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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
XENOGEN CORPORATION,
DRUM ACQUISITION CORPORATION,
MDS INC.,
PHOENIX INTERNATIONAL LIFE SCIENCES INC.,
PHOENIX INTERNATIONAL LIFE SCIENCES (US) INC.,
PHOENIX INTERNATIONAL LIFE SCIENCES (CHRYSALIS) INC.,
AND
CHRYSALIS DNX TRANSGENIC SCIENCES CORPORATION
Dated as of September 28, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................................... 1
1.1 The Merger................................................................ 1
1.2 Effective Time; Closing................................................... 2
1.3 Effect of the Merger...................................................... 2
1.4 Certificate of Incorporation; Bylaws...................................... 2
1.5 Directors and Officers.................................................... 2
1.6 Effect on Capital Stock................................................... 2
1.7 Surrender of Certificates................................................. 3
1.8 No Further Ownership Rights in Company Common Stock....................... 4
1.9 Lost, Stolen or Destroyed Certificates.................................... 4
1.10 Tax and Accounting Consequences........................................... 4
1.11 Taking of Necessary Action; Further Action................................ 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF INDIRECT PARENT, SECOND
INTERMEDIARY PARENT, FIRST INTERMEDIARY PARENT, PARENT AND
COMPANY................................................................... 5
2.1 Organization and Qualification; Subsidiaries.............................. 5
2.2 Certificate of Incorporation and Bylaws................................... 6
2.3 Capitalization............................................................ 6
2.4 Authority Relative to this Agreement...................................... 6
2.5 No Conflict; Required Filings and Consents................................ 6
2.6 Compliance; Permits....................................................... 7
2.7 Financial Statements...................................................... 7
2.8 Absence of Certain Changes or Events...................................... 8
2.9 Absence of Litigation..................................................... 11
2.10 Employee Benefit Plans.................................................... 12
2.11 Employees................................................................. 13
2.12 Material Contracts........................................................ 13
2.13 Guaranties, Intercompany Contracts........................................ 13
2.14 Restrictions on Business Activities....................................... 14
2.15 Environmental Matters..................................................... 14
2.16 Intellectual Property..................................................... 14
2.17 Board Approval............................................................ 16
2.18 Assets.................................................................... 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENTAL ENTITIES AND
INDIRECT PARENT........................................................... 17
3.1 Organization and Qualification of the Parental Entities................... 17
3.2 Authority of the Parental Entities Relative to this Agreement............. 17
3.3 No Conflict; Required Filings and Consents of the Parental Entities....... 18
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3.4 Parental Entities Brokers................................................. 18
3.5 Intellectual Property of the Parent Entities.............................. 18
3.6 Organization and Qualification of Indirect Parent......................... 19
3.7 Authority of Indirect Parent Relative to this Agreement................... 19
3.8 No Conflict; Required Filings and Consents of Indirect Parent............. 20
3.9 Indirect Parent Brokers................................................... 20
3.10 Intellectual Property of Indirect Parent.................................. 20
3.11 Experience................................................................ 21
3.12 Investment................................................................ 21
3.13 Rule 144.................................................................. 21
3.14 No Public Market.......................................................... 21
3.15 Access to Data............................................................ 21
3.16 Economic Risk............................................................. 21
3.17 Accredited Investor; Foreign Investor..................................... 22
3.18 Tax Liability............................................................. 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB.................. 22
4.1 Organization and Qualification; Subsidiaries.............................. 22
4.2 Certificate of Incorporation and Bylaws................................... 22
4.3 Capitalization............................................................ 23
4.4 Authority Relative to this Agreement...................................... 24
4.5 No Conflict; Required Filings and Consents................................ 24
4.6 Financial Statements...................................................... 25
4.7 Absence of Litigation..................................................... 25
4.8 Environmental Matters..................................................... 25
4.9 Board Approval............................................................ 25
4.10 No Undisclosed Liabilities................................................ 26
4.11 Compliance................................................................ 26
4.12 Brokers................................................................... 26
4.13 Absence of Certain Changes or Events...................................... 26
4.14 Intellectual Property..................................................... 26
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................... 27
5.1 Conduct of Business by Company, Indirect Parent, Second Intermediary
Parent, First Intermediary Parent and Parent.............................. 27
5.2 Conduct of Business by Purchaser.......................................... 29
ARTICLE VI ADDITIONAL AGREEMENTS....................................................... 29
6.1 Confidentiality; Access to Information.................................... 29
6.2 Public Disclosure......................................................... 30
6.3 Reasonable Efforts; Notification.......................................... 30
6.4 Employee Benefits......................................................... 31
6.5 Third Party Consents...................................................... 33
6.6 Regulatory Filings; Reasonable Efforts.................................... 33
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6.7 Intercompany Accounts; Cash Balance....................................... 33
6.8 Strategic Relationship.................................................... 33
6.9 WARN...................................................................... 34
6.10 Investor Rights........................................................... 34
6.11 Real Property Lease....................................................... 34
ARTICLE VII CONDITIONS TO THE MERGER................................................... 34
7.1 Conditions to Obligations of Each Party to Effect the Merger.............. 34
7.2 Additional Conditions to Obligations of Company, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent and Parent................. 34
7.3 Additional Conditions to the Obligations of Purchaser and Merger Sub...... 35
ARTICLE VIII TAX MATTERS............................................................... 36
8.1 Definition of Taxes....................................................... 36
8.2 Tax Representations....................................................... 36
8.3 Indemnity................................................................. 38
8.4 Tax Returns............................................................... 40
8.5 Termination of Tax Sharing Agreements..................................... 40
8.6 Conduct of Audits and Other Procedural Matters............................ 40
8.7 Assistance and Cooperation................................................ 41
8.8 Survival.................................................................. 42
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER........................................... 42
9.1 Termination............................................................... 42
9.2 Notice of Termination; Effect of Termination.............................. 43
9.3 Fees and Expenses......................................................... 43
9.4 Amendment................................................................. 43
9.5 Extension; Waiver......................................................... 43
ARTICLE X GENERAL PROVISIONS........................................................... 44
10.1 Survival of Representations and Warranties................................ 44
10.2 Indemnification by the Holders............................................ 44
10.3 Notices................................................................... 46
10.4 Interpretation............................................................ 47
10.5 Counterparts.............................................................. 48
10.6 Entire Agreement; Third Party Beneficiaries............................... 48
10.7 Severability.............................................................. 48
10.8 Other Remedies; Specific Performance...................................... 48
10.9 Governing Law............................................................. 48
10.10 Rules of Construction..................................................... 48
10.11 Assignment................................................................ 49
10.12 Waiver of Jury Trial...................................................... 49
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INDEX OF EXHIBITS
Exhibit A Amended and Restated Certificate of Incorporation
Exhibit B Strategic Relationship Agreement
Exhibit C License Agreement dated June 13, 1985 between the Ohio University
and Embryogen, Inc. and amendment thereto dated June 13, 1985
Exhibit D Articles and Regulations of the Surviving Corporation
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
September 28, 2000, among Xenogen Corporation, a Delaware corporation
("Purchaser"), Drum Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Purchaser ("Merger Sub"), MDS Inc., a Canada
corporation ("Indirect Parent"), Phoenix International Life Sciences Inc., a
Canadian corporation and a wholly-owned subsidiary of Indirect Parent ("Second
Intermediary Parent"), Phoenix International Life Sciences (US) Inc., a Delaware
corporation and wholly-owned subsidiary of Second Intermediary Parent ("First
Intermediary Parent"), Phoenix International Life Sciences (Chrysalis) Inc., a
Delaware corporation and wholly-owned subsidiary of First Intermediary Parent
("Parent"), and Chrysalis DNX Transgenic Sciences Corporation, an Ohio
corporation and a wholly-owned subsidiary of Parent ("Company").
RECITALS
--------
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Ohio General
Corporation Law and Delaware General Corporation Law (the "Corporate Code"),
Purchaser, Merger Sub, Indirect Parent, Second Intermediary Parent, First
Intermediary Parent, Parent and Company intend to enter into a business
combination transaction.
B. The Boards of Directors of Company, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent, Parent, Purchaser and Merger Sub
(i) have determined that the Merger (as defined in Section 1.1) is consistent
with and in furtherance of their respective long-term business strategies and is
fair to, and in the best interests of their respective stockholders and (ii)
have approved this Agreement, the Merger and the other transactions contemplated
by this Agreement.
C. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
D. It is also intended by the parties hereto that the Merger shall
qualify for accounting treatment as a purchase.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Corporate Code, Merger Sub shall be merged with and
into Company (the "Merger"), the separate corporate
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existence of the Merger Sub shall cease and Company shall continue as the
surviving corporation. Company as the surviving corporation of the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this
-----------------------
Agreement, the parties hereto shall cause the Merger to be consummated by filing
certificates of merger with the Secretaries of State of the States of Ohio and
Delaware in accordance with the relevant provisions of Ohio and Delaware law,
respectively, (the "Merger Documents") (the time of acceptance of such filings
by both the Secretaries of State of the States of Delaware and Ohio (or such
later time as may be agreed in writing by Company and Purchaser and specified in
the Merger Documents) being the "Effective Time") as soon as practicable on or
after the Closing Date (as herein defined). Unless the context otherwise
requires, the term "Agreement" as used herein refers collectively to this
Agreement and Plan of Reorganization and the certificates of merger. The closing
of the Merger (the "Closing") shall take place at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, at a time and date to be specified
by the parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VII, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
--------------------
Merger shall be as provided in this Agreement and the applicable provisions of
the Corporate Code. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws
------------------------------------
(a) Unless otherwise determined by Xylophone prior to the Effective
Time, at the Effective Time, the Articles of Incorporation and Regulations in
the form attached as Exhibit D shall be the Articles of Incorporation and
Regulations of the Surviving Corporation until thereafter amended as provided by
law.
1.5 Directors and Officers. The initial directors of the Surviving
----------------------
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
-----------------------
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Indirect Parent, Second Intermediary Parent, First Intermediary
Parent, Parent, Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock,
----------------------------------
no par value per share, of Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b), will be canceled
and extinguished and automatically converted,
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subject to Section 1.6(d), into the right to receive such number of shares of
Series F Preferred Stock of Purchaser, having the rights, privileges and
preferences set forth in Exhibit A attached hereto ("Purchaser Preferred
Stock"), equal to the quotient obtained by dividing 3.5 million shares of
Purchaser Preferred Stock by the number of shares of Company Common Stock
outstanding at such time ("Merger Consideration"), or upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.7 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 1.9). No fractional shares of Purchaser Preferred Stock
shall be issued by virtue of the Merger. Any such fractional share each holder
of Company Common Stock would otherwise be entitled to (after aggregating all
fractional shares of Purchaser Preferred Stock such holder would otherwise be
entitled to) shall be rounded up to the next whole share of Purchaser Preferred
Stock.
(b) Cancellation of Purchaser-Owned Stock. Each share of Company
-------------------------------------
Common Stock held by Company or owned by Merger Sub, Purchaser or any direct or
indirect wholly-owned subsidiary of Company or of Purchaser immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Capital Stock of Merger Sub. Each certificate evidencing
---------------------------
ownership of shares of Common Stock, par value $.0001 per share, of Merger Sub
shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) Adjustments to Merger Consideration. The Merger Consideration
-----------------------------------
shall be adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into common stock of the Purchaser or Company Common
Stock), extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to Purchaser Common Stock or Preferred Stock occurring on or after the
date hereof and prior to the Effective Time.
1.7 Surrender of Certificates
-------------------------
(a) Purchaser to Provide Preferred Stock. At the Effective Time,
Purchaser shall make available for exchange in accordance with this Article I,
the Merger Consideration issuable pursuant to Section 1.6 in exchange for
outstanding shares of Company Common Stock and any dividends or distributions to
which holders of shares of Company Common Stock may be entitled pursuant to
Section 1.7(b).
(b) Distributions With Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions declared or made after the date of this Agreement with
respect to the Purchaser Preferred Stock with a record date after the Effective
Time will be paid to the holders of any unsurrendered certificate or
certificates of Company Common Stock (the "Certificates") with respect to the
shares of Purchaser Preferred Stock represented thereby until the holders of
record of such Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates, the Purchaser
shall deliver to the record holders thereof, without interest, certificates
representing whole shares of Purchaser Preferred Stock issued in exchange
therefor and
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the amount of any such dividends or other distributions with a record date after
the Effective Time payable with respect to such whole shares of Purchaser
Preferred Stock.
(c) Transfers of Ownership. If certificates representing shares of
----------------------
Purchaser Preferred Stock are to be issued in a name other than that in which
the Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Purchaser or any agent designated by
it any transfer or other taxes required by reason of the issuance of
certificates representing shares of Purchaser Preferred Stock in any name other
than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of Purchaser or any agent designated by it that
such tax has been paid or is not payable.
(d) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, neither the Purchaser nor the Surviving Corporation shall be liable
to a holder of shares of Purchaser Preferred Stock or Company Common Stock for
any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law following the passage of time
specified therein.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Purchaser Preferred Stock issued in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, Purchaser shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, certificates representing the
shares of Purchaser Preferred Stock into which the shares of Company Common
Stock represented by such Certificates were converted pursuant to Section 1.6
and any dividends or distributions payable pursuant to Section 1.7(b); provided,
however, that Purchaser may, in its sole and absolute discretion and as a
condition precedent to the issuance of such certificates representing shares of
Purchaser Preferred Stock, cash and other distributions, require the owner of
such lost, stolen or destroyed Certificates to deliver a bond in such sum as it
may reasonably direct as indemnity against any claim that may be made against
Purchaser or the Surviving Corporation with respect to the Certificates alleged
to have been lost, stolen or destroyed.
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1.10 Tax and Accounting Consequences
-------------------------------
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto 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 Income Tax
Regulations.
(b) It is intended by the parties hereto that the Merger shall be
treated as a purchase for accounting purposes.
1.11 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub immediately prior to the Effective Time will take all such lawful
and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF INDIRECT PARENT, SECOND
INTERMEDIARY PARENT, FIRST INTERMEDIARY PARENT, PARENT AND COMPANY
As of the date hereof and as of the Closing Date, the Indirect Parent,
Second Intermediary Parent, First Intermediary Parent, Parent and Company
represent and warrant to Purchaser and Merger Sub, jointly and severally,
subject to such exceptions as are disclosed in writing in the disclosure letter
supplied by Indirect Parent, Second Intermediary Parent, First Intermediary
Parent, Parent and Company to Purchaser dated as of the date hereof and
certified by duly authorized officers of Indirect Parent, Second Intermediary
Parent, First Intermediary Parent, Parent and Company (the "Company Schedule"),
as follows ("Knowledge of the Company" means the knowledge of the Company,
Parent, First Intermediary Parent, Second Intermediary Parent and Indirect
Parent):
2.1 Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted.
Company is in possession of all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders ("Approvals")
necessary to own, lease and operate the assets it purports to own, operate or
lease and to carry on its business as it is now being conducted except where the
failure to have such Approvals would not have a Material Adverse Effect on the
Company.
(b) Company has no subsidiaries. Company does not directly or
indirectly own nor is it a party to any agreement to own any equity or similar
interest in or any interest convertible,
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exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business, association or
entity.
2.2 Certificate of Incorporation and Bylaws. Company has previously
---------------------------------------
furnished to Purchaser a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date (together, the "Company Charter
Documents"). Such Company Charter Documents are in full force and effect.
Company is not in violation of any of the provisions of the Company Charter
Documents.
2.3 Capitalization.
--------------
(a) The authorized capital stock of Company consists of 750,000
shares of Company Common Stock, with no par value per share. At the close of
business on the date of this Agreement (i) 100 shares of Company Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable and owned by Percussion (Chrysallis), Inc.; (ii) no shares of
Company Common Stock were available or reserved for issuance pursuant to any
stock option plans, employee stock plan or upon conversion of any warrants or
other rights; and all 100 shares of issued and outstanding Company Common Stock
were held by Parent. Company does not have any subsidiaries or an equity stake
in any other entity.
2.4 Authority Relative to this Agreement. Company has all necessary
------------------------------------
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Company and
the consummation by Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Company and,
assuming the due authorization, execution and delivery by Purchaser and Merger
Sub, constitutes a legal and binding obligation of Company, enforceable against
Company in accordance with its terms, except (i) as may be limited by (x)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (y) the effect of rules of law governing the availability of
equitable remedies and (ii) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public policy
thereunder.
2.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company shall not, (i) conflict with or
violate the Company Charter Documents, (ii) subject to compliance with the
requirements set forth in Section 2.5(b) below, to the Knowledge of the Company,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Company or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or materially impair Company's rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any
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of the properties or assets of Company pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Company is a party or by which Company
or its properties are bound or affected, except in any case for such conflicts,
violations, breaches, defaults or other occurrences that could not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) The execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "Governmental Entity"), except for applicable
requirements, if any, of the pre-merger notification requirements (the "HSR
Approval") of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and the rules and regulations thereunder, and the filing
and recordation of the Merger Documents as required by the Corporate Code and
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications would not otherwise have a
Material Adverse Effect.
2.6 Compliance; Permits.
-------------------
(a) Company is not in conflict with, or in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to Company
or by which its properties are bound or affected, or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Company is a party or by
which Company or its properties are bound or affected, except for any conflicts,
defaults or violations that (individually or in the aggregate) would not cause
the Company to lose any material benefit or incur any material liability. No
investigation or review by any governmental or regulatory body or authority is
pending or, to the Knowledge of the Company, threatened against Company, nor has
any governmental or regulatory body or authority indicated to the Company an
intention to conduct the same.
(b) Company holds all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities, including without limitation
the Food and Drug Administration and the United States Department of
Agriculture, which are material to operation of the business of Company taken as
a whole as it is now being conducted (collectively, the "Company Permits").
Company is in compliance in all material respects with the terms of the Company
Permits.
2.7 Financial Statements.
--------------------
(a) The Company has provided to Purchaser's auditors all relevant
information for the preparation of its (i) audited consolidated financial
statements for the fiscal years ended December 31, 1997, 1998 and 1999, and (ii)
unaudited financial statements for the period ended June 30, 2000 (collectively
and as amended, the "Company Reports"), and Company, Parent, First Intermediary
Parent, Second Intermediary Parent and Indirect Parent have reviewed the Company
Reports.
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(b) Each of the financial statements presents fairly, to the
Knowledge of the Company, in all material respects, the financial position of
the Company as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject to normal and
recurring year-end adjustments which did not have and could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect).
(c) Except as and to the extent set forth or reserved against on the
balance sheet of the Company as reported in the Company Reports, including the
notes thereto, to the Knowledge of the Company, the Company has no liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet or in notes
thereto prepared in accordance with GAAP, except (i) liabilities provided for in
Company's balance sheet as of June 30, 2000; or (ii) liabilities incurred since
June 30, 2000 in the ordinary course of business none of which is material to
the business, results of operations or financial condition of the Company.
2.8 Absence of Certain Changes or Events. Since June 30, 2000 (the
------------------------------------
"Reference Balance Sheet Date"), the business of the Company has been conducted
by Company, Indirect Parent and Parent in the ordinary course and consistent
with past practice. As amplification and not limitation of the foregoing, since
the Reference Balance Sheet Date, the Company has not:
(i) knowingly permitted or allowed any of the assets or
properties (whether tangible or intangible) of the Company to be subjected to
any security interest, pledge, mortgage, lien (including, without limitation,
environmental and tax liens), charge, encumbrance, adverse claim, preferential
arrangement or restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership ("Encumbrance"), other than such of the following as
to which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable which are not in excess of $50,000 in
the aggregate; (b) Encumbrances imposed by law, such as mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period of
more than 30 days and (ii) are not in excess of $10,000 in the aggregate at any
time; (c) pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory obligations; and
(d) minor survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property or assets that (i) were not incurred in
connection with any Indebtedness, (ii) do not render title to the property
encumbered thereby unmarketable, (iii) do not, individually or in the aggregate,
materially adversely affect the value or use of such property for its current
and anticipated purposes and (iv) Encumbrances that could not reasonably be
expected to have a Material Adverse Effect ("Permitted Encumbrances") and
Encumbrances that will be released at or prior to the Closing;
(ii) made any loan to, guaranteed any indebtedness for borrowed
money of or otherwise incurred any indebtedness for borrowed money on behalf of
any Person other than payroll, travel guaranties and other advances made in the
ordinary course of business;
-8-
<PAGE>
(iii) failed to pay any creditor any material amount owed to
such creditor when due except as may be in accordance with the ordinary course
of business consistent with past practice;
(iv) made any capital expenditure or commitment of any capital
expenditure in excess of $25,000 individually or $100,000 in the aggregate;
(v) issued any sales orders or otherwise entered into an
agreement that requires the Company to make any purchases involving payments by
the Company in excess of $25,000 individually or $100,000 in the aggregate;
(vi) sold, transferred, leased, subleased, licensed or otherwise
disposed of any Intellectual Property, other than the sale of Inventories in the
ordinary course of business consistent with past practice;
(vii) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company;
(viii) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Person);
(ix) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other benefits
payable by the Company to any of its employees, consultants or directors or (B)
established or increased or promised to increase any benefits under any Indirect
Parent or Parent employee benefit or option plans, in either case except as
required by law or any collective bargaining agreement or involving ordinary
increases in the ordinary course of business consistent with the past practices
of the Company;
(x) amended, terminated, cancelled or compromised any material
claims of the Company or waived any other rights of substantial value to the
Company or settled any material litigation;
(xi) amended or modified in any material respect, or consented
to the termination of, any Material Contract (as defined below) or the Company's
rights thereunder;
(xii) amended or restated the certificate of incorporation or
the bylaws (or other organizational documents) of the Company;
(xiii) made any express or deemed election (other than as set
forth on the Company's tax returns) or settled or compromised any material
liability, with respect to Taxes (as defined in Section 8.1) of the Company;
(xiv) suffered any Material Adverse Effect; or
(xv) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 2.8 or granted any options to purchase, rights
of first refusal, rights of first
-9-
<PAGE>
offer or any other similar rights or commitments with respect to any of the
actions specified in this Section 2.8, except as expressly contemplated by this
Agreement.
For purposes of this Agreement, the term "Person" shall mean any
individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including, without limitation, a "person" as defined
in Section 13(d)(3) of the Exchange Act), trust, association, entity or
government or political subdivision, agency or instrumentality of a government.
For purposes of this Agreement, the term "Inventories" shall mean all
inventory, merchandise, finished goods, raw materials, packaging and supplies of
the Company.
For purposes of this Agreement, the term "Material Contracts" shall
mean the following contracts and agreements (including, without limitation, oral
and informal arrangements) of the Company:
(i) each contract, agreement, invoice, purchase order and other
arrangement, for the purchase of Inventory, spare parts, other materials or
personal property with any supplier or for the furnishing of services to the
Company or otherwise related to the business of the Company under the term of
which the Company (A) is likely to pay or otherwise give consideration of more
than $10,000 in the aggregate during the calendar year ended December 31, 2000,
(B) is likely to pay or otherwise give consideration of more than $10,000 in the
aggregate over the remaining term of such contract, or (C) cannot be cancelled
by the Company without penalty or further payment and without more than 90 days'
notice;
(ii) each contract, agreement, invoice, sales order and other
arrangement, for the sale of Inventory or other personal property or for the
furnishing of services by the Company which: (A) is likely to involve
consideration of more than $10,000 in the aggregate during the calendar year
ended December 31, 2000, (B) is likely to involve consideration of more than
$10,000 in the aggregate over the remaining term of the contract, or (C) cannot
be cancelled by the Company without penalty or further payment and without more
than 90 days' notice;
(iii) all broker, distributor, label group, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and agreements to which
the Company is a party involving the payment of more than $10,000 during the
calendar year ended December 31, 2000 and which are not cancelable without
penalty or further payment and without more than 90 days' notice;
(iv) all management contracts, and contracts with independent
contractors, consultants or employees (or similar arrangements) to which the
Company is a party which are not cancelable without penalty or further payment
and without more than 30 days' notice;
(v) all contracts and agreements relating to indebtedness of the
Company;
(vi) all agreements relating to Intellectual Property, including
all licenses and sublicenses thereof, but excluding shrink wrap and other
commodity type licenses;
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<PAGE>
(vii) all contracts and agreements with any Governmental Entity
to which the Company is a party;
(viii) all contracts and agreements that limit or purport to
limit the ability of the Company to compete in any line of business or with any
Person or in any geographic area or during any period of time;
(ix) all contracts and agreements between or among the Company
and any Affiliate of the Company, including any shareholder agreements;
(x) all contracts and agreements for providing benefits to
Company employees, consultants or directors under any Indirect Parent or Parent
employee benefit or option plans;
(xi) all contracts and agreements of indemnification or any
guaranty;
(xii) all dealer, distributor, joint marketing or development
contracts and agreements currently in force under which Company has continuing
material obligations to jointly market any product, technology or service and
which may not be canceled without penalty upon notice of ninety (90) days or
less, and all contracts and agreements pursuant to which Company has continuing
material obligations to jointly develop any intellectual property that will not
be owned, in whole or in part, by Company and which may not be canceled without
penalty upon notice of ninety (90) days or less;
(xiii) all contracts, agreement and commitments currently in
force to license any third party to manufacture or reproduce any Company
product, service or technology or any contract, agreement and commitment
currently in force to sell or distribute any Company products, service or
technology except agreements with distributors or sales representative in the
normal course of business cancelable without penalty upon notice of ninety (90)
days or less and substantially in the form previously provided to Purchaser; and
(xiv) all other contracts and agreements, whether or not made in
the ordinary course of the business, which are material to the Company, taken as
a whole, or the conduct of the business, or the absence of which would have a
Material Adverse Effect.
For purposes of this Agreement, the term "Regulations" means the
Treasury Regulations (including Temporary Regulations) promulgated by the United
States Department of Treasury with respect to the Code or other federal tax
statutes.
2.9 Absence of Litigation. There are no claims, actions, suits or
---------------------
proceedings pending or, to the Knowledge of the Company, threatened (or, to the
Knowledge of the Company, any governmental or regulatory investigation pending
or threatened) against Company or any properties or rights of Company, before
any court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign.
-11-
<PAGE>
2.10 Employee Benefit Plans. For purposes of this Section 2.10, the
----------------------
following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any person or entity under common
---------
control with the Company within the meaning of Code Section 414(b), (c), (m) or
(o).
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
-----
Reconciliation Act of 1985, as amended.
(iii) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
(iv) "Employee" shall mean any former or active employee,
--------
consultant, or director of the Company.
(v) "Employee Plan" shall mean each plan, program, policy,
-------------
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of ERISA Section 3(3), (each a "Plan") which is or has been maintained,
contributed to, or required to be contributed to, by the Indirect Parent, Parent
or any Affiliate for the benefit of any Employee or for which the Company has or
may have any liability or obligation.
(vi) "ERISA" shall mean the Employee Retirement Income Security
-----
Act of 1974, as amended.
(b) (i) Each Employee Plan has been maintained in all material
respects in compliance with its terms and with all applicable requirements of
law (including the Code and ERISA). Indirect Parent, Second Intermediary Parent,
First Intermediary Parent, Parent and the Company have performed in all material
respects all obligations required to be performed by each of them under, is not
in default or violation of, and has no knowledge of any default or violation by
any other party to each Employee Plan; (ii) Each Employee Plan intended to
qualify under Code Section 401(a) and each trust intended to qualify under Code
Section 501(a) has either received a favorable determination, opinion,
notification or advisory letter from the IRS with respect to each such Employee
Plan as to its qualified status under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a letter and make any amendments
necessary to obtain a favorable determination as to the qualified status of each
such Employee Plan;
(c) (i) No "prohibited transaction," within the meaning of Code
Section 4975 or ERISA Sections 406 and 407, and not otherwise exempt under Code
Section 4975 or ERISA Section 408 (or any administrative class exemption issued
thereunder), has occurred with respect to any Company Employee Plan; (ii)
Neither Company nor any Affiliate has at any time maintained, established,
sponsored, participated in, or contributed to any Employee Plan subject to Title
IV of ERISA or Code Section 412; (iii) Neither Company nor any Affiliate has
been required to contribute
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<PAGE>
or contributed to any "multiemployer plan," as defined in ERISA Section 3(37);
and (iv) Neither Company nor any Affiliate has ever maintained, established,
sponsored, participated in, or contributed to any "multiple employer plan," as
defined in Code Section 413(c).
(d) (i) Neither Company nor any Affiliate has in any material
respect violated any of the health care continuation requirements of COBRA with
respect to any Employee; (ii) None of the Employee Plans provides, reflects or
represents any liability to provide retiree health to any person for any reason,
except as may be required by COBRA or other applicable statute, and Indirect
Parent, Parent and the Company have never represented, promised, or contracted
(whether in oral or written form) to any Employee (either individually or to
Employees as a group) that such Employee(s) would be provided with retiree
health, except to the extent required by statute.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or employee of Company
under any Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Plan, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.11 Employees. Section 2.11 of the Company Schedule lists the name,
---------
place of employment, the current annual salary rates, bonuses, deferred or
contingent compensation, pension, accrued vacation, "golden parachute" and other
like benefits paid or payable (in cash or otherwise) in 1999 and 2000, the date
of employment and job title of each current salaried employee, officer,
director, consultant or agent of the Company.
2.12 Material Contracts.
------------------
(a) Each Material Contract: (i) is legal, valid and binding on the
respective parties thereto and is in full force and effect, and (ii) upon
consummation of the transactions contemplated by this Agreement, shall continue
in full force and effect without penalty or other adverse consequence except in
a situation where the failure to be in full force and effect could not
reasonably be expected to have a Material Adverse Effect. The Company is not in
breach of, or default under, any Material Contract, except in any such case for
breaches or defaults that could not reasonably be expected to have a Material
Adverse Effect.
(b) To the best Knowledge of the Company, no other party to any
Material Contract is in material breach thereof or default thereunder.
2.13 Guaranties, Intercompany Contracts. Except in respect of the lease
----------------------------------
noted in Section 6.11 hereof, neither the Company, Indirect Parent, First
Intermediary Parent, Second Intermediary Parent, nor Direct Parent is a party to
any guaranty, and no Person is a party to any guaranty, for the benefit of the
Company. Except for the lease noted in Section 6.11 hereof, there are no
contracts or agreements between Company and Indirect Parent, First Intermediary
Parent, Second Intermediary Parent, or Parent.
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<PAGE>
2.14 Restrictions on Business Activities. To the Knowledge of the
-----------------------------------
Company, there is no agreement, commitment, judgment, injunction, order or
decree binding upon Indirect Parent, Parent or Company or to which the Company,
Indirect Parent or Parent is a party which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any business practice
of Company, any acquisition of property by Company or the conduct of business by
Company as currently conducted, except for any prohibition or impairment that
could not reasonably be expected to have a Material Adverse Effect.
2.15 Environmental Matters. The Indirect Parent, Second Intermediary
---------------------
Parent, First Intermediary Parent, Parent and Company are, to their collective
knowledge, not in violation of any applicable laws relating to the protection of
the environment ("Environmental Laws"); all past noncompliance, if any, of the
Company, Indirect Parent or Parent with respect to Environmental Laws, known to
the Company, Indirect Parent, Second Intermediary Parent, First Intermediary
Parent or Parent has been resolved without any pending, ongoing or future
obligation, cost or liability; and neither the Company, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent nor Parent, to their collective
knowledge, have released any hazardous materials to or from any real property
currently, or within the two year period preceding the date hereof, owned,
leased or occupied by the Company, Indirect Parent or Parent except in
compliance with all Environmental Laws.
2.16 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("Patents"); (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) trade
names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor; (iv) all databases
and data collections and all rights therein; and (v) any similar or
equivalent rights to any of the foregoing (as applicable).
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by, or licensed to, Company and the Intellectual Property that is
the subject of the license agreement attached hereto as Exhibit C as
---------
amended (and any continuations, continuations-in-part and improvements
thereof).
"Registered Intellectual Property" means all Intellectual Property that is
the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any private, state, government
or other legal authority.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company.
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<PAGE>
"Company Products" means all products or service offerings of the Company.
(a) Section 2.16(a) of the Company Schedule contains a list of all
Company Registered Intellectual Property.
(b) To the Knowledge of the Company, no Company Intellectual
Property or Company Product is subject to any proceeding or outstanding decree,
order, judgment, contract, license, agreement, or stipulation restricting in any
manner the use, transfer, or licensing thereof by Company, or which may affect
the validity, use or enforceability of such Company Intellectual Property or
Company Product.
(c) Company owns and has good and exclusive title to, each material
item of Company Intellectual Property owned by it free and clear of any lien or
encumbrance (including non-exclusive licenses). Without limiting the foregoing:
Company is the exclusive owner or licensee of all patents, copyrights,
trademarks and trade names used in connection with the operation or conduct of
the business of Company, including the sale, distribution or provision of any
Company Products by Company.
(d) To the extent that any material technology, software or
Intellectual Property has been developed or created independently or jointly by
a third party for Company and is incorporated into any of the Company Products,
Company has a written agreement with such third party with respect thereto and
Company thereby either (i) has obtained ownership of, and is the exclusive owner
of, or (ii) has obtained a perpetual, non-terminable license (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to all such third party's Intellectual Property in such work, material or
invention by operation of law or by valid assignment, to the fullest extent it
is legally possible to do so.
(e) Company has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was in
the last year material Company Intellectual Property, to any third party, or
knowingly permitted Company's rights in such material Company Intellectual
Property to lapse or enter the public domain.
(f) Section 2.16(f) of the Company Schedule lists all material
contracts, licenses and agreements to which Company is a party: (i) with respect
to Company Intellectual Property licensed or transferred to any third party
(other than end-user licenses in the ordinary course); or (ii) pursuant to which
a third party has licensed or transferred any material Intellectual Property to
Company.
(g) All material contracts, licenses and agreements relating to
either (i) Company Intellectual Property or (ii) between the Company and a third
party relating to Intellectual Property of a third party licensed to Company,
are in full force and effect. The consummation of the transactions contemplated
by this Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such contracts, licenses and
agreements. Company is in material compliance with, and has not materially
breached any term of any such contracts, licenses and agreements and, to the
Knowledge of the Company, all other parties to such contracts, licenses and
agreements are in compliance with, and have not materially breached any
-15-
<PAGE>
term of, such contracts, licenses and agreements. Neither Indirect Parent nor
Parent is aware of any fact that would prevent the Surviving Corporation
following the Closing Date from exercising all of Company's rights under such
contracts, licenses and agreements to the same extent Company would have been
able to had the transactions contemplated by this Agreement not occurred and
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which Company would otherwise be required to
pay. Neither this Agreement nor the transactions contemplated by this Agreement,
including the assignment to Purchaser or Merger Sub by operation of law or
otherwise of any contracts or agreements to which the Company is a party, will
result in (i) either Purchaser's or the Merger Sub's granting to any third party
any right to or with respect to any material Intellectual Property right owned
by, or licensed to, either of them, (ii) either the Purchaser's or the Merger
Sub's being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of their respective businesses, or (iii)
either the Purchaser's or the Merger Sub's being obligated to pay any royalties
or other material amounts to any third party in excess of those payable by
Purchaser or Merger Sub, respectively, prior to the Closing.
(h) The operation of the business of the Company as such business
currently is conducted, including (i) Company's design, development,
manufacture, distribution, reproduction, marketing or sale of the products or
services of Company (including Company Products ) and (ii) the Company's use of
any product, device or process in connection with the foregoing, has not, does
not and, to the Knowledge of the Company, will not infringe or misappropriate
the Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(i) Company has not received notice from any third party that the
operation of the business of Company or any product or service of Company,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(j) To the Knowledge of the Company, Parent, Indirect Parent, First
Intermediary Parent, and Second Intermediary Parent, no person has or is
infringing or misappropriating any Company Intellectual Property.
(k) Company has taken reasonable steps to protect Company's rights
in Company's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to Company, and, without limiting the foregoing, Company has and uses
its best efforts to enforce a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Purchaser and all current and former employees and contractors
of Company have executed such an agreement, except where the failure to do so is
not reasonably expected to be material to Company.
2.17 Board Approval. The Board of Directors of Company has, as of the
--------------
date of this Agreement unanimously (i) approved this Agreement and the
transactions contemplated hereby and (ii) determined that the Merger is in the
best interests of the stockholders of Company and is on terms that are fair to
such stockholders.
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<PAGE>
2.18 Assets. At the Closing, the Company shall have right, title or
------
interest in and to such assets (tangible and intangible) necessary to
manufacture, develop and sell the Company Products as currently manufactured,
developed and sold by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENTAL ENTITIES
AND INDIRECT PARENT
A. As of the date hereof and as of the Closing Date, Parent, First Intermediary
Parent and Second Intermediary Parent (each a "Parental Entity" and together
"Parental Entities" for purposes of this Article III) represent and warrant to
Purchaser and Merger Sub, subject to such exceptions as are disclosed in writing
in the disclosure letter supplied by Parent, First Intermediary Parent and
Second Intermediary Parent to Purchaser dated as of the date hereof and
certified by a duly authorized officer of each of Parent, First Intermediary
Parent and Second Intermediary Parent (the "Parent Schedule"), as follows:
3.1 Organization and Qualification of the Parental Entities. Each
-------------------------------------------------------
Parental Entity is a corporation duly organized, validly existing and in good
standing under the laws of Canada in the case of Parent, and Delaware in the
case of First Intermediary Parent and Second Intermediary Parent, the
jurisdictions of their incorporation, and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each Parental Entity is qualified or
licensed to do business as a foreign corporation, and is in good standing, in
each jurisdiction where the nature of its business makes such qualification or
licensing necessary and where the failure to so qualify would have a Material
Adverse Effect.
3.2 Authority of the Parental Entities Relative to this Agreement. Each
-------------------------------------------------------------
Parental Entity has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each Parental Entity and the consummation by each Parental
Entity of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of each Parental Entity
and no other corporate proceedings on the part of any of the Parental Entities
are necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
each Parental Entity and, assuming the due authorization, execution and delivery
by Purchaser and Merger Sub, constitutes legal and binding obligations of each
Parental Entity, enforceable against each Parental Entity in accordance with
their respective terms, except (i) as may be limited by (x) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally and (y)
the effect of rules of law governing the availability of equitable remedies and
(ii) as rights to indemnity or contribution may be limited under federal, state
or provincial securities laws or by principles of public policy thereunder.
Second Intermediary Parent has executed an irrevocable written consent voting
all of its shares of First Intermediary Parent's capital stock in favor of the
Merger. Second Intermediary Parent has good and marketable title to and is the
legal and beneficial owner of all the outstanding
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<PAGE>
shares of First Intermediary Parent's capital stock free and clear of any
Encumbrance. First Intermediary Parent has executed an irrevocable written
consent voting all of its shares of Parent's capital stock in favor of the
Merger. First Intermediary Parent has good and marketable title to and is the
legal and beneficial owner of all the outstanding shares of Parent's capital
stock free and clear of any Encumbrance. Parent has executed an irrevocable
written consent voting all of its shares of Company Common Stock in favor of the
Merger. Parent has good and marketable title to and is the legal and beneficial
owner of all the outstanding shares of Company Common Stock free and clear of
any Encumbrance.
3.3 No Conflict; Required Filings and Consents of the Parental Entities.
-------------------------------------------------------------------
(a) The execution and delivery of this Agreement by each Parental
Entity do not, and the performance of this Agreement by each Parental Entity
shall not, (i) conflict with or violate the organizational documents of any of
the Parental Entities, (ii) subject to compliance with the requirements set
forth in Section 3.3(b) below, to the knowledge of each Parental Entity,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to any Parental Entity or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair any Parental Entities's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of any
Parental Entity pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which any Parental Entity is a party or by which any Parental
Entity or its properties are bound or affected, except in any case for such
conflicts, violations, breaches, defaults or other occurrences that could not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) The execution and delivery of this Agreement by each Parental
Entity do not, and the performance of this Agreement by any Parental Entity
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity, except for applicable
requirements, if any, of the HSR Approval of the HSR Act and of foreign
Governmental Entities and the rules and regulations thereunder, and the filing
and recordation of the Merger Documents as required by the Corporation Codes and
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications would not otherwise have a
Material Adverse Effect on the Company.
3.4 Parental Entities Brokers. No broker, finder or investment banker is
-------------------------
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of any Parental
Entity.
3.5 Intellectual Property of the Parent Entities.
--------------------------------------------
(a) no Parental Entity has disclosed any portion of the Company's
Intellectual Property to any third party and has not violated any
confidentiality or use restrictions regarding the Company's Intellectual
Property.
-18-
<PAGE>
(b) no Parental Entity is aware of any third party rights that are
or may be infringed by products currently or previously manufactured, used, or
sold by the Company.
(c) no Parental Entity has filed any patent application or obtained
any issued patent covering any technology invented, created or developed solely
by the Company, or invented, created or developed jointly by any Parental Entity
and the Company.
(d) No patent or patent application filed by, issued to or assigned
to any Parental Entity identifies any current or former employee of the Company
as an inventor.
(e) No Parental Entity is aware of any Parental Entity patent or
patent application which covers technology used in products manufactured by the
Company.
B. As of the date hereof and as of the Closing Date, the Indirect Parent
represents and warrants to Purchaser and Merger Sub, subject to such exceptions
as are disclosed in writing in the disclosure letter supplied by Indirect Parent
to Purchaser dated as of the date hereof and certified by a duly authorized
officer of Indirect Parent (the "Indirect Parent Schedule"), as follows:
3.6 Organization and Qualification of Indirect Parent. Indirect Parent
-------------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of Canada, the jurisdiction of its incorporation, and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Indirect
Parent or its Affiliates is qualified or licensed to do business as a foreign or
extra-provincial corporation, and is in good standing, in each jurisdiction
where the nature of their business makes such qualification or licensing
necessary and where the failure to so qualify would have a Material Adverse
Effect.
3.7 Authority of Indirect Parent Relative to this Agreement. Indirect
-------------------------------------------------------
Parent has all necessary corporate power and authority to execute and deliver
this Agreement and the Strategic Relationship Agreement attached hereto as
Exhibit B and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Indirect Parent and the consummation by Indirect Parent of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Indirect Parent and no other corporate
proceedings on the part of Indirect Parent are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Indirect Parent and, assuming
the due authorization, execution and delivery by Purchaser and Merger Sub,
constitutes legal and binding obligations of Indirect Parent, enforceable
against Indirect Parent in accordance with their respective terms, except (i) as
may be limited by (x) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (y) the effect of rules of law governing the
availability of equitable remedies and (ii) as rights to indemnity or
contribution may be limited under federal or state securities laws or by
principles of public policy thereunder. Indirect Parent has taken corporate
action to cause Parent to execute an irrevocable written consent voting all of
its shares of Company Common Stock in favor of the Merger. Indirect Parent has
good and
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marketable title to and is the legal and beneficial owner of all the outstanding
shares of capital stock of Parent free and clear of any Encumbrance.
3.8 No Conflict; Required Filings and Consents of Indirect Parent.
-------------------------------------------------------------
(a) The execution and delivery of this Agreement by Indirect Parent
do not, and the performance of this Agreement by Indirect Parent shall not, (i)
conflict with or violate the Indirect Parent organizational documents, (ii)
subject to compliance with the requirements set forth in Section 3.8(b) below,
to the knowledge of Indirect Parent, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Indirect Parent or by which
its or any of their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or materially impair Indirect
Parent's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Indirect Parent pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Indirect Parent is a party
or by which Indirect Parent or its properties are bound or affected, except in
any case for such conflicts, violations, breaches, defaults or other occurrences
that could not reasonably be expected to have a Material Adverse Effect on the
Company.
(b) The execution and delivery of this Agreement by Indirect Parent
do not, and the performance of this Agreement by Indirect Parent shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except for applicable requirements, if
any, of the HSR Act and of foreign Governmental Entities and the rules and
regulations thereunder, the rules and regulations of Nasdaq, and the filing and
recordation of the Merger Documents as required by the Corporation Codes and
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications would not otherwise have a
Material Adverse Effect on the Company.
3.9 Indirect Parent Brokers. No broker, finder or investment banker is
-----------------------
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of the Indirect
Parent.
3.10 Intellectual Property of Indirect Parent.
----------------------------------------
(a) Indirect Parent has not disclosed any portion of the Company's
Intellectual Property to any third party and has no violated any confidentiality
or use restrictions regarding the Company's Intellectual Property.
(b) Indirect Parent is not aware of any third party rights that are
or may be infringed by products currently or previously manufactured, used, or
sold by the Company.
(c) Indirect Parent has not filed any patent application or obtained
any issued patent covering any technology invented, created or developed solely
by the Company, or invented, created or developed jointly by Indirect Parent and
the Company.
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(d) No patent or patent application filed by, issued to or assigned
to Indirect Parent identifies any current or former employee of the Company as
an inventor.
Indirect Parent is not aware of any Indirect Parent patent or patent application
which covers technology used in products manufactured by the Company.
3.11 Experience
3.11. Experience. Indirect Parent has substantial experience in evaluating
----------
and investing in private placement transactions of securities in companies
similar to Purchaser so that it is capable of evaluating the merits and risks of
its investment in Purchaser and has the capacity to protect its own interests.
3.12 Investment. Indirect Parent is acquiring the Purchaser Preferred
----------
Stock and the Purchaser Common Stock issuable upon conversion thereof for its
own account, not as a nominee or agent, and not with the present view to, or for
resale in connection with, any public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act. It
understands that the Purchaser Preferred Stock and the Purchaser Common Stock
issuable upon conversion thereof to be purchased have not been, and will not be,
registered under the Securities Act and are being sold to it by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the accuracy of Indirect
Parent's representations as expressed herein.
3.13 Rule 144. Indirect Parent acknowledges that the Purchaser Preferred
--------
Stock and the Purchaser Common Stock issuable upon conversion thereof must be
held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available, including Rule 144. It
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions contained in such rules.
3.14 No Public Market. Indirect Parent understands that no public market
----------------
now exists for any of the securities issued by the Purchaser and that the
Purchaser has made no assurances that a public market will ever exist for the
Purchaser's securities.
3.15 Access to Data. Indirect Parent has had an opportunity to discuss
--------------
the Purchaser's business, technology, management and financial affairs with its
management. It has also had an opportunity to ask questions of officers of the
Purchaser. It understands that such discussions, as well as any written
information issued by the Purchaser, were intended to describe certain aspects
of the Purchaser's business and prospects but were not a thorough or exhaustive
description.
3.16 Economic Risk. Indirect Parent understands that the Purchaser has a
-------------
very limited financial and operating history and that an investment in the
Purchaser involves substantial risks. The Indirect Parent understands all of the
risks related to the purchase of the Purchaser Preferred Stock and the Purchaser
Common Stock issuable upon conversion thereof. The Indirect Parent further
understands that the purchase of the Purchaser Preferred Stock and the Purchaser
Common Stock issuable upon conversion thereof will be a highly speculative
investment. The Indirect Parent is able, without impairing the Investor's
financial condition, to hold the Purchaser Preferred Stock
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<PAGE>
and the Purchaser Common Stock issuable upon conversion thereof for an
indefinite period of time and to suffer a complete loss of the its investment.
3.17 Accredited Investor; Foreign Investor. Indirect Parent represents
-------------------------------------
that it is an accredited investor within the meaning of Regulation D under the
Securities Act. Indirect Parent represents it is not a U.S. citizen and shall be
deemed a Foreign Investor within the meaning of Regulation S under the
Securities Act.
3.18 Tax Liability. Indirect Parent has reviewed with its own tax
-------------
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Indirect Parent
relies solely on such advisors and not on any statements or representations of
the Purchaser or any of its agents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
As of the date hereof and as of the Closing Date, Purchaser and Merger Sub
jointly and severally represent and warrant to Company and Parent, subject to
such exceptions as are disclosed in writing in the disclosure letter supplied by
Purchaser to Company and Parent dated as of the date hereof and certified by a
duly authorized officer of Purchaser (the "Purchaser Schedule"), as follows:
4.1 Organization and Qualification; Subsidiaries. Each of Purchaser and
--------------------------------------------
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, except
where the failure to do so would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser. Each of Purchaser and its subsidiaries is
in possession of all Approvals necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted, except where the failure to have such Approvals would
not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser. Each of Purchaser and its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect on Purchaser.
4.2 Certificate of Incorporation and Bylaws. Purchaser has previously
---------------------------------------
furnished to Company and Parent complete and correct copies of its Certificate
of Incorporation and Bylaws, as amended to date (together the "Charter
Documents"). Such Purchaser Charter Documents and equivalent organizational
documents of each of its subsidiaries are in full force and effect. Purchaser is
not in violation of any of the provisions of the Purchaser Charter Documents,
and no subsidiary of Purchaser is in violation of any of its equivalent
organizational documents.
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<PAGE>
4.3 Capitalization. The authorized capital stock of Purchaser consists
--------------
of (i) 40,000,000 shares of common stock, par value $0.001 per share ("Purchaser
Common Stock"), and 23,846,501 shares of preferred stock, par value $0.001 per
share. At the close of business on August 31, 2000, (i) 4,502,132 shares of
purchaser common stock and 6,606, 200,000, 5,041,539, 6,678,791, 7,194,113, and
no shares of purchaser's Series A, B, C, D, E, and F Preferred Stocks,
respectively, were issued and outstanding, (ii) no shares of such common stock
were held in treasury by Purchaser or by subsidiaries of Purchaser, and (iii) as
of August 31, 2000, 3,000,000 shares of Purchaser common stock were reserved for
issuance pursuant to Purchaser's 1996 Stock Plan ("Purchaser's Stock Option
Plan"), and an aggregate of 177,387 common stock and 115,383 Series C Preferred
Stock shares were subject to warrants. The authorized capital stock of Merger
Sub consists of 1,000 shares of common stock, no par value, all of which, as of
the date hereof, are issued and outstanding. All of the outstanding shares of
Purchaser's and Merger Sub's respective capital stock have been duly authorized
and validly issued and are fully paid and nonassessable. All shares of Purchaser
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall, and the shares of Purchaser Preferred Stock to be issued pursuant to the
Merger will be, duly authorized, validly issued, fully paid and nonassessable.
All of the outstanding shares of capital stock (other than directors' qualifying
shares) of each of Purchaser's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and all such shares (other than directors'
qualifying shares) are owned by Purchaser or another subsidiary free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
Purchaser's voting rights, charges or other encumbrances of any nature
whatsoever. Except as set forth in this Section, there are no subscriptions,
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Purchaser [or any of its subsidiaries]
is a party or by which it is bound obligating Purchaser or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of the Purchaser or any of its subsidiaries or
obligating the Purchaser of any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, there are no registration rights and there is no voting trust, proxy,
rights plan, antitakeover plan or other agreement or understanding to which the
Purchaser or any of its subsidiaries is a party or by which they are bound with
respect to any equity security of any class of Purchaser or with respect to any
equity security, partnership interest or similar ownership interest of any class
of any of its subsidiaries.
4.4 Authority Relative to this Agreement. Each of Purchaser and Merger
------------------------------------
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and the Strategic Relationship Agreement attached hereto as Exhibit B,
and to perform its obligations hereunder and thereunder and, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement by Purchaser and Merger Sub and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of
Purchaser and Merger Sub, and no other corporate proceedings on the part of
Purchaser or Merger Sub are necessary to authorize this Agreement, or to
consummate the transactions so contemplated. This Agreement has been duly and
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<PAGE>
validly executed and delivered by Purchaser and Merger Sub and, assuming the due
authorization, execution and delivery by Company and the approval of the Amended
and Restated Certificate of Incorporation attached hereto as Exhibit A by the
requisite vote of the stockholders of Purchaser, constitute legal and binding
obligations of Purchaser and Merger Sub, enforceable against Purchaser and
Merger Sub in accordance with its terms.
4.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by Purchaser and
Merger Sub do not, and the performance of this Agreement by Purchaser and Merger
Sub shall not, (i) conflict with or violate the Certificate of Incorporation,
Bylaws or equivalent organizational documents of Purchaser or any of its
subsidiaries, (ii) subject to compliance with the requirements set forth in
Section 4.5(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Purchaser or any of its subsidiaries or by
which it or their respective properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair Purchaser's or any such
subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Purchaser or any of its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Purchaser
or any of its subsidiaries is a party or by which Purchaser or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except to the extent such conflict, violation, breach, default, impairment or
other effect could not in the case of clauses (ii) or (iii) individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Purchaser.
(b) The execution and delivery of this Agreement by Purchaser and
Merger Sub do not, and the performance of this Agreement by Purchaser and Merger
Sub shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity except for filing of the
Amended and Restated Certificate of Incorporation attached hereto as Exhibit A
---------
with and acceptance thereof by the Secretary of the State of Delaware and (i)
for applicable requirements, if any, of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), state securities laws ("Blue Sky Laws"), the pre-merger
notification requirements (the "HSR Approval") of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the rules and
regulations thereunder, and the filing and recordation of the certificate of
merger as required by the Corporation Codes and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, (x) would not prevent consummation of the Merger or otherwise
prevent Purchaser or Merger Sub from performing their respective obligations
under this Agreement or (y) could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Purchaser.
4.6 Financial Statements.
--------------------
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<PAGE>
(a) Purchaser has made available to Company a correct and complete
copy of its audited financial statements for the fiscal years ended December 31,
1997, 1998 and 1999 and unaudited financial statements for the period ended June
30, 2000.
(b) Each set of financial statements (including, in each case, any
related notes thereto) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto and each presented fairly in all material respects the
consolidated financial position of Purchaser and its subsidiaries at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal adjustments which were not or are not
expected to be material in amount.
(c) Since Purchaser's balance sheet dated June 30, 2000, and until
the date hereof, there has not occurred any Material Adverse Effect on
Purchaser.
4.7 Absence of Litigation. There are no claims, actions, suits or
---------------------
proceedings pending or, to the knowledge of each of Purchaser and Merger Sub,
threatened (or, to the knowledge of each of Purchaser and Merger Sub, any
governmental or regulatory investigation pending or threatened) against
Purchaser, Merger Sub or any other subsidiary of Purchaser or any properties or
rights of Purchaser, Merger Sub or any other subsidiary of Purchaser, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign.
4.8 Environmental Matters. Except as disclosed in Section 4.8 of the
---------------------
Purchaser Schedule, (i) the Purchaser, Merger Sub or any other subsidiary of
Purchaser are in material compliance with all applicable laws relating to
pollution and environment; all past noncompliance, if any, of the Purchaser,
Merger Sub or any other subsidiary of Purchaser with respect to such laws or
environmental related permits, known to the Purchaser has been resolved without
any pending, ongoing or future obligation, cost or liability; and (iii) neither
the Purchaser, Merger Sub nor any other subsidiary of Purchaser has released any
hazardous materials to or from, any real property currently or within the two
year period preceding the date hereof, owned, leased or occupied by the
Purchaser, Merger Sub or any other subsidiary of Purchaser, in violation of any
environmental related laws.
4.9 Board Approval. The Boards of Directors of each of Purchaser and
--------------
Merger Sub have, as of the date of this Agreement unanimously (i) approved this
Agreement and the transactions contemplated hereby and (ii) determined that the
Merger is in the best interests of the stockholders of each of Purchaser and
Merger Sub and is on terms that are fair to such stockholders.
4.10 No Undisclosed Liabilities. Neither Purchaser, Merger Sub or any
--------------------------
other subsidiary of Purchaser has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except (i) liabilities provided for in Purchaser's balance sheet as of
June 30, 2000 or (ii) liabilities incurred since June 30, 2000 in the ordinary
course of business, none of which is material to the business, results of
operations or financial condition of Purchaser and its subsidiaries, taken as a
whole.
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<PAGE>
4.11 Compliance.
----------
(a) Neither Purchaser, Merger Sub nor any other subsidiary of
Purchaser is in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to Purchaser, Merger Sub or any
other subsidiary of Purchaser or by which its or any of their respective
properties is bound or affected, or (ii) any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Purchaser, Merger Sub or any other subsidiary
of Purchaser is a party or by which Purchaser, Merger Sub or any other
subsidiary of Purchaser or its or any of their respective properties is bound or
affected, except for any conflicts, defaults or violations that (individually or
in the aggregate) would not cause the Purchaser to lose any material benefit or
incur any material liability. No investigation or review by any governmental or
regulatory body or authority is pending or, to the knowledge of Purchaser,
threatened against Purchaser, Merger Sub or any other subsidiary of Purchaser,
nor has any governmental or regulatory body or authority indicated to the
Purchaser an intention to conduct the same, other than, in each such case, those
the outcome of which could not, individually or in the aggregate, reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Purchaser, Merger Sub or any other subsidiary of Purchaser, any
acquisition of material property by the Purchaser, Merger Sub or any other
subsidiary of Purchaser or the conduct of business by the Purchaser, Merger Sub
or any other subsidiary of Purchaser.
(b) Purchaser has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of Purchaser and believes that it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. Purchaser is not in default
in any material respect under any of such franchises, permits, licenses or other
similar authority.
4.12 Brokers. No broker, finder or investment banker (other than
-------
Prudential Securities Inc.) is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger based upon arrangements made by or
on behalf of the Purchaser.
4.13 Absence of Certain Changes or Events. Since June 30, 2000, (i) the
------------------------------------
business of the Purchaser and its subsidiaries has been conducted in the
ordinary course of business consistent with past practice and (ii) there has not
occurred any event, development or change which, individually or in the
aggregate, has resulted in or is reasonably likely to result in a Material
Adverse Effect on Purchaser.
4.14 Intellectual Property. For the purposes of this Agreement,
---------------------
"Purchaser Intellectual Property" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Purchaser and its subsidiaries. The
operation of the business of Purchaser and its subsidiaries as such business
currently is conducted, including (i) Purchaser's and its subsidiaries' design,
development, manufacture, distribution, reproduction, marketing or sale of
products or services of Purchaser and its subsidiaries, and (ii) Purchaser's use
of any product, device or process, to its knowledge does not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction. Purchaser has
not received notice from any
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<PAGE>
third party that the operation of the business of Purchaser, any of its
subsidiaries or any product or service of Purchaser, infringes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business by Company, Indirect Parent, Second Intermediary
--------------------------------------------------------------------
Parent, First Intermediary Parent and Parent. During the period from the date
--------------------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent and Parent shall cause the
Company to and the Company shall, except to the extent that Purchaser shall
otherwise consent in writing (which consent shall not be unreasonably withheld
or delayed), carry on its business, in the usual, regular and ordinary course,
in substantially the same manner as heretofore conducted and in compliance with
all applicable laws and regulations, pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has significant
business dealings.
In addition, except as permitted by the terms of this Agreement, and the
transactions contemplated hereby, without the prior written consent of
Purchaser, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to its terms or
the Effective Time, neither Indirect Parent, Second Intermediary Parent, First
Intermediary Parent nor Parent shall permit the Company to, and Company shall
not do any of the following:
(a) With respect to Indirect Parent, Second Intermediary Parent,
First Intermediary Parent or Parent, waive any stock repurchase rights,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans to any employee, consultant or director
of the Company, except as provided for under this Agreement or the attached
exhibits;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Purchaser, or adopt any new severance plan, or amend or modify or
alter in any manner any severance plan, agreement or arrangement existing on the
date hereof or hire any new employees or consultants;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company Intellectual Property, or enter into
grants to transfer or license to any person future patent rights;
-27-
<PAGE>
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to any shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares;
(g) Cause, permit or propose any amendments to the Company Charter
Documents;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
enter into any joint ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except sales of inventory in the ordinary course of
business consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than in connection with the financing of ordinary course trade
payables by Indirect Parent, Second Intermediary Parent, First Intermediary
Parent or Parent;
(k) Adopt or amend any material employee policy or arrangement, or
enter into any employment contract or collective bargaining agreement (other
than offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will"), pay any special bonus or special remuneration to any director or
employee, or, except in the ordinary course of business consistent with past
practice, increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants;
(l) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practice or in accordance with
their terms, or liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of Company as provided
to the Purchasers or incurred since the date of such financial statements, or
(ii) waive the benefits of, agree to modify in any manner, terminate, release
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<PAGE>
any person from or knowingly fail to enforce any confidentiality or similar
agreement to which Company is a party or of which Company is a beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $10,000;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any Material Contract or agreement to which
Company is a party or waive, delay the exercise of, release or assign any
material rights or claims thereunder;
(o) Enter into, renew or materially modify any contracts,
agreements, or obligations relating to the distribution, sale, license or
marketing by third parties of Company's products or products licensed by Company
other than renewals of existing nonexclusive contracts, agreements or
obligations;
(p) Except as required by GAAP, revalue any of its assets or make
any change in accounting methods, principles or practices;
(q) Incur or enter into any agreement, contract or commitment
requiring Company to pay in excess of $10,000, excluding routine purchase orders
consistent with past practices;
(r) Settle any material litigation;
(s) Make or change any election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, file any Tax Returns or any amendment
to any Tax Return other than in a manner consistent with prior practices, enter
into any closing agreement, settle any claim or assessment in respects of Taxes,
or consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(t) Agree in writing or otherwise to take any of the actions
described in Section 5.1(a) through (s) above.
5.2 Conduct of Business by Purchaser. During the period from the date of
--------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, except as permitted by
the terms of this Agreement and except as provided in Section 5.2 of the
Purchaser Schedule, without the prior written consent of Company, Purchaser
shall not engage in any action that could reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the Code
or that could reasonably be expected to delay the Closing of the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Confidentiality; Access to Information.
--------------------------------------
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(a) The parties acknowledge that Indirect Parent, Parent and
Purchaser have previously executed a mutual nondisclosure agreement effective
August 9, 2000 and that Company and Purchaser have entered such an agreement
effective March 13, 2000 (together, the "Confidentiality Agreement"), which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms.
(b) Access to Information. Company, Indirect Parent, Secondary
---------------------
Intermediary Parent, First Intermediary Parent and Parent will afford Purchaser
and its accountants, counsel and other representatives, and Purchaser will
afford Company and its accountants, counsel and other representatives,
reasonable access during normal business hours, upon reasonable notice, to the
properties, books, records and personnel of Company and Purchaser, respectively,
during the period prior to the Effective Time to obtain all information
concerning the business of the Company and Purchaser, respectively, including
the status of product development efforts, properties, results of operations and
personnel of Company and Purchaser, as Purchaser and Company may reasonably
request. No information or knowledge obtained by Purchaser or Company in any
investigation pursuant to this Section 6.1 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
6.2 Public Disclosure. Purchaser, Merger Sub, Indirect Parent, Second
-----------------
Intermediary Parent, First Intermediary Parent, Parent and Company will consult
with each other and agree, before issuing any press release or otherwise making
any public statement with respect to the Merger, this Agreement or the
transactions contemplated hereby and will not issue any such press release or
make any such public statement prior to such agreement, except as may be
required by law, or by regulation or policy of a securities regulatory authority
or other Governmental Entity or any listing agreement with a securities exchange
on which any of the Parties shares is listed, in which case reasonable efforts
to consult with the other party will be made prior to such release or public
statement.
6.3 Reasonable Efforts; Notification. Upon the terms and subject to the
--------------------------------
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including using reasonable efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VII to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all consents, approvals or waivers from third parties required as a result of
the transactions contemplated in this Agreement, (iv) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
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instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
(a) Indirect Parent, Second Intermediary Parent, First Intermediary
Parent, Parent and Company shall give prompt notice to Purchaser upon becoming
aware that any representation or warranty made by it contained in this Agreement
has become untrue or inaccurate, or of any failure of Indirect Parent, Second
Intermediary Parent, First Intermediary Parent, Company or Parent to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 7.3(a) or 7.3(b) would not be satisfied;
provided, however, that no such notification shall affect the representations,
-------- -------
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(b) Purchaser shall give prompt notice to Company upon becoming
aware that any representation or warranty made by it or Merger Sub contained in
this Agreement has become untrue or inaccurate, or of any failure of Purchaser
or Merger Sub to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, such that the conditions set forth in Section 7.2(a) or
7.2(b) would not be satisfied; provided, however, that no such notification
-------- -------
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
6.4 Employee Benefits.
-----------------
(a) The Company will not maintain, sponsor, participate in, or be
obligated to contribute to any Employee Plan, including without limitation those
Employee Plans (the "Parent-group Employee Plans") in which it participated
prior to the Effective Time but which were not sponsored or maintained by the
Company solely for the benefit of its employees, former employees or
beneficiaries (the "Employees"), effective upon the Closing Date; and Indirect
Parent, Second Intermediary Parent, First Intermediary Parent or Parent shall
satisfy any and all of the Company's obligations and liabilities relating to,
arising out of or resulting from its participation in the Employee Plans. Upon
and following the Effective Time, the Company shall have no responsibility or
liability for contributions, premiums, benefits, or other payments, or any other
obligation, under any Employee Plan or any Plan of Indirect Parent, Second
Intermediary Parent, First Intermediary Parent or Parent and as of the Closing
date, shall terminate any Employee Plan it sponsored or maintained (but shall
maintain any such Employee Plan up to the Closing Date).
(b) Indirect Parent, Second Intermediary Parent, First Intermediary
Parent, Parent and the Company agree that the Merger will result in, and
constitute, a distribution event for the Employees under any Code Section 401(k)
plan sponsored and maintained by the Company, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent or Parent. Indirect Parent,
Second Intermediary Parent, First Intermediary Parent, Parent and the Company
further agree that on or prior to the Closing Date, all accounts of Company
employees participating in such 401(k) plan shall be fully vested. To the extent
permitted by the Purchaser's 401(k) plan, Purchaser shall cause a tax-qualified
defined contribution plan maintained by Purchaser or a subsidiary of Purchaser
to accept
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rollovers from the 401(k) plan maintained for the benefit of employees of
Company (the "Transferor Plan") in respect of distributions made on account of
the transactions contemplated by this Agreement; provided however, Purchaser is
reasonably satisfied that the Transferor Plan is qualified under Code Section
401(a) and that the trust is exempt under Code Section 501(a).
(c) Parent, Second Intermediary Parent, First Intermediary Parent
and Indirect Parent assume any and all liability relating to, arising out of, or
resulting from non-compliance with or claims relating to COBRA (or similar state
statute) attributable to Employees and any and all related Qualified
Beneficiaries (as such term is defined in COBRA) with respect to qualifying
events occurring at or prior to the Effective Time (including, without
limitation, by reason of the transactions contemplated by this Agreement) under
a Parent-group Employee Plan (as that term is defined at (b) above); provided,
that Company shall cooperate with Parent, Second Intermediary Parent, First
Intermediary Parent and Indirect Parent in facilitating the delivery by Parent,
Second Intermediary Parent, First Intermediary Parent or Indirect Parent of
required notices and other COBRA-related communications to Employees and
Qualified Beneficiaries.
(d) Parent, Second Intermediary Parent, First Intermediary Parent
and Indirect Parent shall transfer to Purchaser (i) all records attributable to
each Employee's participation in the flexible spending accounts (pursuant to
Code Sections 105 and/or 129) maintained by Indirect Parent, Parent, Second
Intermediary Parent, First Intermediary Parent or Company; and (ii) the
aggregate cash amount of contributions paid by or on behalf of Employees to, net
of the aggregate amount of reimbursements and payments to Employees from, such
flexible spending accounts for the year in which the Closing occurs.
(e) Purchaser shall use its commercially reasonable best efforts to
cause each employee who continues his or her employment with Company following
the Effective Time, and if applicable their eligible dependents, to the extent
permitted by law, applicable tax qualification requirements and subject to the
approval of any insurance carrier, to be entitled to participate in the employee
welfare benefit plans (as defined within the meaning of ERISA Section 3(1)) of
the Purchaser and Purchaser shall use its commercially reasonable best efforts,
to the extent permitted by law, applicable tax qualification requirements and
subject to the approval of any insurance carrier, to cause any and all pre-
existing condition limitations, eligibility waiting periods and evidence of
insurability requirements under any group health plans to be waived with respect
to such Employees (and their eligible dependents) and shall provide them with
credit for any co-payments and deductibles prior to the Effective Time for
purposes of satisfying any applicable deductible, out-of-pocket, or similar
requirements under any Employee Plans of Purchaser in which they are eligible to
participate immediately after the Effective Time.
(f) On or prior to the Closing Date, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent or Parent shall transfer to the
Company the dollar amount equal to the cash value of all vacation and other paid
time off accrued but unused by the Employees as of the Closing Date. Indirect
Parent shall provide Purchaser with proof of such payment on or prior to the
Closing Date.
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6.5 Third Party Consents. As soon as practicable following the date
--------------------
hereof, Purchaser, Indirect Parent, Second Intermediary Parent, First
Intermediary Parent, Parent and Company will each use its commercially
reasonable efforts to obtain any consents, waivers and approvals under any of
its respective agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
6.6 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
--------------------------------------
practicable, Indirect Parent, Company, and, if necessary, Second Intermediary
Parent, First Intermediary Parent and Parent, and Purchaser each shall file with
the United States Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice ("DOJ") Notification and
Report Forms relating to the transactions contemplated herein as required by the
HSR Act, as well as comparable pre-merger notification forms required by the
merger notification or control laws and regulations of any applicable
jurisdiction, as agreed to by the parties. Company and Purchaser each shall
promptly (a) supply the other with any information which may be required in
order to effectuate such filings and (b) supply any additional information which
reasonably may be required by the FTC, the DOJ or the competition or merger
control authorities of any other jurisdiction and which the parties may
reasonably deem appropriate; provided, however, that Purchaser shall not be
required to agree to any divestiture by Purchaser or the Company or any of
Purchaser's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Purchaser or its subsidiaries or affiliates or
of the Company, its affiliates, or the imposition of any material limitation on
the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock.
6.7 Intercompany Accounts; Cash Balance. "Net Intercompany Payables"
-----------------------------------
shall mean the dollar amount obtained by subtracting (i) any and all
intercompany payables or liabilities of the Company to Indirect Parent, Second
Intermediary Parent, First Intermediary Parent or Parent outstanding as of the
Closing Date ("Company Payables") from (ii) any and all intercompany payables or
liabilities of Indirect Parent, Second Intermediary Parent, First Intermediary
Parent or Parent to the Company outstanding as of the Closing Date other than
any payables or liabilities created by this Agreement ("Parental Payables"). If
the Net Intercompany Payables is a negative number or zero, (a) all Company
Payables shall be satisfied and no longer outstanding at the Effective Time
through additional funding in the form of a capital contribution from Parent to
Company on the Closing Date in the amount of the Company Payable, and (b) all
Parental Payables shall be cancelled and extinguished at the Effective Time. If
the Net Intercompany Payables is a positive number, Indirect Parent shall pay
the Company at or prior to the Effective Time a cash amount equal to such number
and all other Company Payables and Parental Payables shall be cancelled and
extinguished at the Effective Time. At the Effective Time, all indemnification
and similar obligations of Company in favor of Parent, Second Intermediary
Parent, First Intermediary Parent or Indirect Parent shall be cancelled and
extinguished.
6.8 Strategic Relationship. Effective as of the Closing Date, subject to
----------------------
the terms and conditions of this Agreement, Indirect Parent and Purchaser shall
enter into the Strategic Relationship Agreement substantially in the form
attached hereto as Exhibit B.
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6.9 WARN. For a period of 90 days after the Closing, Indirect Parent,
----
Second Intermediary Parent, First Intermediary Parent, Parent and the Surviving
Corporation shall not conduct any layoffs or plant closings involving the
Surviving Corporation that could trigger obligations under the Worker Adjustment
and Retraining Notification Act of 1988 or any state plant closing or
notification law.
6.10 Investor Rights. Purchaser shall use its commercially reasonable
---------------
best efforts to cause its Amended and Restated Investor Rights Agreement to be
amended by the parties thereto to entitle Indirect Parent to the piggy-back
registration rights specified therein with respect to the Purchaser Preferred
Stock.
6.11 Real Property Lease. Second Intermediary Parent shall remain the
-------------------
guarantor and leave in place and renew upon its expiration Second Intermediary
Parents' letter of credit guaranteeing Company's real property lease until such
time as the landlord of such real property accepts Purchaser as such guarantor
on substantially the same terms. Purchaser shall use its commercially reasonable
best efforts to obtain such acceptance from such landlord.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) No Order; HSR Act. No Governmental Entity shall have enacted,
-----------------
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
(b) Strategic Relationship Agreement. Purchaser and Parent shall
--------------------------------
have entered into the Strategic Relationship Agreement in substantially the form
attached hereto as Exhibit B.
---------
(c) Stockholder Approval. The Amended and Restated Certificate of
--------------------
Incorporation attached hereto as Exhibit A shall have been approved by the
---------
requisite vote of Purchaser's stockholders under applicable law and accepted for
filing by the Secretary of State of Delaware.
7.2 Additional Conditions to Obligations of Company, Indirect Parent,
-----------------------------------------------------------------
Second Intermediary Parent, First Intermediary Parent and Parent. The
----------------------------------------------------------------
obligation of Company, Second Intermediary Parent, First Intermediary Parent and
Parent to consummate and effect the Merger shall
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be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Company:
(a) Representations and Warranties. Each representation and
------------------------------
warranty of Purchaser and Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except (A) in each case, or in the aggregate, as does
not constitute a Material Adverse Effect on Purchaser and Merger Sub, (B) for
changes contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the qualifications
as set forth in the preceding clause A) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect" qualifications
and other qualifications based on the word "material" or similar phrases
contained in such representations and warranties shall be disregarded and (ii)
any update of or modification to the Purchaser Schedule made or purported to
have been made after the date of this Agreement shall be disregarded). Company
shall have received a certificate with respect to the foregoing signed on behalf
of Purchaser by an authorized officer of Purchaser.
(b) Agreements and Covenants. Purchaser and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Purchaser by an authorized officer of Purchaser.
(c) Board Composition. A nominee of Indirect Parent mutually
-----------------
agreeable to Purchaser shall be appointed to Purchaser's board of directors at
or prior to the Closing Date.
7.3 Additional Conditions to the Obligations of Purchaser and Merger Sub.
--------------------------------------------------------------------
The obligations of Purchaser and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing,
exclusively by Purchaser:
(a) Representations and Warranties. Each representation and
------------------------------
warranty of Company, Indirect Parent, Second Intermediary Parent, First
Intermediary Parent and Parent contained in this Agreement (i) shall have been
true and correct as of the date of this Agreement and (ii) shall be true and
correct on and as of the Closing Date with the same force and effect as if made
on and as of the Closing Date except (A) in each case, or in the aggregate, as
does not constitute a Material Adverse Effect on Company, (B) for changes
contemplated by this Agreement and (C) for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications as set forth in the
preceding clause A) as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (i)
all "Material Adverse Effect" qualifications and other qualifications based on
the word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Schedule made or purported to have been made after the date of this
Agreement shall be
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<PAGE>
disregarded). Purchaser shall have received a certificate with respect to the
foregoing signed on behalf of Company by an authorized officer of Company.
(b) Agreements and Covenants. Company, Indirect Parent, Second
------------------------
Intermediary Parent, First Intermediary Parent and Parent shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it at or prior to the
Closing Date, and Purchaser shall have received a certificate to such effect
signed on behalf of Company by the Chief Executive Officer and the Chief
Financial Officer of Company.
(c) Consents. Company shall have obtained all consents, waivers and
--------
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses or
leases set forth on Schedule 7.3(d).
ARTICLE VIII
TAX MATTERS
8.1 Definition of Taxes. For the purposes of this Agreement, "Tax" or
-------------------
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges constituting taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
8.2 Tax Representations. Indirect Parent, Second Intermediary Parent,
-------------------
First Intermediary Parent, Parent and Company represent and warrant to the
Purchaser and Merger Sub as set forth below:
(a) The Company (or Indirect Parent, Second Intermediary Parent,
First Intermediary Parent or Parent on behalf of the Company) has (i) timely
filed within the time period for filing or any extension granted with respect
thereto all applicable federal, state, local, foreign and other returns,
declarations, reports, claims for refund, or information statements relating to
Taxes including any schedule attached thereto and any amendment thereto
("Returns") required to be filed relating to or pertaining to any and all Taxes
attributable to, levied or imposed upon, or incurred in connection with the
Company including all Tax Returns with respect to any affiliated, consolidated,
combined, unitary or similar group of which Company is or was a member or has
liability for Taxes with respect thereto (a "Relevant Group") and (ii) paid on a
timely basis all of the Taxes required to be paid prior to the date hereof
except for Taxes shown as liabilities on the balance of the Company dated June
30, 2000.
(b) Company has provided Purchaser true, complete, accurate copies
of all material Tax Returns filed by or on behalf of the Company or which
include Taxes payable in
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respect of the Company's assets, operations or its liability for Taxes for all
taxable periods commencing on or after January 1, 1995.
(c) With respect to the Company or to the extent relevant to the
Company's business or assets, Indirect Parent, Second Intermediary Parent, First
Intermediary Parent and Parent, (i) there are not pending or threatened in
writing any audits, examinations, assessments, asserted deficiencies or written
claims for Taxes nor is there any factual or legal basis therefore and (ii)
there are (and immediately after the Closing there will be) no Encumbrances for
Taxes upon any assets of the Company other than for Taxes not yet due and
payable.
(d) Except as disclosed in Schedule 8.2(d), no Tax deficiencies,
assessments or audit adjustments have been proposed in writing, assessed or
asserted against the Company, Second Intermediary Parent, First Intermediary
Parent, Indirect Parent or Parent to the extent Company would be liable for such
deficiencies, assessments or adjustments.
(e) Except as disclosed in Schedule 8.2(e), neither Company,
Indirect Parent, Second Intermediary Parent, First Intermediary Parent nor
Parent have requested any extension of time within which to file any Returns
related to the Company in respect of any taxable period which have not since
been filed and no request for waivers of the time to assess any Taxes are
pending or outstanding. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company or with
respect to any Tax assessment or deficiency affecting the Company or any
Relevant Group.
(f) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign Laws)
and have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all
employment, FICA, FUTA and other Taxes and similar amounts required to be so
withheld and paid over under all applicable laws.
(g) For the tax years where the statute of limitations is open, no
power of attorney for Taxes has been granted with respect to the Company.
(h) The accruals and reserves for Taxes reflected in the balance
sheet of the Company as of June 30, 2000 are in all material respects adequate
to cover all Taxes required to be accrued through the date thereof (including
interest and penalties, if any, thereon and Taxes being contested) in accordance
with GAAP applied on a consistent basis with the balance sheet included in the
Company Reports, and the accrual and reserves for Taxes reflected in the books
and records of the Company as of the last day of the Company's most recently
complete fiscal month end are in all material respects adequate to cover all
Taxes required to be accrued through such date (including interest and
penalties, if any, thereon and Taxes being contested) in accordance with GAAP
applied on a consistent basis with the balance sheet included in the Company
Reports. The Company has incurred no material liability for Taxes in the period
after the date of the Company's most recent completed financial month.
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<PAGE>
(i) The Company has not received any written ruling related to Taxes
or entered into any agreement with a Taxing Authority relating to Taxes.
(j) The Company has no liability for the Taxes of any Person other
than the Company (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign Law), (ii) as a transferee or
successor, (iii) by any written, oral or other agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan, commitment or
undertaking of any nature, as of the date hereof or as may hereafter be in
effect (a "Contract") or (iv) otherwise.
(k) The Company (i) has neither agreed to make nor is required to
make any adjustment under Section 481 of the Code by reason of a change in
accounting method and (ii) is not a "consenting corporation" within the meaning
of Section 341(f)(1) of the Code.
(l) The Company is not involved in, subject to, or a party to any
joint venture, partnership, Contract or other arrangement that is treated as a
partnership for federal, state, local or foreign Tax purposes.
(m) The Company has not made any payments, is not obligated to make
any payments, nor is a party to any contract, agreement or arrangement covering
any current or former employee or consultant of the Company that under certain
circumstances could require it to make or give rise to any payments that are not
deductible as a result of the provisions set forth in Section 280G of the Code
or the treasury regulations thereunder or would result in an excise tax to the
recipient of any such payment under Section 4999 of the Code.
(n) As a result of ownership changes on April 30, 1999 and April 7,
2000, the Company is subject to limitations on the utilization of the net
operating losses, built-in losses, capital losses, Tax credits or other similar
items of the Company under (i) Section 382 of the Code, (ii) Section 383 of the
Code, (iii) Section 384 of the Code, and (iv) Section 1502 of the Code and
Treasury regulations promulgated thereunder. These limitations and the amounts
of available loss and other carryovers will be reported by the Parent to the
Purchaser prior to March 31, 2001.
(o) Each material election with respect to Taxes affecting the
Company are set forth in Section 8.2 of the Company Schedule.
(p) The Company is not nor has it ever been a United States real
property holding corporation within the meaning of Section 897(c)(1)(A)(ii) of
the Code.
8.3 Indemnity.
---------
(a) Indirect Parent, Second Intermediary Parent, First Intermediary
Parent and Parent shall indemnify, defend and hold harmless, the Purchaser from
and against and in respect of and shall be responsible for and shall timely pay
or cause to be paid (i) any and all Taxes whensoever arising with respect to or
relating to the Company that are attributable to any taxable period ending on or
prior to the Closing Date and, in the case of a taxable period that includes,
but does not end on the Closing Date, the portion of such taxable period that
ends on the Closing Date, (ii) any and all
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Taxes of Parent, Indirect Parent or any subsidiaries or Affiliates thereof other
than the Company, whensoever arising, regardless of the period to which such
Taxes relate, imposed on the Company arising out of Treasury Regulation (S)
1.1502-6 or any comparable provision of foreign, state, local or subnational law
or Taxes of such entities for which the Company is otherwise liable, (iii) any
and all Taxes arising out of or constituting a breach of any representation,
warranty, or covenant of the Parent, Second Intermediary Parent, First
Intermediary Parent, Indirect Parent or the Company contained in this Article
VIII (The foregoing items (i) through (iii) shall collectively be referred to
herein as "Parent's Taxes"). Parent's Taxes shall include, with respect to any
taxable period commencing before the Closing Date and ending after the Closing
Date (a "Straddle Period"), all Taxes relating to the Company attributable to
the portion of the Straddle Period prior to and including the Closing Date (the
"Pre-Closing Period"). For purposes of such Straddle Periods, the portion of any
Tax that is attributable to the Pre-Closing Period shall be (i) in the case of a
Tax that is not based on net income, gross income, sales, premiums or gross
receipts, the total amount of such Tax for the period in question multiplied by
a fraction, the numerator of which is the number of days in the Pre-Closing
Period, and the denominator of which is the total number of days in such
Straddle Period, and (ii) in the case of a Tax that is based on any of net
income, gross income, sales, premiums or gross receipts, the Tax that would be
due with respect to the Pre-Closing Period if such Pre-Closing Period were a
separate taxable period, except that exemptions, allowances, deductions or
credits, exclusive of the amount by which they are increased or decreased as a
result of the transactions contemplated hereby, and which are calculated on an
annual basis (such as the deduction for depreciation or capital allowances)
shall be apportioned on a per diem basis.
(b) Purchaser shall indemnify, defend and hold harmless Parent and
its affiliates from and against and in respect of and shall be responsible for
and shall timely pay or cause to be paid (i) any and all Taxes with respect to
the Company, that are attributable to any taxable period commencing after the
Closing Date and, in the case of a Straddle Period, the portion of such taxable
period that begins on the day after the Closing Date and all other Taxes imposed
on the Company which are not Parent's Taxes ("Purchaser's Taxes") and (ii) any
losses incurred by Parent, Second Intermediary Parent, First Intermediary Parent
or Indirect Parent attributable to a breach of any representation, warranty or
covenant of Purchaser or Merger Sub contained in this Article VIII.
(c) If Purchaser or any Affiliate files any Return which includes
payment of Parent's Taxes, Parent, Second Intermediary Parent, First
Intermediary Parent and Indirect Parent shall reimburse Purchaser for such
Parent's Taxes within ten (10) days following written notice that payment of
such amounts to the appropriate tax authority is due, provided that payment
shall not be required earlier than two (2) days before it is due to the
appropriate tax authority. If Parent, Second Intermediary Parent, First
Intermediary Parent or Indirect Parent files any Return which includes payments
of Purchaser's Taxes, Purchaser shall reimburse Parent, Second Intermediary
Parent, First Intermediary Parent or Indirect Parent, as relevant, for such
Purchaser's Taxes within ten (10) days following written notice that payment of
such amounts to the appropriate tax authority is due, provided that payment
shall not be required earlier than two (2) days before it is due to the
appropriate tax authority. Parent, Second Intermediary Parent, First
Intermediary Parent and Indirect Parent shall timely provide to Purchaser all
information and documents within the possession of Parent, Second Intermediary
Parent, First Intermediary Parent or Indirect Parent (or their auditors,
advisors or Affiliates) and signatures and consents necessary for Purchaser to
properly prepare and
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<PAGE>
file the Returns described in the second preceding sentence or in connection
with the determination of any Tax liability or any audit, examination or
proceeding. Purchaser shall timely provide to Parent, Second Intermediary
Parent, First Intermediary Parent and Indirect Parent all information and
documents within its possession or the possession of its auditors, advisors or
affiliates and signatures and consents necessary for Parent, Second Intermediary
Parent, First Intermediary Parent and Indiredt Parent properly to prepare and
file the Returns described in the second preceding sentence or in connection
with the determination of any Tax liability or any audit, examination or
proceeding. Each party hereto shall reasonably cooperate with the other (at
their own expense) party to obtain other information or documents necessary or
appropriate to prepare and file Returns or elections or necessary or appropriate
in connection with the determination of any Tax liability or any audit,
examination or proceeding.
8.4 Tax Returns.
-----------
(a) Parent shall prepare and file (or cause to be prepared and
filed) on a timely basis all Returns with respect to the Company ("Company Tax
Returns") for all taxable periods ending on or before the Closing Date. Such
Returns shall be prepared in a manner consistent with past practice.
(b) Purchaser shall prepare and file (or cause to be prepared and
filed) on a timely basis all Company Tax Returns for periods ending after the
Closing Date. Purchaser shall provide Parent those Returns which include
Parent's Taxes at least ten (10) business days before each such Return is due to
be filed.
8.5 Termination of Tax Sharing Agreements. Parent, Second Intermediary
-------------------------------------
Parent, First Intermediary Parent and Indirect Parent hereby agree and covenants
that there are and will be no obligations relating to the Company pursuant to
any Tax sharing agreement or any similar arrangement in effect at any time
before or on the Closing Date, and any further obligations that might otherwise
have existed thereunder shall be extinguished as of the Closing Date and any Tax
Proceedings with respect to Straddle Periods. Indirect Parent, Second
Intermediary Parent, First Intermediary Parent and Parent shall settle or
resolve any Tax Proceedings with the written consent of Purchaser, which consent
shall not be unreasonably withheld.
8.6 Conduct of Audits and Other Procedural Matters.
----------------------------------------------
(a) Indirect Parent, Second Intermediary Parent, First Intermediary
Parent and Parent shall, at their own expense, control any audit or examination
by any Taxing authority, and resolve and defend against any assessment, notice
of deficiency or other adjustment or proposed adjustment of Taxes ("Tax
Proceedings") for which Indirect Parent, Second Intermediary Parent, First
Intermediary Parent or Parent have an indemnification obligation under this
Article VIII. Purchaser shall, at its own expense, control any audit or
examination by any Taxing authority, and resolve and defend against any Tax
Proceeding for any taxable period beginning after the Closing Date and any Tax
Proceedings with respect to Straddle Periods. Indirect Parent, Second
Intermediary Parent, First Intermediary Parent and Parent shall settle or
resolve any Tax Proceeding with the written consent of Purchaser, which consent
shall not be unreasonably withheld.
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<PAGE>
(b) Each party shall promptly forward to the other all written
notifications and other written communications from any Taxing authority
received by such party or its affiliates relating to any liability for Taxes for
any taxable period for which such other party or any of its affiliates is
charged with payment or indemnification responsibility under this Agreement and
each indemnifying party shall promptly notify, and consult with, each
indemnified party as to any action it proposes to take with respect to any
liability for Taxes for which it is required to indemnify another party or which
may affect the Taxes of another party and shall not enter into any closing
agreement or final settlement with any Taxing authority with respect to any such
liability without the written consent of the indemnified or affected parties,
which consent shall not be unreasonably withheld.
(c) The failure by a party to provide timely notice under this
subsection shall not relieve the other party from its obligations under this
Section 8.6 with respect to the subject matter of any notification not timely
forwarded, unless and to the extent that the other party can demonstrate that
the other party has suffered an economic detriment because of such failure to
provide notification in a timely fashion.
8.7 Assistance and Cooperation. Indirect Parent, Second Intermediary
--------------------------
Parent, First Intermediary Parent and Parent as one party and Purchaser as the
other (and their respective Affiliates) shall at their own expense:
(a) assist the other party in preparing any Returns which such other
party is responsible for preparing and filing in accordance with this Article
VIII;
(b) cooperate fully in preparing for any audits of, or disputes with
Taxing authorities regarding, any Returns relating to the Company;
(c) make available to the other and to any Taxing authority as
reasonably requested all information, records, and documents relating to Taxes
concerning the Company;
(d) make available to the other and to any Taxing authority as
reasonably requested employees and independent auditors to provide explanations
and additional information relating to Taxes concerning the Company;
(e) provide timely notice to the other in writing of any pending or
threatened Tax audits, assessments or Tax Proceedings with respect to the
Company for taxable periods for which the other may have a liability under this
Article VIII;
(f) furnish the other with copies of all correspondence received
from any Taxing authority in connection with any Tax audit or Tax Proceedings
with respect to any taxable period for which the other may have a liability
under this Article VIII; and
(g) retain any books and records that could reasonably be expected
to be necessary or useful in connection with Purchaser's or Parent's
preparation, as the case may be, of any Return, or for any audit, examination,
or Proceeding relating to Taxes. Such books and records shall be retained until
the expiration of the applicable statute of limitations (including extensions
thereof to the extent the party has been notified thereof); provided, however,
that in the event of an
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<PAGE>
audit, examination, investigation or Proceeding has been instituted prior to the
expiration of the applicable statute of limitations (or in the event of any
claim under this Agreement), the books and records shall be retained until there
is a final determination thereof (and the time for any appeal has expired).
8.8 Survival. Notwithstanding anything in this Agreement to the
--------
contrary, the provisions of this Article VIII shall survive for the full period
of all statutes of limitations (giving effect to any waiver, mitigation or
extension thereof).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of Purchaser and Company;
(b) by either Company or Purchaser if the Merger shall not have been
consummated by October 31, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either Company or Purchaser if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Purchaser set forth in this Agreement, or
if any representation or warranty of Purchaser shall have become untrue, in
either case such that the conditions set forth in Section 7.2(a) or Section
7.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided, that if such
inaccuracy in Purchaser's representations and warranties or breach by Purchaser
is curable by Purchaser through the exercise of its commercially reasonable
efforts, then Company may not terminate this Agreement under this Section 9.1(d)
for ten (10) days after delivery of written notice from Company to Purchaser of
such breach, provided Purchaser continues to exercise commercially reasonable
efforts to cure such breach (it being understood that Company may not terminate
this Agreement pursuant to this Section 9.1(d) if it shall have materially
breached this Agreement or if such breach by Purchaser is cured during such ten
(10)-day period); or
(e) by Purchaser, upon a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this Agreement, or if
any representation or warranty
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<PAGE>
of Company shall have become untrue, in either case such that the conditions set
forth in Section 7.3(a) or Section 7.3(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall have
become untrue, provided, that if such inaccuracy in Company's representations
and warranties or breach by Company is curable by Company through the exercise
of its commercially reasonable efforts, then Purchaser may not terminate this
Agreement under this Section 9.1(e) for ten (10) days after delivery of written
notice from Purchaser to Company of such breach, provided Company continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that Purchaser may not terminate this Agreement pursuant to this
Section 9.1(e) if it shall have materially breached this Agreement or if such
breach by Company is cured during such ten (10)-day period).
9.2 Notice of Termination; Effect of Termination. Any termination of
--------------------------------------------
this Agreement under Section 9.1 above will be effective immediately upon (or,
if the termination is pursuant to Section 9.1(d) or Section 9.1(e) and the
proviso therein is applicable, ten (10) days after) the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 9.2,
Section 9.3 and Article X (General Provisions), each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any intentional or willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
9.3 Fees and Expenses. All fees and expenses incurred in connection with
-----------------
this Agreement and the transactions contemplated hereby by the Purchaser shall
be paid by the Purchaser whether or not the Merger is consummated. All fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby by the Indirect Parent, Second Intermediary Parent, First
Intermediary Parent, Parent or the Company shall be paid by the Indirect Parent
whether or not the Merger is consummated.
9.4 Amendment. Subject to applicable law, this Agreement may be amended
---------
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Purchaser, Indirect Parent, Second Intermediary
Parent, First Intermediary Parent and Company.
9.5 Extension; Waiver. At any time prior to the Effective Time, any
-----------------
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
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<PAGE>
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the Indirect Parent, Second Intermediary Parent, First
Intermediary Parent, Parent, the Company, Merger Sub and the Purchaser contained
in this Agreement, and all statements contained in this Agreement, the Company,
Indirect Parent, Second Intermediary Parent, First Intermediary Parent, Parent
and Purchaser Disclosure Schedules and any certificate delivered pursuant to
this Agreement (collectively, the "Acquisition Documents"), shall survive the
Closing for two years; provided, however, that the representation and warranty
contained in Section 2.16 shall survive until the fifth anniversary of the
Closing Date; and provided further, however, that the obligations under Article
8 shall survive as provided therein. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties, then
the relevant representations and warranties shall survive as to such claim,
until such claim has been finally resolved.
10.2 Indemnification by the Holders.
------------------------------
(a) From and after the Closing, Purchaser and its Affiliates,
officers, directors, employees, agents, successors and assigns (each an
"Indemnified Party") shall be indemnified and held harmless, jointly and
severally, by each holder (a "Holder") of Company capital stock for any and all
Liabilities, losses, damages, claims, costs (including business interruption
costs) and expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees and expenses) actually
suffered or incurred by them (including, without limitation, any Action brought
or otherwise initiated by any of them) (hereinafter a "Loss" and in the
aggregate the "Losses"), arising out of or resulting from the breach of any
representation or warranty made by the Company, Indirect Parent, Second
Intermediary Parent, First Intermediary Parent or Parent contained in the
Acquisition Documents and for any Losses related to any Plan, Employee Plan or
ERISA (or an equivalent foreign law) liabilities of Parent, Second Intermediary
Parent, First Intermediary Parent or Indirect Parent or any of Parent's or
Indirect Parent's ERISA Affiliates ("ERISA Liabilities"). For the purposes of
determining whether there has been a breach of any representation or warranty
made by the Company, Indirect Parent, Second Intermediary Parent, First
Intermediary Parent or Parent, all "Material Adverse Effect" qualifications and
other qualifications based on the word material or similar phrases shall be
disregarded and all qualifications based on "knowledge" or "Knowledge" shall
also be disregarded. Indemnification payments under this Agreement (including
under Article 8 hereof) shall be reduced by any Tax benefit (net of Tax cost
including, without limitation, receipt of indemnification payments) actually
realized by the indemnified party as a result of the indemnification payment.
(b) An Indemnified Party shall give Indirect Parent notice of any
matter which an Indemnified Party has determined has given or could give rise to
a right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligation and Liabilities of the Holders under this Article X with
respect to Losses arising from claims of any third party which
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<PAGE>
are subject to the indemnification provided for in this Article X ("Third Party
Claims") shall be governed by and contingent upon the following additional terms
and conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indirect Parent notice of such Third
Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
release the Holders from any of its obligations under this Article X except to
the extent the Holders are materially prejudiced by such failure and shall not
relieve the Holders from any other obligation or Liability that it may have to
any Indemnified Party otherwise than under this Article X. If the Indirect
Parent acknowledges in writing the Holders' obligation to indemnify the
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then the Indirect Parent shall be entitled to assume and control
the defense of such Third Party Claim on behalf of the Holders at its expense
and through counsel of its choice if it gives notice of its intention to do so
to the Indemnified Party within ten days of the receipt of such notice from the
Indemnified Party; provided, however, that if there exists or is reasonably
likely to exist a conflict of interest that would make it appropriate in the
judgment of the Indemnified Party, in its sole and absolute discretion, for the
same counsel to represent both the Indemnified Party and the Holders, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Holders. In any event, the Indirect Parent exercises the
right to undertake any such defense against any such Third Party Claim on behalf
of the Holders as provided above, the Indemnified Party shall cooperate with the
Indirect Parent in such defense and make available to the Indirect Parent, at
the Holders' expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indirect
Parent. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Holders shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Holders' expense, all such witnesses,
records, materials and information in the Holders' possession or under the
Holders' control relating thereto as is reasonably required by the Indemnified
Party. No such Third Party Claim may be settled by the Holders without the prior
written consent of the Indemnified Party; provided, however, that if the
Indemnified Party does not consent to a settlement that is otherwise acceptable
to the Holders, in no event shall the Holders be required to indemnify the
Indemnified Party for any judgment amount in excess of the proposed settlement
amount.
(c) The Holders shall not have any obligation to indemnify the
Indemnified Parties pursuant to Sections 10.2(a) and (b) unless the aggregate
amount of all Losses arising under Section 10.2 (excluding claims related to
ERISA Liabilities and Parent's, Second Intermediary Parent's, First Intermediary
Parent's and Indirect Parent's Taxes) exceeds $150,000. The total maximum
aggregate indemnification liability of the Holders for any Losses arising under
Sections 10.2(a) and (b) (including Losses arising from a breach of Section 2.20
of this Agreement but excluding claims related to ERISA Liabilities and
Parent's, Second Intermediary Parent's, First Intermediary Parent's and Indirect
Parent's Taxes) shall not exceed $3,000,000 (three million). The Holders shall
indemnify Purchaser dollar for dollar with respect to any losses associated with
ERISA Liabilities and Parent's, Second Intermediary Parent's, First Intermediary
Parent's and Indirect Parent's Taxes.
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<PAGE>
(d) From and after the Closing, in the absence of fraud, willful
misconduct or bad faith breach ("Excepted Claims"), the sole and exclusive
remedy of Purchaser and its Affiliates, officers, directors, employees, agents,
successors and assigns against Parent or any of its Affiliates, officers,
directors, employees, agents, successors and assigns with respect to any and all
claims relating to the Acquisition Documents shall be pursuant to the
indemnification provisions set forth in this Section 10.2.
10.3 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Purchaser or Merger Sub, to:
Xenogen Corporation
860 Atlantic Avenue
Alameda, California 94501
Attention: Chief Executive Officer
Telephone No.: (510) 291-6100
Telecopy No.: (510) 291-6196
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market, Spear Tower
San Francisco, California 94105
Attention: Michael Kennedy, Esq.
Karen Dempsey, Esq.
Telephone No.:(415) 947-2000
Telecopy No.:(415) 947-2099
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<PAGE>
(b) if to Indirect Parent, Parent, Second Intermediary Parent, First
Intermediary Parent or Company, to:
MDS Inc.
100 International Boulevard
Toronto, Ontario
Canada M9W6J6
Attention: Peter Brent
Telephone No.: (416) 675-7661
with a copy to:
Fasken Martineau DuMoulin LLP
Toronto Dominion Bank Tower
Suite 4200
P.O. Box 20
Toronto-Dominion Centre
Toronto, Ontario
Canada M5K1N6
Attention: John Turner
Telephone No.: (415) 366-8381
Fax: (415) 364-7813
10.4 Interpretation.
--------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), capitalization, financial condition or results of operations of such
entity and its subsidiaries taken as a whole; provided that a decline in a
Person's stock price shall not in and of itself constitute a Material Adverse
Effect.
(c) For purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited
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<PAGE>
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
10.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.6 Entire Agreement; Third Party Beneficiaries. This Agreement and the
-------------------------------------------
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company, Indirect Parent,
Parent, Second Intermediary Parent, First Intermediary Parent and Purchaser
Disclosure Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder.
10.7 Severability. In the event that any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.8 Other Remedies; Specific Performance. Except as otherwise provided
------------------------------------
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
10.10 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application
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<PAGE>
of any law, regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
10.11 Assignment. No party may assign either this Agreement or any of its
----------
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
10.12 WAIVER OF JURY TRIAL. EACH OF INDIRECT PARENT, PARENT, SECOND
--------------------
INTERMEDIARY PARENT, FIRST INTERMEDIARY PARENT, COMPANY, PURCHASER AND MERGER
SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY,
PURCHASER OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
[Remainder of page intentionally left blank.]
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<PAGE>
**Agreement and Plan of Reorganization**
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
XENOGEN CORPORATION
By: /s/ David W. Carter
-----------------------------------
Name: David W. Carter
---------------------------------
Title: Chairman
--------------------------------
DRUM ACQUISITION CORPORATION
By: /s/ David W. Carter
-----------------------------------
Name: David W. Carter
---------------------------------
Title: President
--------------------------------
MDS INC.
By: /s/ Robert W. Breckon
-----------------------------------
Name: Robert W. Breckon
---------------------------------
Title: Senior Vice President, Strategic
Initiatives and Investments
--------------------------------
PHOENIX INTERNATIONAL LIFE
SCIENCES INC.
By: /s/ David Moszkowski
-----------------------------------
Name: David Moszkowski
---------------------------------
Title: Chief Financial Officer
--------------------------------
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<PAGE>
PHOENIX INTERNATIONAL LIFE
SCIENCES (US) INC.
By: /s/ David Moszkowski
-----------------------------------
Name: David Moszkowski
---------------------------------
Title: Vice President, Treasurer
and Secretary
--------------------------------
PHOENIX INTERNATIONAL LIFE
SCIENCES (CHRYSALIS) INC.
By: /s/ David Moszkowski
-----------------------------------
Name: David Moszkowski
---------------------------------
Title: Vice President, Treasurer
and Secretary
--------------------------------
CHRYSALIS DNX TRANSGENIC
SCIENCES CORPORATION
By: /s/ David Moszkowski
-----------------------------------
Name: David Moszkowski
---------------------------------
Title: Vice President, Treasurer
and Secretary
--------------------------------
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