent;
(e) a legal opinion of Gray Cary Ware & Freidenrich LLP, dated
as of the Closing Date, in the form of EXHIBIT I;
(f) Amendment to Employment Agreement in the form of EXHIBIT
J, executed by each of Richard Canote, Prasad Sunkara, Ben Tseng, Jeffery Vick
and Eckard Weber;
(g) a legal opinion of Cooley Godward LLP, dated as of the
Closing Date, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, such counsel may rely upon the tax representation
letters referred to in Section 5.7);
(h) written resignations of all directors of the Company,
effective as of the Effective Time;
(i) a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company representing
that the conditions set forth in Sections 6.1 and 6.2 have been duly satisfied
(the "COMPANY COMPLIANCE CERTIFICATE"); and
(j) a list setting forth the name and address of each Company
stockholder entitled to receive the Merger Shares pursuant to Section 1.5(a)(i).
6.6 CONVERSION OF PREFERRED STOCK. Each outstanding share of the
Company's Preferred Stock shall have been converted to Company Common Stock
prior to the Closing.
6.7 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for quotation (subject to notice of issuance) on
Nasdaq.
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6.8 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been any change in the business, condition, capitalization,
assets, liabilities, prospects, operations or financial performance of the
Company that has had or would reasonably be expected to have a Material Adverse
Effect on the Company.
6.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.10 NO GOVERNMENTAL LITIGATION. There shall not be pending or
threatened any Legal Proceeding in which a Governmental Body is or is threatened
to become a party or is otherwise involved, and neither Parent nor the Company
shall have received any communication from any Governmental Body in which such
Governmental Body indicates the possibility of commencing any Legal Proceeding
or taking any other action: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement; (b) relating to the Merger and seeking to obtain from Parent or
any of its Subsidiaries or the Company any damages or other relief that may be
material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Company; or (d) which
would materially and adversely affect the right of Parent or the Company or any
of its Subsidiaries to own the assets or operate the business of the Company.
6.11 NO OTHER LITIGATION. There shall not be pending any Legal
Proceeding in which, in the reasonable judgment of Parent, there is a reasonable
probability of an outcome that could have a Material Adverse Effect on the
Company or any of its Subsidiaries or a material adverse effect on Parent: (a)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement; (b) relating to
the Merger and seeking to obtain from Parent or any of its Subsidiaries, or any
of the Company or any of its Subsidiaries, any damages or other relief that may
be material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Company or any of its
Subsidiaries; or (d) which would affect adversely the right of Parent or the
Company or any of its Subsidiaries to own the assets or operate the business of
the Company or any of its Subsidiaries.
6.12 TERMINATION OF EMPLOYEE PLANS. The Company shall have provided
Parent with evidence, reasonably satisfactory to Parent, as to the termination
of the benefit plans, if any, referred to in Section 5.9.
6.13 FIRPTA COMPLIANCE. Parent shall have received the statement
referred to in Section 5.10(a) and the Company shall have filed with the
Internal Revenue Service the notification referred to in Section 5.10(b).
6.14 SATISFACTORY COMPLETION OF PRE-MERGER REVIEW. Regardless of any
disclosure made on the Disclosure Schedule, Parent shall have satisfactorily
completed its pre-merger
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investigation and review of the Company's business, condition, assets,
liabilities, operations, financial performance, net income and prospects and
shall be satisfied with the results of that investigation and review.
6.15 GRANT OF STOCK OPTIONS. The Company shall have granted those
certain stock option agreements to purchase 108,700 shares of the Company's
Common Stock that were approved at the May 11, 2000 meeting of the Company's
Board of Directors.
6.16 CANCELLATION OF STOCK. The Company shall have cancelled and
terminated those certain 16,000 shares of the Company's Common Stock held by
Beverly S. Packard and Akira Komoriya, principals of OncoImmunin, Inc., as
described in Section 7 of that certain Settlement Agreement dated January 26,
2000 by and between the Company and OncoImmunin, Inc.
6.17 FULLY DILUTED COMPANY SHARE AMOUNT. The Fully Diluted Company
Share amount shall be equal to 4,532,029 shares.
6.18 DISSENTING SHARES. The holders of no more than 5% of the total
shares of Company Common Stock and Preferred Stock of the Company shall have
perfected or be entitled to exercise dissenters' rights under Chapter 13 of the
CCC or rights of appraisal under Section 262 of the DGCL.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement and in each of the
other agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall have been accurate in all
respects as of the date of this Agreement, and as of the Closing Date as if made
on the Closing Date, it being understood that for purposes of determining the
accuracy of the representations and warranties, the following shall be
disregarded: (i) any "Material Adverse Effect" qualification or other
materiality qualifications contained in such representations and warranties, and
(ii) any inaccuracy, that does not, when considered together with all other
inaccuracies of such representations and warranties, does not have and would not
reasonably be expected to have a Material Adverse Effect on Parent.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 DOCUMENTS. The Company shall have received the following documents:
(a) a legal opinion of Cooley Godward llp, dated as of the
Closing Date, in the form of EXHIBIT K;
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(b) a legal opinion of Gray Cary Ware & Freidenrich LLP dated
as of the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, such counsel may rely upon the tax
representation letters referred to in Section 5.7); and
(c) a certificate signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent representing and
warranting that the conditions set forth in Sections 7.1 and 7.2 have been duly
satisfied.
7.4 STOCKHOLDER APPROVAL. The principal terms of this Agreement and the
Merger shall have been duly approved by the Required Company Stockholder Vote.
7.5 LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for quotation (subject to notice of issuance) on
Nasdaq.
7.6 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been any change in the business, condition, capitalization,
assets, liabilities, operations or financial performance of Parent that has had
or would reasonably be expected to have a Material Adverse Effect on Parent.
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that
the timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company to
comply with or perform any covenant or obligation set forth in this Agreement or
in any other agreement or instrument delivered to Parent);
(c) by Parent if any of the Company's representations and
warranties contained in this Agreement shall have been materially inaccurate as
of the date of this Agreement or shall have become materially inaccurate as of
any subsequent date (as if made on such subsequent date), or if any of the
Company's covenants contained in this Agreement shall have been breached in any
material respect; PROVIDED, HOWEVER, that Parent may not terminate this
Agreement under this Section 8.1(c) on account of an inaccuracy in the Company's
representations and warranties that is curable by the Company or on account of a
breach of a
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covenant by the Company that is curable by the Company unless the Company fails
to cure such inaccuracy or breach within 30 days after receiving written notice
from Parent of such inaccuracy or breach;
(d) by the Company if any of Parent's representations and
warranties contained in this Agreement shall have been materially inaccurate as
of the date of this Agreement or shall have become materially inaccurate as of
any subsequent date (as if made on such subsequent date), or if any of Parent's
covenants contained in this Agreement shall have been breached in any material
respect; PROVIDED, HOWEVER, that the Company may not terminate this Agreement
under this Section 8.1(d) on account of an inaccuracy in Parent's
representations and warranties that is curable by Parent or on account of a
breach of a covenant by Parent that is curable by Parent unless Parent fails to
cure such inaccuracy or breach within 30 days after receiving written notice
from the Company of such inaccuracy or breach;
(e) by Parent if the Closing has not taken place on or before
June 23, 2000 (other than as a result of any failure on the part of Parent to
comply with or perform any covenant or obligation of Parent set forth in this
Agreement) unless such Closing has been extended by the mutual agreement of the
Company and Parent;
(f) by the Company if the Closing has not taken place on or
before June 23, 2000 (other than as a result of the failure on the part of the
Company to comply with or perform any covenant or obligation of the Company set
forth in this Agreement) unless such Closing has been extended by the mutual
agreement of the Company and Parent;
(g) by the mutual consent of Parent and the Company; or
(h) by Parent if the Company issues any shares of Preferred
Stock or other securities (other than securities permitted to be issued under
Section 4.2(f)) of the Company prior to the Closing Date.
8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c), Section 8.1(e) or Section
8.1(h), Parent shall deliver to the Company a written notice stating that Parent
is terminating this Agreement and setting forth a brief description of the basis
on which Parent is terminating this Agreement. If the Company wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or Section
8.1(f), the Company shall deliver to Parent a written notice stating that the
Company is terminating this Agreement and setting forth a brief description of
the basis on which the Company is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; PROVIDED, HOWEVER, that: (a) such termination shall not preclude a
party from seeking and obtaining a court decree or order of specific performance
or mandamus to enforce the observance and performance of this Agreement; (b) the
parties shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10; and (c) the Company shall, in all events,
remain bound by and continue to be subject to Section 5.3.
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SECTION 9. REGISTRATION RIGHTS
9.1 REGISTRATION STATEMENT.
(a) As promptly as practicable after the Closing (and in any
event within 30 days after the Closing), Parent shall (at its own expense)
prepare and file with the SEC a registration statement on Form S-3 (the
"REGISTRATION STATEMENT") registering for resale the shares of Parent Common
Stock to be issued pursuant to Sections 1.5(a)(i) and upon the exercise of any
Company Warrants assumed by Parent pursuant to Section 1.6 (such shares of
Parent Common Stock being referred to collectively as the "REGISTRABLE
SECURITIES"). Parent shall use commercially reasonable efforts: (a) to cause the
Registration Statement to be declared effective by the SEC as soon as
practicable after filing with the SEC; and (b) cause the Registration Statement
to remain effective until the earlier of (i) the second anniversary of the
Closing Date, or (ii) the date on which all of the Registrable Securities have
been sold.
(b) Parent shall (at its own expense):
(i) prepare and file with the SEC such amendments to
the Registration Statement, and such supplements to the related prospectus, as
may be required in order to comply with the applicable provisions of the
Securities Act;
(ii) promptly furnish to the holders of Registrable
Securities such numbers of copies of a prospectus conforming to the requirements
of the Securities Act as they may reasonably request in order to facilitate the
disposition of the Registrable Securities covered by the Registration
Statements; and
(iii) use reasonable efforts to register and qualify
the Registrable Securities under the securities laws of such states as the
holders of Registrable Securities may reasonably request, PROVIDED, HOWEVER,
that Parent shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any of such states.
(c) Notwithstanding anything to the contrary contained herein,
no Person who receives Parent Common Stock in the Merger shall have any rights
under this Section 9 unless such Person (i) executes a written agreement
satisfactory in form and content to Parent, confirming that such Person wishes
to be allowed to sell Parent Common Stock pursuant to the Registration
Statements and agrees to be bound by the applicable provisions of this Section
9, which written agreement shall be delivered to the Company stockholders with
the Information Statement contemplated by Section 5.2, and (ii) delivers such
written agreement (as executed by such Person) to Parent within 10 days after
the Closing. A Person who receives Registrable Securities in the Merger pursuant
to Section 1.5(a)(i) and who executes and delivers such an agreement is referred
to in this Section 9 as a "PARTICIPATING HOLDER."
(d) Notwithstanding anything to the contrary contained herein,
all of Parent's obligations under this Section 9.1 (including its obligation to
file and maintain the effectiveness of the Registration Statements) shall
terminate and expire as to the earliest date on which all Registrable Securities
can be sold without registration pursuant to Rule 144(k) under the
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Securities Act at which time Parent shall, upon receipt of appropriate
supporting documentation as may be reasonably requested by Parent, authorize
removal of the restrictive legend on the applicable stock certificate.
9.2 INDEMNIFICATION.
(a) Parent agrees to indemnify, to the extent permitted by
law, each Participating Holder against all Damages suffered by such
Participating Holder as a result of any untrue or alleged untrue statement of
material fact contained in either of the Registration Statements or in the
related prospectus or preliminary prospectus (or in any amendment thereof or
supplement thereto) or as a result of any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such untrue statement or omission or
alleged untrue statement or omission results from or is contained in any
information furnished in writing to Parent by such Participating Holder for use
therein or results from such Participating Holder's failure to deliver a copy of
the Registration Statements or related prospectus (or any amendment thereof or
supplement thereto) after Parent has furnished such Participating Holder with a
sufficient number of copies thereof.
(b) In connection with the Registration Statement, each
Participating Holder (i) shall furnish to Parent in writing such information and
affidavits as Parent reasonably requests for use in connection with such
Registration Statement or the related prospectus, and (ii) to the extent
permitted by law, will indemnify Parent, its directors and officers and each
Person who controls Parent (within the meaning of the Securities Act) against
all Damages resulting from any untrue or alleged untrue statement of material
fact contained in such Registration Statement or in the related prospectus or
preliminary prospectus (or in any amendment thereof or supplement thereto) or
from any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission or alleged untrue statement or
omission results from or is contained in any information or affidavit furnished
in writing by such Participating Holder.
(c) Any Person entitled to indemnification under this Section
9 will (i) give prompt written notice to the indemnifying party of any claim
with respect to which it seeks indemnification, and (ii) unless in the
indemnified party's reasonable judgment a conflict of interest exists between
the indemnified party and the indemnifying party with respect to such claim,
permit the indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any consent to
the entry of any judgment or any settlement made by the indemnified party
without the indemnifying party's consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will pay the fees and expenses of only one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest exists between such indemnified party and any other
indemnified party with respect to such claim (in which case the indemnifying
party will pay the fees and expenses of additional counsel).
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9.3 TRANSFERABILITY OF REGISTRATION RIGHTS. The rights of Participating
Holders under this Section 9 are not transferable except in connection with: (a)
a transfer by will or intestacy; (b) estate planning transfers consisting of
gifts to the spouse or issue of the transferor, or to a charity qualified under
Section 501(c)(3) of the Code; or (c) a distribution of any of the Registrable
Securities, without additional consideration, to the underlying beneficial
owners thereof (such as the general partners, limited partners, stockholders or
trust beneficiaries of a Company stockholder), in which event in each such case
such transferee or distributee shall be deemed to be a "Participating Holder"
for purposes of this Section 9. In the event of such a transfer under this
Section 9.3, Parent shall file an amendment to the Form S-3 Registration
Statement then in effect naming each of the distributees as a selling
shareholder. Parent shall effect such amendment promptly after such
Participating Holders request and receipt by Parent of the names of such
distributees and respective number of shares allocated to each. If a transfer
pursuant to this Section 9.3 occurs prior to the first anniversary of the
Closing, then the transferee or distributee shall be required to comply with any
remaining applicable provisions of Section 9.1(c), if any.
9.4 DELAY OF REGISTRATION; SUSPENSION.
(a) Parent may delay the filing or effectiveness of the
Registration Statement for a period not to exceed 30 days (as may be extended as
permitted below) in the event that Parent, in its reasonable judgment after
consultation with counsel, believes that there is or may be in existence
material nonpublic information or events involving Parent, the failure of which
to be disclosed in the prospectus included in the Registration Statement could
result in a violation of the Securities Act, the Exchange Act or any provision
of any state securities law. In the event Parent exercises such delay right
under this Section 9.4(a), such delay shall continue for the period of time, and
only such period of time, reasonably necessary for disclosure to occur at a time
that is not detrimental to Parent or its stockholders or until such time as the
information or event is no longer material, each as determined in good faith by
Parent after consultation with counsel; but in no event beyond 60 days after the
Closing. Parent will promptly give the Participating Holders notice of any such
delay and prompt notice of the cessation of delay. In the event Parent
reasonably believes that any of the foregoing circumstances are continuing and
warrant the delay of the filing or effectiveness of the Registration Statement
beyond such 30-day period, it may, with the consent of the holders of a majority
of the Registrable Securities (which consent may be withheld in the reasonable
discretion of such holders) extend such 30-day period for one additional 30-day
period. Parent will use all reasonable efforts to minimize the length of any
delay under this Section 9.4(a); provided however that nothing contained in this
Section 9.4(a) shall be deemed to require Parent to make any disclosures.
(b) At any time after the Registration Statement has been
declared effective, Parent may suspend the use of the Registration Statement for
a period not to exceed five business days (as may be extended as permitted
below), and the Participating Holders hereby agree not to offer or sell any
Registrable Securities pursuant to the Registration Statement during any such
period after receiving notice of such suspension, at any time when Parent, in
its reasonable judgment after consultation with counsel, believes that there is
or may be in existence material nonpublic information or events involving
Parent, the failure of which to be disclosed in the prospectus included in the
Registration Statement could result in a violation of the Securities
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Act, the Exchange Act or any provision of any state securities law; provided
that Parent may exercise such suspension right no more than three times in any
one-year period, with the first such year to commence on the Closing Date. In
the event Parent exercises such suspension right under this Section 9.4(b), such
suspension shall continue for the period of time, and only such period of time,
reasonably necessary for disclosure to occur at a time that is not detrimental
to Parent or its stockholders or until such time as the information or event is
no longer material, each as determined in good faith by Parent after
consultation with counsel, but in no event beyond five business days. Parent
will promptly give the Participating Holders notice of any such suspension and
prompt notice of the cessation of suspension. In the event Parent reasonably
believes that any of the foregoing circumstances are continuing and warrant
suspension of the use of the Registration Statement beyond such five
business-day period, it may, with the consent of the holders of a majority of
the Registrable Securities (which consent may be withheld in the reasonable
discretion of such holders) extend such five business-day period for one
additional five business-day period. Parent will use all reasonable efforts to
minimize the length of any suspension under this Section 9.4(b); provided
however that nothing contained in this Section 9.4 shall be deemed to require
Parent to make any disclosures.
9.5 AMENDMENT. Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 9 may be amended by Parent at any
time with the consent of the holders of a majority of the Registrable Securities
(which consent shall not be unreasonably withheld).
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
10.2 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the Company
Disclosure Schedule) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger.
10.3 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the
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prevailing party shall be entitled to recover reasonable attorneys' fees, costs
and disbursements (in addition to any other relief to which the prevailing party
may be entitled).
10.4 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
IF TO PARENT:
Maxim Pharmaceuticals, Inc.
8899 University Center Lane, Suite 400
San Diego, CA 92121
Attn: Dale A. Sander
Fax: (858) 453-5005
WITH A COPY TO:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Kay Chandler, Esq.
Fax: (858) 453-3555
IF TO THE COMPANY:
Cytovia, Inc.
6650 Nancy Ridge Drive
San Diego, CA 92121
Attn: ______________
Fax: (858) 860-2300
WITH A COPY TO:
Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, CA 92121
Attn: T. Knox Bell, Esq.
Fax: (858) 677-1477
10.5 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
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10.6 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.8 GOVERNING LAW. The corporate law of the state of Delaware shall
govern issues related to the relative rights of Parent's stockholders and all
other issues shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of California (without giving effect to
principles of conflicts of laws).
10.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns (if
any). Neither the Company nor Parent shall assign this Agreement or any rights
or obligations hereunder (by operation of law or otherwise) to any Person;
provided, however, that Parent may assign any or all of its rights under this
Agreement, in whole or in part, to any wholly-owned subsidiary of Parent without
obtaining the consent or approval of any other party hereto or of any other
Person, but may not delegate any of its obligations to issue Parent Common
Stock.
10.10 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
10.11 WAIVER. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
10.12 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto, except as provided in Section
10.5.
44.
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10.13 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.14 PARTIES IN INTEREST. Except for the provisions of Sections 1.5
and 1.6, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.15 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof; provided, however, that the [Mutual
Non-Disclosure Agreement executed by Parent and the Company on May ___, 2000]
shall not be superseded by this Agreement and shall remain in effect in
accordance with its terms until the earlier of (a) the Effective Time, or (b)
the date on which such Mutual Non-Disclosure Agreement is terminated in
accordance with its terms.
10.16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company contained in this Agreement shall not survive the
Closing. The representations and warranties of Parent contained in this
Agreement shall survive for a period of one year following the Closing.
10.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
10.18 NEGOTIATION OF DISPUTES. If a dispute arises between the parties
relating to the interpretation or performance of this Agreement, including any
right of setoff, and the parties cannot resolve the dispute within 30 days of a
written request by either party to the other, such
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dispute shall be referred to the Chief Executive Officer, Chief Financial
Officer or General Counsel of Parent and Chief Executive Officer, Chief
Financial Officer or General Counsel of the Company for resolution. Such persons
shall hold a meeting to attempt in good faith to negotiate a resolution of the
dispute prior to pursuing other available remedies. If within 10 business days
after such meeting, the Chief Executive Officer, Chief Financial Officer or
General Counsel of Parent and the Chief Executive Officer, Chief Financial
Officer or General Counsel of the Company have not succeeded in negotiating a
resolution of the dispute, such dispute may be resolved through arbitration
pursuant to Section 10.19.
10.19 ARBITRATION. Disputes that have not been successfully resolved
pursuant to Section 10.18, with the exception of any claim for a temporary
restraining order or preliminary or permanent injunctive relief to enjoin any
breach or threatened breach hereof, shall be settled by a panel of three
arbitrators with such arbitration to be held in San Diego, California, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. All arbitrators must be
knowledgeable in the subject matter at issue in the dispute. The arbitrators
shall make their decision in accordance with the terms of this Agreement and
applicable law. Each party shall initially bear its own costs and legal fees
associated with such arbitration and the parties shall split the cost of the
arbitrators. The prevailing party in any such arbitration shall be entitled to
recover from the other party the reasonable attorneys' fees, costs and expenses
incurred by such prevailing party in connection with such arbitration. The
decision of the arbitrators shall be final and may be sued on or enforced by the
party in whose favor it runs in any court of competent jurisdiction at the
option of the successful party. The rights and obligations of the parties to
arbitrate any dispute relating to the interpretation or performance of this
Agreement or the grounds for the termination thereof, shall survive the
expiration or termination of this Agreement for any reason. The arbitrators
shall be empowered to award specific performance, injunctive relief and other
equitable remedies as well as damages, but shall not be empowered to award
punitive or exemplary damages or award any damages in excess of any limitations
set forth in this Agreement.
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The parties hereto have caused this Agreement to be executed and
delivered as of the date first set forth above.
MAXIM PHARMACEUTICALS, INC.,
a Delaware corporation.
By: /s/ LARRY G. STAMBAUGH
-------------------------------------------
Name: Larry G. Stambaugh
-----------------------------------------
Title: Chairman and Chief Executive Officer
----------------------------------------
M-80 ACQUISITION CORP., a
Delaware corporation.
By: /s/ DALE A. SANDER
-------------------------------------------
Name: Dale A. Sander
-----------------------------------------
Title: President
----------------------------------------
CYTOVIA, INC.,
a Delaware corporation.
By: /s/ ECKARD WEBER
-------------------------------------------
Name: Eckard Weber
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
<PAGE>
EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Amended and Restated Articles of Incorporation of
Surviving Corporation
Exhibit C - Form of Restated Bylaws of the Surviving Corporation
Exhibit D - Directors and officers of Surviving Corporation
Exhibit E - Reserved
Exhibit F - Forms of tax representation letters
Exhibit G - Form of Release
Exhibit H - Form of Lock-up
Exhibit I - Form of legal opinion of Gray Cary Ware & Freidenrich LLP
Exhibit J - Form of Amendment to Employment Agreement
Exhibit K - Form of legal opinion of Cooley Godward llp
<PAGE>
SCHEDULES AND EXHIBITS EXCLUDED FROM FILING
The following is a brief description of schedules and exhibits that
were omitted pursuant to Item 601(b)(2) of Regulation S-K.
1. Schedule of Exceptions. The Schedule of Exceptions contains
exceptions to the representations and warranties contained in this Agreement and
Plan of Merger and reorganization.
2. Exhibit B. Exhibit B contains the form of Amended and Restated
Certificate of Incorporation of the surviving entity in this Agreement and Plan
of Merger.
3. Exhibit C. Exhibit C contains the form of Restated Bylaws of the
surviving entity in this Agreement and Plan of Merger and reorganization.
4. Exhibit D. Exhibit D lists the directors and officers of the
surviving entity in this Agreement and Plan of Merger and reorganization.
5. Exhibit F. Exhibit F contains the form of tax representation letter
signed by each party, which made certain factual representations that were
important to the analysis of the tax-free nature of the merger.
6. Exhibit G. Exhibit G contains a form of Status Letter and Release
signed by each of the selling stockholders of Cytovia. The Status Letter and
Release includes certain factual representations by the stockholder and a
general release of claims.
7. Exhibit H. Exhibit H is the form of lock up agreement which is filed
as a separate exhibit.
8. Exhibit I and K. Exhibit I and K contain the form of legal opinion
delivered at the closing of the merger by each party's legal counsel.
9. Exhibit J. Exhibit J contains amendments to certain employment
agreements Cytovia had with certain of its employees related to severance
benefits.
Maxim Pharmaceuticals, Inc. agrees to furnish supplementally a copy of any
omitted schedule to the Securities and Exchange Commission upon request.
<PAGE>
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(i) any sale, license, lease, exchange, transfer, disposition
or acquisition of any portion of the business or assets of the Company or any
direct or indirect subsidiary or division of the Company, except for immaterial
amounts of the business or assets in the ordinary course of business;
(ii) the issuance, grant, disposition or acquisition of (A)
any capital stock or other equity security of the Company or any direct or
indirect subsidiary of the Company (other than issuances of Company Common Stock
pursuant to options outstanding as of the date hereof), (B) any option, call,
warrant or right (whether or not immediately exercisable) to acquire any capital
stock or other equity security of the Company or any direct or indirect
subsidiary of the Company, or (C) any security, instrument or obligation that is
or may become convertible into or exchangeable for any capital stock or other
equity security of the Company or any direct or indirect subsidiary of the
Company; or
(iii) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction or series of related
transactions involving the Company or any direct or indirect subsidiary of the
Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Company
Disclosure Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) delivered to Parent on
behalf of the Company.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
COMPANY SOURCE CODE. "Company Source Code" shall mean any source code,
or any portion, aspect or segment of any source code, relating to any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
<PAGE>
COMPANY STOCK OPTION PLANS. "Company Stock Option Plans" shall mean the
Company's 1998 Equity Incentive Plan and the Company's 2000 Equity Incentive
Plan.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, option, right of first
refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
ENTITY. "Entity" shall mean any 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 or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GAAP. "GAAP" shall mean generally accepted accounting principles,
applied on a basis consistent with the basis on which the Company Financial
Statement.
GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body or
any such prime contractor or subcontractor otherwise has or may acquire any
right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or
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authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or (b)
right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR ACT. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
KNOWLEDGE. An individual shall be deemed to have "Knowledge" or be
aware of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably diligent and comprehensive investigation concerning the truth or
existence of such fact or other matter.
The Company shall be deemed to have "Knowledge" of a particular fact or
other matter if any of the following officers or management employees has
Knowledge of such fact or other matter: Eckard Weber (Chief Executive Officer),
Richard Canote (Vice President Finance and Operations; Secretary; Chief
Financial Officer), Jeffery S. Vick (Vice President Corporate Development), and
Prasad Sunkara (Executive Vice President Research and Development).
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Company Compliance Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
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such representations and warranties) has had or would reasonably be expected to
have a material adverse effect on the Company's business, condition, prospects,
assets, liabilities, operations or financial performance. A violation or other
matter will be deemed to have a "Material Adverse Effect" on Parent if such
violation or other matter (considered together with all other matters that would
constitute exceptions to the representations and warranties set forth in the
Agreement or in the Parent Compliance Certificate but for the presence of
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) has had or would
reasonably be expected to have a material adverse effect on Parent's business,
condition, assets, liabilities, operations or financial performance; PROVIDED
THAT the following shall not constitute a Material Adverse Effect on Parent: (i)
matters generally affecting the biotechnology industry that do not
disproportionately affect Parent, or (ii) any decline in the price of Parent's
Common Stock. Provided further, that any event or occurrence which has had or
would reasonably be expected to have a material adverse effect on Parent's
business, condition, assets, liabilities, operations or financial performance
that would ordinarily need to be publicly disclosed under the Securities and
Exchange Act of 1934, as amended, shall be considered to constitute a Material
Adverse Effect on Parent.
NASDAQ. "Nasdaq" shall mean the Nasdaq National Market.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, cell lines, samples of assay components,
formulations, experimental work, clinical data customer list, franchise, system,
computer software, computer program, invention, design, blueprint, engineering
drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to use or exploit
any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
SUBSIDIARY. Any Entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record,
(a) an amount of voting securities or other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or (b) at least 50% of
the outstanding equity or financial interests of such Entity.
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TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
UNANIMOUS OR UNANIMOUSLY. "Unanimous" or "Unanimously" when referring
to approval or recommendation by the Company's board of directors shall mean the
affirmative vote, consent or approval of all directors duly elected and voting
on the Merger.
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